How to Plan for a Child and Adult How to Plan for a Child and Adult With Special Needs in Your Last With Special Needs in Your Last

Will & TestamentWill & Testamentand and

A Plan for Parents and A Plan for Parents and Grandparents of Persons with Grandparents of Persons with

Developmental and Other Chronic Developmental and Other Chronic Disabilities By Using a Will Disabilities By Using a Will

Containing a Testamentary Special Containing a Testamentary Special Needs TrustNeeds Trust

Presented by Presented by Fredrick P. Niemann, Esq.Fredrick P. Niemann, Esq.

Elder Law, Asset & Estate ProtectionElder Law, Asset & Estate ProtectionPlanning, Medicare, Medicaid andPlanning, Medicare, Medicaid and

Veteran’s Benefit Assistance LawyersVeteran’s Benefit Assistance Lawyers

www.specialneedstrustnewjersey.comwww. njelderlawcenter.com www. njelderlawcenter.com

www.njmedicaidlawattorney.comwww.njmedicaidlawattorney.com

Visit me atVisit me at Hanlon Niemann, PCHanlon Niemann, PC

3499 Route 9 North, Suite 1F3499 Route 9 North, Suite 1FFreehold, NJ 07728Freehold, NJ 07728

Phone: (888) 800-7442Phone: (888) 800-7442fniemann@hnlawfirm.com fniemann@hnlawfirm.com

Fredrick P. Niemann, Esq.Fredrick P. Niemann, Esq.

Fredrick P. Niemann offers his clients over Fredrick P. Niemann offers his clients over 30 years of accomplished practice in the 30 years of accomplished practice in the law. He is a member of the National law. He is a member of the National Academy of Elder Law Attorneys, the Academy of Elder Law Attorneys, the Guardianship and Conservatorship Guardianship and Conservatorship Committee of NAELA, Monmouth County Committee of NAELA, Monmouth County Probate and Estate Committee and the Probate and Estate Committee and the Monmouth County Chancery Practice Monmouth County Chancery Practice Committee. Mr. Niemann is one of the few Committee. Mr. Niemann is one of the few attorneys in New Jersey, accredited by the attorneys in New Jersey, accredited by the Veteran’s Administration, to apply for Aid Veteran’s Administration, to apply for Aid and Attendance benefits for Veterans and Attendance benefits for Veterans and/or their spouses.and/or their spouses.

Legal WitLegal Wit

  

What’s wrong with lawyer jokes?  Lawyers don’t think What’s wrong with lawyer jokes?  Lawyers don’t think they’re funny, and nobody else thinks they’re jokes.they’re funny, and nobody else thinks they’re jokes.

How can you tell when a lawyer is lying?  His lips are How can you tell when a lawyer is lying?  His lips are moving.moving.

  

Cont.Cont.

  What’s the difference between a good What’s the difference between a good lawyer and a great lawyer?  A good lawyer and a great lawyer?  A good lawyer knows the law. A great lawyer knows the law. A great lawyer knows the judge.lawyer knows the judge.

The first thing we do, let’s kill all the The first thing we do, let’s kill all the lawyers.lawyers.

ShakespeareShakespeare

Facts of LifeFacts of Life

1.1. Persons with disabilities are living longer Persons with disabilities are living longer and public benefits are often necessary.and public benefits are often necessary.

2.2. There is no guarantee that public benefits There is no guarantee that public benefits will provide adequate resources over the will provide adequate resources over the disabled person’s lifetime.disabled person’s lifetime.

3.3. There is no guarantee that public There is no guarantee that public agencies will provide services and agencies will provide services and advocacy over the disabled person’s advocacy over the disabled person’s lifetime.lifetime.

What Does Planning What Does Planning Involve?Involve? Preserving your loved one’s financial Preserving your loved one’s financial

security and quality of lifesecurity and quality of life

Addressing key issues: Those key issues Addressing key issues: Those key issues are:are:Understanding the role of public benefits todayUnderstanding the role of public benefits today

Making assumptions about public benefits in the Making assumptions about public benefits in the futurefuture

Using estate planning/trusts to protect your Using estate planning/trusts to protect your assets for the financial security of your loved assets for the financial security of your loved one’s futureone’s future

Part 1:Part 1:Understanding Public Understanding Public

BenefitsBenefits

Public Benefits at a GlancePublic Benefits at a GlanceFinancial BenefitsFinancial Benefits

Supplemental Security Income (SSI)Supplemental Security Income (SSI)

Social Security (SS)Social Security (SS)&&

Social Security Disability Insurance Social Security Disability Insurance (SSDI)(SSDI)

Not means tested but subject to work credits Not means tested but subject to work credits or parents’ eligibilityor parents’ eligibility

Means tested: Income and asset limitations for eligibilityMeans tested: Income and asset limitations for eligibility

Public Benefits at a GlancePublic Benefits at a GlanceMedical BenefitsMedical Benefits

MedicaidMedicaid Automatic with SSIAutomatic with SSI

Must apply for SS/SSDI for first 2 yrsMust apply for SS/SSDI for first 2 yrs

MedicareMedicare After two years of SSDIAfter two years of SSDI

Supplemental Security Supplemental Security Income Income (SSI)(SSI)

Must meet SSA’s definition of Must meet SSA’s definition of “disability” and have limited “disability” and have limited assets/incomeassets/income

Provides monthly income for Provides monthly income for food/shelterfood/shelter

Gateway to Medicaid / in-home Gateway to Medicaid / in-home support servicessupport services

Social Security (SS) / Social Social Security (SS) / Social Security Disability Insurance Security Disability Insurance

(SSDI)(SSDI)Social Security for individuals:Social Security for individuals: Disabled before age 22 andDisabled before age 22 and With parents eligible based on their work With parents eligible based on their work

record if retired, disabled or deceasedrecord if retired, disabled or deceased

SSDI for individuals with work SSDI for individuals with work recordrecord

Social Security benefits may reduce Social Security benefits may reduce or eliminate SSI benefits if greater or eliminate SSI benefits if greater than monthly SSI benefitthan monthly SSI benefit

Medical Assistance & Medical Assistance & SupportSupportMedicaid:Medicaid:

SSI recipients automatically receive MedicaidSSI recipients automatically receive Medicaid Covers “medically necessary” services, Covers “medically necessary” services,

equipment, hospitalization equipment, hospitalization In-home services needed to live at home: personal In-home services needed to live at home: personal

care, housekeeping, cooking, transportation to care, housekeeping, cooking, transportation to doctorsdoctors

SS & SSDI individuals must apply for MedicaidSS & SSDI individuals must apply for Medicaid

Medicare:Medicare: Medical coverage, including doctors, hospital, Medical coverage, including doctors, hospital,

skilled careskilled care Individuals with SS or SSDI eligible for Medicare Individuals with SS or SSDI eligible for Medicare

after 2 years of eligibilityafter 2 years of eligibility

How Benefits Work How Benefits Work TogetherTogether

SSISSI MedicaidMedicaid

SSDISSDI MedicareMedicare

Part 2:Part 2:Making Decisions About the Making Decisions About the

FutureFuture

Typical Timeline for a Typical Timeline for a Child Child

With a DisabilityWith a Disability Upon Attaining Age 18Upon Attaining Age 18 Deeming of parents’ income and Deeming of parents’ income and resources to the disabled child ends.resources to the disabled child ends. Child becomes eligible for public Child becomes eligible for public benefits based upon evidence of benefits based upon evidence of disability and the child’s low income disability and the child’s low income and resources – parents’ resources not and resources – parents’ resources not considered in determining child’s considered in determining child’s eligibility.eligibility. Parental decision-making authority Parental decision-making authority ends - Guardianship may be necessary.ends - Guardianship may be necessary.

Providing for Persons Providing for Persons with Disabilitieswith Disabilities

Pitfalls to commonly used eligibility strategies:

¦ Uniform Gift to Minors Act Accounts (UGMA or POD Accounts)

¦ Unstructured Beneficiary Designations

¦ No planning at all

Uniform Gifts to Minors Uniform Gifts to Minors ActAct

(UGMA) Accounts(UGMA) Accounts

¦Once the child takes control of the account ( age 18 or 21), the child may then use the money for purposes other than education -- regardless of the custodian’s wishes.

¦ UGMA accounts are considered available resources for purpose of SSI eligibility.

Unstructured Beneficiary Unstructured Beneficiary DesignationsDesignations

Naming an SSI, beneficiary Medicaid recipient or minor child as the beneficiary of a retirement plan (401k,IRA, etc.), life insurance policy annuity or any other resource, investment, asset (ie. brokerage account, CD’s, money market, etc.) will cause a reduction or elimination of public benefits.

No Planning at AllNo Planning at All

Dying intestate (without a will or trust) will usually leave all or a portion of the estate of a single parent, person to the decedent’s children.

¦ Any child receiving SSI or Medicaid will lose eligibility until the inheritance is either spent down, converted to a exempt resource, or placed in a Special Needs Trust.

Providing for Persons Providing for Persons with Disabilities:with Disabilities:

Special Needs Trust Special Needs Trust BasicsBasics

Purpose - To preserve the disabled person’s eligibility for needs-based governmental benefits while providing assets which may be used to supplement public benefits in order to improve the disabled person’s quality of life.

Third Party SNTThird Party SNT

1.1. Established with assets owned by a Established with assets owned by a third party (ie: parents, grandparents, third party (ie: parents, grandparents, aunts, uncles) for the benefit of the aunts, uncles) for the benefit of the disabled person.disabled person.

2.2. Usually established and funded by the Usually established and funded by the parents, relatives or friends of the parents, relatives or friends of the disabled adult child as part of an disabled adult child as part of an estate or gifting plan.estate or gifting plan.

3.3. Other children can be named as Other children can be named as remainder beneficiaries after death of remainder beneficiaries after death of disabled person.disabled person.

Third Party SNT (cont’d)Third Party SNT (cont’d)

4.4. Third Party SNT may be revocable and Third Party SNT may be revocable and interinter vivosvivos, or irrevocable and , or irrevocable and testamentary.testamentary.

5.5. No need to pay Medicare or Medicaid liens No need to pay Medicare or Medicaid liens before funding.before funding.

6.6. No age limit for disabled beneficiary.No age limit for disabled beneficiary.7.7. ““Pay-back” to the State of NJ, Medicaid and Pay-back” to the State of NJ, Medicaid and

Medicare provision not required (doesn’t Medicare provision not required (doesn’t matter if beneficiary is an adult or minor)matter if beneficiary is an adult or minor)

The Golden RuleThe Golden Rule

The golden rule in SNT planning - the The golden rule in SNT planning - the trustee should make payments on trustee should make payments on behalf of the beneficiary directly to behalf of the beneficiary directly to third party vendors for equipment or third party vendors for equipment or services which are not food or shelter. services which are not food or shelter. For example, distributions directly to For example, distributions directly to a retailer for a radio or television, to a retailer for a radio or television, to an airline for a plane ticket, or to a an airline for a plane ticket, or to a companion/aide for services rendered companion/aide for services rendered are not income to the beneficiary.are not income to the beneficiary.

Objectives Should be Objectives Should be Expressed in The SNT and Expressed in The SNT and

Memorandum of IntentMemorandum of IntentThe trust should set out broad The trust should set out broad instructions that are not likely instructions that are not likely to change.to change.

ExampleExample - “I wish that my child live - “I wish that my child live as independently as possible in as independently as possible in the least restrictive the least restrictive environment”.environment”.

Objectives Should be Objectives Should be Expressed in the SNT and Expressed in the SNT and Memorandum of IntentMemorandum of Intent

The memorandum of intent should The memorandum of intent should reflect more timely and detailed reflect more timely and detailed instructions.instructions.

Example - “I have inspected the Monmouth Example - “I have inspected the Monmouth County Independent Living Center and, in the County Independent Living Center and, in the event of my incapacity or death, I believe that event of my incapacity or death, I believe that this facility meets my son David’s needs. this facility meets my son David’s needs. Please make sure that David is monitored Please make sure that David is monitored regularly by the care manager, especially regularly by the care manager, especially regarding his medication because he is prone regarding his medication because he is prone to frequent side effects”.to frequent side effects”.

Follow-Up Steps:Follow-Up Steps:(1) Select Resources(1) Select Resources

Select a combination of resources Select a combination of resources that will guarantee adequate funds that will guarantee adequate funds for the disabled child’s lifetime, such for the disabled child’s lifetime, such as insurance, savings, investments, as insurance, savings, investments, family assistance, etc., and change family assistance, etc., and change the ownership of each asset to the the ownership of each asset to the trustee of the SNT.trustee of the SNT.

Follow-Up Steps:Follow-Up Steps:(2) Remove Child as (2) Remove Child as

BeneficiaryBeneficiary

Remove the disabled child as the Remove the disabled child as the beneficiary from all of the parents’, and beneficiary from all of the parents’, and others relatives’, financial programs, i.e., others relatives’, financial programs, i.e., employer sponsored retirement plans, IRAs, employer sponsored retirement plans, IRAs, KEOGHSs, life insurance policies, joint KEOGHSs, life insurance policies, joint accounts of all types, brokerage and accounts of all types, brokerage and financial. financial.

A. This is 1 of the 10 Commandments A. This is 1 of the 10 Commandments for asset for asset protection planning. protection planning.

Follow-Up Steps:Follow-Up Steps:(3) Meet With (3) Meet With

CaregiversCaregivers

Hold a meeting with all interested Hold a meeting with all interested parties, i.e., the Guardian, all parties, i.e., the Guardian, all Trustees and Successor Trustees and Trustees and Successor Trustees and all siblings, to review the estate all siblings, to review the estate planning documents, discuss plan and planning documents, discuss plan and management of trust assets.management of trust assets.

Case Study: NathanCase Study: Nathan

Current situation:Current situation:

18-year-old with autism18-year-old with autism

Lives with momLives with mom

Income from work programs, SSI, Income from work programs, SSI, Social Security (from dad who is Social Security (from dad who is deceased)deceased)

Limited personal assets (clothing, tv)Limited personal assets (clothing, tv)

Qualifies for MedicaidQualifies for Medicaid

Case Study: NathanCase Study: Nathan

Future situation:Future situation:

Who will make health care Who will make health care decisions?decisions?

Who will make financial decisions?Who will make financial decisions?

Where will he live?Where will he live?

How will his medical expenses be How will his medical expenses be paid?paid?

What Plan Could What Plan Could Nathan’s Mom Make?Nathan’s Mom Make?

Possible Options:Possible Options:

Make no decisions/plansMake no decisions/plans

Leave money to NathanLeave money to Nathan

Disinherit NathanDisinherit Nathan

Leave money to a future caregiverLeave money to a future caregiver

Establish third-party SNT for Establish third-party SNT for NathanNathan

Establish first-party SNT for NathanEstablish first-party SNT for Nathan

Example: Distributions from Example: Distributions from a Supplemental Needs Trust a Supplemental Needs Trust

Directly Directly to an SSI Beneficiaryto an SSI Beneficiary

Jill is the trustee of a special needs trust established by her deceased mother, Paula, for the benefit of Paula’s disabled daughter and Jill’s sister, Anne. Anne’s living expenses, including rent, food, transportation and clothing, total approximately $2,000 per month. Jill sends Anne a check on the first of every month for $2,000 so Anne can pay her expenses. Since Anne is receiving cash income in excess of her monthly SSI benefits, she loses her SSI. Since Anne received Medicaid based on her SSI payment, she also loses Medicaid.

Example: Distributions from a Example: Distributions from a Supplemental Needs Ttrust to Supplemental Needs Ttrust to

Third Party Vendors for Food or Third Party Vendors for Food or ShelterShelter

Jill is the trustee of a testamentary supplemental needs trust established by Joan under her last will and testament for her adult disabled daughter, Pamela. Pamela receives SSI, Medicaid, food stamps and services from DDD. Pamela lives in an apartment. Jill signed the lease as trustee of the SNT and pays all rent directly to the landlord. The rental payments will result in a reduction, but not the elimination, of Pamela’s SSI benefits.

Example: Distributions from a Example: Distributions from a SNT to Third Party Vendors for SNT to Third Party Vendors for Items Which are Not Food or Items Which are Not Food or

ShelterShelterJill, a disabled adult, receives SSI. Joan is the trustee of a special needs trust established by Jill’s parents for her benefit. Jill likes to read the National Review not the (New York Times.) Joan arranges with the local newspaper distributor to deliver the National Review not the (New York Times) to Jill on a daily basis, including Sundays, and pays the bill directly to the newspaper distributor. This is not considered income, and will not affect Jill’s SSI benefits.

Follow-Up Steps:Follow-Up Steps:(4) New Wills for (4) New Wills for

ParentsParents Prepare Last Will and Testaments for Prepare Last Will and Testaments for parents excluding the child from receiving parents excluding the child from receiving any portion of the parents’ estate outright any portion of the parents’ estate outright and free of trust which may cause the and free of trust which may cause the disabled child to lose government benefits.disabled child to lose government benefits.

Create a Discretionary Supplemental Create a Discretionary Supplemental Needs Trust to protect future quality of Needs Trust to protect future quality of life for the child.life for the child.

Periodic Update and Periodic Update and ReviewReview

The Estate Plan should be periodically reviewed The Estate Plan should be periodically reviewed to:to:

• Ensure all assets either are owned by the Ensure all assets either are owned by the SNT, or SNT is named as the beneficiary SNT, or SNT is named as the beneficiary of the assets.of the assets.

A. The importance of A. The importance of beneficiary designationsbeneficiary designations

• To update trustees and persons To update trustees and persons representatives and power of attorneyrepresentatives and power of attorney

• Changes in the beneficiary’s condition or Changes in the beneficiary’s condition or eligibility for benefits.eligibility for benefits.

• Changes in your economic situation.Changes in your economic situation.

Part 3:Part 3:Creating an Effective PlanCreating an Effective Planfor Your Child / Loved Onefor Your Child / Loved One

What Steps Should You Take What Steps Should You Take Today?Today?

Step 1: Envision Your Child’s Step 1: Envision Your Child’s FutureFuture

Planning ahead makes a difference:Planning ahead makes a difference: Where and with whom will your child live?Where and with whom will your child live? What type/level of care will be required?What type/level of care will be required? Will a guardian/conservator be necessary?Will a guardian/conservator be necessary? Who else will be involved? Who else will be involved? What kind of lifestyle is desired?What kind of lifestyle is desired? What unforeseen challenges could arise?What unforeseen challenges could arise?

Lays out goals/expectations:Lays out goals/expectations: Details preferences, needs, wishes, both Details preferences, needs, wishes, both

medical and personalmedical and personal Lists key people in child’s lifeLists key people in child’s life

Helps guide:Helps guide: Family membersFamily members TrusteesTrustees CaregiversCaregivers OthersOthers

What Steps Should You Take Today? Step 2: Create a Memorandum of Intent

Monthly income: Monthly income: SSI, SSDI, Social Security, earned/unearned SSI, SSDI, Social Security, earned/unearned

incomeincome

Monthly living expenses:Monthly living expenses: Housing, food, transportation, medical, recreation, Housing, food, transportation, medical, recreation,

etc.etc.

Consider how any shortfall will be metConsider how any shortfall will be met

What Steps Should You Take Today? Step 3: Estimate Income & Expenses

Income - Expenses = ShortfallIncome - Expenses = Shortfall

Provides supplemental funds for Provides supplemental funds for living expenses not covered by other living expenses not covered by other income sourcesincome sources

May be established by parents:May be established by parents: Through willThrough will Through living trustThrough living trust

““Living” SNT lets others contributeLiving” SNT lets others contribute

Trustee has discretion over Trustee has discretion over distributionsdistributions

What Steps Should You Take Today? Step 4: Utilize a Third-Party SNT

The SNT Trustee The SNT Trustee ResponsibilitiesResponsibilities

What are the trustee’s responsibilities?What are the trustee’s responsibilities?Invests/manages assetsInvests/manages assetsDistributes fundsDistributes fundsKeeps booksKeeps booksFiles tax returnsFiles tax returnsHires advocates and care managers, etc., as Hires advocates and care managers, etc., as

neededneeded

Selecting an SNT TrusteeSelecting an SNT Trustee

Who should be the trustee?Who should be the trustee?

Parent Parent withwith professional co-trustee professional co-trustee

Corporate or other professional trusteeCorporate or other professional trustee

Successor trusteeSuccessor trustee

What Parents Should DoWhat Parents Should Do

Create Memorandum of IntentCreate Memorandum of Intent

Calculate future financial needCalculate future financial need

Establish SNT through will or living Establish SNT through will or living trusttrust

Fund SNT with life insuranceFund SNT with life insurance

Name SNT as beneficiary of Name SNT as beneficiary of accounts, plans, etc.accounts, plans, etc.

Reduce taxable estateReduce taxable estate

What Your Child Should DoWhat Your Child Should Do

Sign Advance Directives, if legal Sign Advance Directives, if legal capacity capacity

Have a legal guardian appointed:Have a legal guardian appointed: When child without mental capacity becomes When child without mental capacity becomes

an adult and parents want to maintain legal an adult and parents want to maintain legal responsibilityresponsibility

Court appoints legal guardianCourt appoints legal guardian

What If Your Child Has What If Your Child Has Assets?Assets?

Establish a First-Party SNT:Establish a First-Party SNT:

Provides funds for living expenses not Provides funds for living expenses not covered by other income sourcescovered by other income sources

Maintains eligibility for public benefitsMaintains eligibility for public benefits

Must be established by parent, Must be established by parent, grandparent, legal guardian or the courtgrandparent, legal guardian or the court

State must be reimbursed from the trust State must be reimbursed from the trust for all Medicaid expensesfor all Medicaid expenses

Get Started TodayGet Started TodayUnderstand your child’s eligibility for public Understand your child’s eligibility for public benefits.benefits.Make plans for the future to maximize public Make plans for the future to maximize public and private resources for your child’s and private resources for your child’s benefit.benefit.Make the SNT a key part of your estate plan.Make the SNT a key part of your estate plan.Contact a special needs attorney for the Contact a special needs attorney for the assistance you need.assistance you need.

Fredrick P. Niemann, Esq.Fredrick P. Niemann, Esq.NJ Elder Law and NJ Special Needs Trust AttorneyNJ Elder Law and NJ Special Needs Trust Attorney

Hanlon Niemann, PCHanlon Niemann, PC3499 Route 9 North, Suite 1F3499 Route 9 North, Suite 1F

Freehold, NJ 07728Freehold, NJ 07728Phone: (888) 800-7442Phone: (888) 800-7442

fniemann@hnlawfirm.com

www.specialneedstrustnewjersey.comwww.njelderlawcenter.com

THANK YOU FOR ATTENDING.THANK YOU FOR ATTENDING.

QUESTIONS / COMMENTS?QUESTIONS / COMMENTS?