Speaker Meeting on Sunday, September 12, 2010
Planning for the Legal and Financial Future of a Loved One with Mental Illness

Estate Planning – More than just a Will.

Estate planning is usually thought of as making sure my assets will be divided or go to who I wish after I pass away. That is only a portion, albeit a very important portion, of estate planning. The days of what could be called The Traditional Model (get a will with perhaps a testamentary trust included) are dwindling rapidly. While this model is applicable in some cases it is no longer meeting the estate planning needs of many individuals today.

Estate planning covers:

  1. The individual doing the planning;
    1. What happens if they become incapacitated (can’t communicate effectively or at all due to accident or illness/dementia/etc.).
    2. Appointments of persons to act in your stead.
  1. Nominate Powers of Attorney:
    1. Durable
    2. Financial
    3. Medical
    4. Mental Health
  2. Nominate Guardians of your person.
  • Complete Advance Directive (also known as living will) to indicate your final medical treatment wishes should you become terminally ill or terminally injured.
  1. To shelter your assets so that you may become Medicaid eligible for long term care or nursing home care funding options.
  2. Nominate an Executor to carry out your final wishes.
  1. The family of the individual doing the planning;
    1. Consideration of gifting options prior to death.
    2. Establishing trusts for minors, disabled or incapacitated family for support and maintenance or in consideration of need for governmental benefits.
  1. Testamentary
  2. Inter Vivos

A newer, perhaps better model to consider involves individuals being proactive and creating special needs trusts to shelter their assets, or the assets of loved ones, for governmental benefit purposes. Also included are the hiring of private case/care management companies and taking other necessary steps to ensure that their hard earned dollars are used effectively both now and in the future.

By taking into account the prevalence of disability (16% for ages 5+ in the US) and by applying past and current real life experiences, such as dealing with the wide spectrum of local and state human services systems and applying for, receiving and maintaining governmental benefits, individuals and families can get a feel for what works and doesn’t work they way they want. They can focus or pinpoint extra help at certain issues.

How does this all fit into estate planning?

Governmental Benefits. Many individuals in this room will be in need of and quite possibly receive some form of governmental benefits in their future.

  1. Older individuals may need Medicaid to help pay for in home services such a

Home and Community Based Services or perhaps to pay for long term care or nursing home level of care.

  1. Medicare only covers so much.
  2. No long term care polices in place.
  3. Individuals with long term care insurance who may not have chosen cost of living increases.
  4. Private pay last only as long as your money.
  5. Medicaid
  6. Individuals with disabilities may current receive benefits and need to keep those benefits to pay for needed services and supports and this should not be direct recipients of assets that would jeopardize those benefits.
  7. Individuals w/out benefits may need benefits in the future and thus should not be direct recipients of assets that would jeopardize those benefits.

Current/ Future Asset Management. There are some individuals who will never actually have a need for governmental benefits but who are simply unable to manage small or large amounts of assets. A special needs trust assists in achieving the goal of assets management with the necessary protections to ensure against poor money management skills or designing persons.

How Special Needs Trusts play a role.

There exist four (4) standard roles or reasons that people have for choosing to use or using a Special Needs Trust as a tool in their current and/or future estate planning.

  1. Special Needs Trusts help individuals with a disability shelter their own money/ assets in order to help them gain access to and even maintain eligibility for the governmental services system and local human services systems that will follow many individuals for their lifetimes.
  2. Special Needs Trusts help other people give, leave or gift money and/or assets to individuals with a disability without affecting the governmental benefits (mainly MA and SSI) of the individual with a disability.
  3. Special Needs Trusts help other people give, leave or gift money and/or assets to individuals with a disability who may not get or ever need MA or SSI but are clearly unable to manage their own finances.
  4. Special Needs Trusts help other people give, leave or gift money and/or assets to individuals with a disability so that the person gifting the assets can become Medicaid eligible (usually for Long Term Care (LTC) or Nursing Home purposes).

To Maintain Control or To Let Go (at least a little bit) – Looking to the future.

Many people don’t view it as such, but ensuring that a person will, in theory, be eligible for Medicaid throughout their lifetime, is a huge task. Special Needs Trusts make that huge task easily manageable. The creation of and use of a Special Needs Trust for this role provides many families with peace of mind and frees up not only their time, but their thoughts, to other matters.

Using Special Needs Trusts not only helps individuals with disabilities get or maintain governmental benefits, it also allows the family members to choose between maintaining their current level of financial assistance to the individual with a disability or it gives them the option of placing that job into the hands of others, be it other family members or perhaps a third party non-profit special needs trust management company.

Having the peace of mind that government benefits are secured, parents and families turn their eye to the future and look to a time when the individual with a disability will be out on their own (with appropriate supports and services in place) and becoming or continuing to be an active member of the community. They also look further down the road to a time when they won’t be around to help or if they are still around, won’t be in any condition to help.

Special Needs Trusts are a valuable tool for controlling how things will be, financially, for the individual with a disability for the years to come. By establishing a Special Needs Trust families take a positive step towards the future financial security of their loved one with a disability.

A New Kind of Peace of Mind – Private Case/Care Management.

Playing on a common theme that “nobody does as good or thorough a job as mom or dad did”, many people want to ensure that the individual with a disability will have someone who will be able to oversee not just the financial future, but the actual hands on care of the individual with a disability with the same level of interest and follow up that the parent, sibling or relative of the individual with a disability showed during their lifetime. Another play on this is that the employees of the local human services systems are overworked and underpaid and people tend to fall through the cracks with no outside person watching.

To ensure that this does not happen, people are now taking steps to engage private agencies to provide that extra level of oversight or care that a parent or other relative provided. Private case managers are now being more frequently used to assist individuals with disabilities in their daily lives. From attending plan meetings to stopping by each week to check the refrigerator, private case managers are taking up the role that parents or relatives once played. Knowing that this option is in place allows families to kick back and relax and enjoy their golden years or take a trip they have always wanted to go on, knowing full well that if something happens to them, there is a person or agency that will still look in on and look after their loved one.

Many third party non profit special needs trust management companies either provide direct case management services or they contract out for such services from local private providers in the area. Many parents are turning to this option as an added layer of security for their loved one. As many families do not have close relatives or any living or interested relatives, the private case management option is seen as almost a necessity in the coming years. Special Needs Trusts make this option possible now and well into the future when mom and dad may be gone.

Special Needs Trusts Nuts and Bolts- A Mini Guide for Individuals and Families

This mini guide is being presented as a brief overview of the process for determining if a Special Needs Trust is right for you. Please consult an attorney skilled in drafting Special Needs Trusts to get an analysis of your specific legal needs.

  1. Understanding the basics of Special Needs Trusts.
    1. What Are Special Needs Trusts (Background Material).
  2. Determining if a Special Needs Trust is Right for You.
    1. Are you in need of or a recipient of:
  1. Medicaid.
  2. Medicaid and SSI.
  • Money Management Services (more that rep payee)
  1. Shelter Assets for Nursing Home/Similar Placement.
  1. Getting a Special Needs Trust/Initial Consultation.
    1. Picking the Attorney.
  1. Initial Consultation to:
    1. Verify A. and B. above.
    2. Screen for experienced attorney/price shop.
    3. See if SNT’s are really right choice for you.
    1. Deciding on the Type of Trust based on your circumstances.
  1. Pooled.
  2. OBRA 93/Payback/Self-Settled/First Party.
  • Common Law/Third Party/Supplemental.
  1. Other.
    1. Hire the attorney-legal agreement in writing:
  1. What is included:
      1. Who is Grantor.
      2. Who is Trustee(s).
        1. Family.
        2. Friends.
  • Bank.
  1. Attorney.
  2. Non-Profit Management Company.
    1. Not all Non-Profits are created equally.
  3. Who is Beneficiary.
    1. Are they really disabled?
    2. Drafting Tip-one primary Beneficiary per Trust document.
  4. Who is/are Contingent Beneficiaries.
    1. OBRA 93-Intestate Heirs.
    2. Common Law-Anyone you wish.
  • Pooled-None at this time.
  1. Special Considerations:
    1. Individuals with Guardians.
    2. Court as Grantor.
  2. Execution of Documents.
  3. Reporting to DPW/SSA where necessary.
  4. Filing with Third Party Liability where necessary.
  5. Filing with local DPW/SSA where necessary.
  1. Managing your Trust:
    1. Trustee(s) in charge of everything:
  1. Single Trustee.
  2. Multiple Trustees.
  • Single Trustee Non Profit.
  1. Multiple Trustees with Family and Non-Profit Mix.
  2. Other.
    1. Trustees must agree or Court will Decide.
    1. Fiduciary Duties.
  1. Responsible for everything/Not responsible to do everything.
    1. Can hire experts.
    2. Can reasonably rely on experts.
      1. Legal Advice.
      2. Actual management of process.


    1. Disbursements:
  1. Must comply with situation at time.
    1. Must be DPW and SSA compliant as needed.
  2. Must follow Trust Document.
  • Must be reported as applicable.
    1. Filing necessary paperwork.
  1. To DPW/SSA.
  2. To the Court when applicable.
  • Federal/State/Local Taxes.
  1. Terminating the Special Needs Trust.
    1. Consult an attorney.
    2. Payback (if Applicable).
    3. Payout to Contingent Beneficiaries (where applicable).
    4. Wrap-up (Will likely include court filings).