CFPC Guest Chat Transcript - August 15, 2007

 

Topic:  “Planning for the Future – Special Needs Trusts.” 

 

Guest Speaker: Mr. Thomas Nurse, MetDESK Specialist 
with MetLife's Division of  Estate Planning for Special Kids
Financial Advisor with New England Financial   
Registered Representative with New England Securities

 

 

Tom Nurse:  Welcome!  Tonight we're talking about planning for the future by recognizing the value of supports provided by family and looking at special needs trusts funding to secure future care.  My first question would be what questions do the participants have about that topic?

 

Question:  I have a question, with special needs trust, can you still have a pre-paid college fund?

 

Yes because the Florida 529 plan which is a type of prepaid the owner is the parent, not the student although those plans do have limits on what those funds can be used for they may not offer the flexibility that may be needed in the future for individuals with special needs.  I recommend considering an investment fund inside a special needs trust in addition to a 529.

 

Question:  With a special needs trust is there a dollar limit on the setup or on the amount that it's allowed to have? 

 

No there is no limit on the amount that can be inside a special needs trust

 

There are three types of special needs trusts...

 

One is called a pooled trust - that serves people of lower or more moderate incomes and some of those pooled trusts can be established without any funding and are set up to be active once money arrives.  There are also options to defer the setup cost until money actually arrives.   You can set them up empty and fund it with say a life insurance policy or the sale of a house, etc.

 

(Tom was unable, during the chat session, to continue on about the three available trusts, so we called him and he provided us with the remainder of his answer, seen below in italics.)

To finish my answer ...In addition to the pooled special needs trust (SNT), an individual with special needs can establish a SNT using their own money from savings, inheritance, or settlements. This type of SNT is also known as a self settled trust, and finally  others like parents, grandparents or the courts can establish and fund a SNT for the person with special needs and this type is sometimes referred to as a third party special needs trust.

 

Here's a link to the Special Needs Alliance that may be a helpful website for participants  to review. http://www.specialneedsalliance.com/families/trusts_disabled.tpl

 

 

Question:  One question that I have is how do we make sure that our children are being taken care of when we die?  Keep in mind that at that point designated trustees are probably dead also and distant relative's children won't care enough to do much of anything.  What do we do?

 

There's a role called a trust protector... who acts like a watchdog of the trust, keeping an eye on the trustee... the other thing is... quality planning would also include successor trustees... and may also involve a corporate trustee.... like a bank.   So you could plan it in such a way that there are checks and balances (like the trustee protector, etc).

 

Question:  I have successor trustees listed but like I said, you can only take that so far.  A bank will only worry about the money, not the care.

 

Then I would consider changing trustees, if that's what you're worried about.  If you don't trust your trustee, get a different one.

 

Question:  Can you put your house in a trust?

 

Yes.  Typically, a house is kept outside of a trust because a house and a car have the greatest liability exposure, but you put all the funding necessary to maintain the house inside the trust.  You are currently allowed to own a house of any value and still receive benefits.  A house and a car are excluded from the $2000 asset cap. 

 

Question:  What must a supplemental needs trust say?

 

It's a detailed legal document prepared by an attorney that must also be reviewed and approved by the Social Security Administration and it is very complex, the wording.  It is critical to utilize an attorney who specializes in special needs law to draft the document.  The planning is done on a very individualized basis because families and needs are different with everyone.

 

About one-third of the clients I see have a special needs trust but never determined how much money would be needed to adequately fund it or determined where it was going to come from, and how that worked with the rest of the family goals, like caring for the other children, retirement, etc.

 

Question:  Does a trustee make them guardian?

 

No.  Typically they are two separate people and we encourage that.  Having the guardian and the trustee be separate helps to create some checks and balances.  These decisions of who will be in charge... are very difficult to make... and can be changed as the situation changes...

 

One of the most important things to do is to have these discussions, and establish these plans - while you're still here to do it!

 

Question:  There needs to be a role for an organization or agency when there are no relatives left who care.

 

There are organizations.. nonprofits and for-profits... than can do that... for example, there is an organization called Aging Wisely... which assists with care management and medical records management. 

 

There are prepaid care plans... look into them carefully and review the financial stability of the organizations and the scope of their commitment.

 

They do exist.

 

Question:  Can i set up an account in somebody else’s name and feed the trust, such as setting up and account in my brother’s name, which he will use to take care of my child?

 

Why would you consider doing that instead of just establishing a special needs trust?   A much better solution is to establish a special needs trust with an investment account inside.

 

At the passing of the person with special needs, any remaining assets in the trust may be able to go to the other family members.   And during your lifetime, YOU are the trustee, so it is already set up while you are here. 

 

The reason that it would not be a good idea to put it in a brother's name is that

if it is in someone else's name and they get married and divorced, half that money would disappear or if he got sued over something unrelated, then all the money is gone. 

 

Question:  Does special needs trust protect eligibility for public assistance programs such as Medicaid and SSDI?

 

Yes, as long as properly administered.

 

Question:  My lawyer indicated that we couldn't be the trustees.  It had to be someone else.

 

Get another lawyer.  I can't stress enough the importance of getting an attorney who KNOWS special needs trusts and how they work.  It's like going to the pediatrician for brain surgery.

 

Question:  I am German.   Can i set up account in Germany?

 

I'm not familiar with German law.  Special needs trusts here in the United States were established by Congress and signed into law by the president in 1993... However, the primary purpose of special needs trusts in the US is to maintain eligibility or needs-based-benefits like Medicaid and Med-Waiver, which both have income and asset limits.  Health care access in Europe is radically different.  Part of the planning process is identifying an annual financial support needed plus the number of years of life expectancy adding an inflation factor and an anticipated return on investment.

 

Question:  Can a grandparent begin a special needs trust?

 

Yes.  It is very common for grandparents to do this because they recognize the intense supports provided by families and sometimes they are in a better financial position to help.

 

For example, if we were planning for fifty more years of life-expectancy, wanting to leave $4000 a month for care... including the 3% inflation factor and assume a 6% return on investment... If you funded it in year one, it would take 1.3 million dollars.  In year 30, there would be 1.8 million.  These numbers are staggering but obtainable utilizing different financial vehicles.

 

Question:  What administration services are offered in a special needs trust?

 

Some administration services offered are: bill paying, hiring caregiver staff, and investing assets, monitoring caregivers or any variety of those options.  It varies from trustee to trustee. 

 

Moderator:  We have ten minutes left.  We would like to suspend questions at this time and allow Tom to use the final minutes for summation.  I thank you all for your questions.  :)

 

Tom Nurse:  It's important to utilize trustees that are sensitive to the issues and needs of special needs.  Special needs planning is very helpful in addressing the greatest concern that many families have... which is "What will happen to my child when I'm no longer here?"  This planning is very emotionally-intense but the end result can provide greater peace of mind and has oftentimes enhanced the communication and understanding across families of what parents and caregivers do everyday.

 

I am very proud of the work I do... and the futures we are helping to create... and I encourage you to proactively move forward with this process... and to update your planning as life evolves.

 

I appreciate the interest and quality of the questions tonight and I again offer to speak to anyone individually confidentially and I can be reached at 813-383-5216 or via email at tnurse@tampa.nef.com.  I do not charge a fee and I only get paid if I can help find solutions that you willingly choose to do.

 

As the father of a 16-year-old on Med-Waiver.. I was so impressed with the planning process when my family went through it I have chosen to do this for the remainder of my working years.

 

Thank you again for the opportunity and I look forward to hearing from you.

 

 

Thank you, Tom!

 

 

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