TABLE OF CONTENTS
Acknowledgments ix
About the Authors xi
CHAPTER 1
Introduction of Planning for Special Needs with Trusts 1
I. Demographics 1
A. The Costs of Long-Term Care 3
B. Why Plan to Become Eligible for Public Benefits? 3
II. History of Trust Planning 4
A. Early Trust Practice (No Holds Barred) 4
B. MQT 6
C. OBRA '93 8
D. Medicaid Trusts 11
III. Distinctions between Self-Settled and Third-Party Trusts 11
A. When Can a Self-Settled Trust Actually Be
a Third-Party Trust? 12
IV. Examples of Various Public Benefits Programs 13
V. SNT Requirements Summary 15
VI. Vocabulary 15
CHAPTER 2
Ethical Issues and Fiduciary Representation 17
I. Introduction 17
II. Who Is the Client? 17
A. First-Party Trusts: Is the Question, ?Who Is the Client??
More Complicated? 19
B. Third-Party SNTs: Is the Question, ?Who Is the Client??
Easier to Answer? 21
III. When an Attorney Represents the Trustee:
The Ethical Issues 22
IV. When the Attorney Is the Trustee (or Other Fiduciary) 27
V. Does the Attorney for the Trustee Have Any Duty
or Liability to the Trust Beneficiary? 28
VI. Ability to Share Information with Nonclient Beneficiary 32
A. What about Privileged Information? Is That Protected
from Disclosure? 34
VII. Always an Attorney Must Be Competent 36
VIII. Conclusion 37
CHAPTER 3
Public Benefits 39
I. Introduction 39
II. Various Programs 39
A. Supplemental Security Income 39
B. SSDI 50
III. Childhood Disability Benefits: Transitioning from SSI to SSDI 60
A. Description of Programs 61
B. Eligibility Requirements 62
C. Proving Disability 62
D. Medicare 64
E. Medicaid 65
F. Tips and Tricks 66
IV. Federal Housing Programs under the U.S. Department of Housing and Urban Development 67
A. Description of Programs 67
B. Eligibility Rules 68
C. Tips and Tricks 72
CHAPTER 4
First-Party Special Needs Trusts 77
I. Introduction 77
II. The Statutes and More 78
III. The Program Operations Manual System 81
IV. The State's Medicaid Program 81
V. The State's Trust Code 81
VI. Commentary 82
VII. The Trust Is Irrevocable 84
VIII. Sole Benefit 85
IX. Source of Funds 86
X. Distribution Standard 88
XI. What Are ?Special Needs?? 89
XII. Some Specific Trust Provisions 89
XIII. Submitting the SNT to the SSA for Approval 91
XIV. Who Should Be the Trustee? 91
XV. Case Law 92
XVI. Creation 93
XVII. Payback Requirements 95
XVIII. Administrative Matters 96
XIX. Spousal and Child Support 97
CHAPTER 5
Third-Party Special Needs Trusts 99
I. Introduction 99
II. What Is a Discretionary Trust? 100
III. Distinctions of a Third-Party SNT from the First-Party SNT 104
A. Why a Third-Party SNT? 104
B. Who Is a Third Party? 109
vi Table of Contents
IV. Uniform Trust Code 110
V. Inter Vivos or Testamentary? 114
VI. Distribution Standard 116
VII. Modification 124
VIII. What the Courts Have to Say 126
CHAPTER 6
Modification, Reformation, Decanting, and Directed Trusts 131
I. Introduction 131
II. Modification 131
A. Guidance from the Program Operations Manual System 134
B. Modification: Applicability to Special Needs Trusts 134
III. Reformation 142
IV. Decanting 144
A. Uniform Trust Decanting Act 145
B. State Example: Florida's Decanting Statute 147
C. Decanting Cases 148
V. Directed Trusts 152
A. Case Law on Trust Directors 154
CHAPTER 7
Special Needs Trust Alternatives 157
I. No SNT or Trust at All 157
II. Achieving a Better Life Experience Accounts 158
III. Qualified Disability Trusts 162
A. Elements 164
B. Taxation of Distributions 165
C. Analysis 166
IV. Sole Benefit Trusts 167
A. Elements 168
B. Analysis 169
V. Settlement Protection/Preservation Trusts 171
VI. Health Insurance under the Affordable Care Act 172
Table of Contents vii
APPENDICES
Appendix A
Self-Created Special Needs Trust 177
Appendix B Third-Party Inter Vivos Trust 193
Appendix C Checklist for First-Party Special Needs Trust
Considerations for Interview and Drafting 209
Appendix D Client Interview Questionnaire 213
Appendix E Social Security Administration Notice Letter
for Self-Settled Trust with Payback Language Based
on SSA Step-Action from the Program Operations
Manual System 221
Appendix F Social Security Administration Letter for Third-Party
Special Needs Trust, No Payback 229
Appendix G Social Security Administration Step-Action from the
Program Operations Manual System: SI 01120.203
Exceptions to Counting Trusts Established on or after
January 1, 2000 233
Appendix H Third-Party Special Needs Trust Information Schedule 237
Appendix I Caregiver Letter 245
Appendix J Trustee Letter 251
Appendix K Choosing a Trustee Letter 265
Appendix L Special Needs Alliance Trustees Handbook 273
Appendix M Trust Distribution Standards (a Sampler) 291
Appendix N ABLE Account, Special Needs, and Pooled Trust
Comparison Chart 293
Appendix O Transmittal 64 309
Index 349
