There can be a lot of anxiety when a loved one is in a nursing home and your assets are dwindling at the rate of +$9,000 every month. Unfortunately this anxiety can also lead to poorly informed decisions. Some families I meet come to me with an estate plan that disinherits a loved one that is in a nursing home or on Connecticut Title 19 Medicaid. The logic of this plan is to protect the family assets from being wiped out. This is a knee-jerk reaction that creates more problems than it solves in my opinion.

What can go wrong?

Many times I have family members contact me because a parent has disinherited the other parent (living in a nursing home or diagnosed with dementia) with the understanding that one child or all the children would actually use the funds to provide care for the surviving parent.

The first issue is that such an arrangement is almost non-existent on the scale of enforceability. At best there could be an oral trust but one side of the oral contract is deceased and if there is a conflict it is obvious that the other side of the contract (the child who received the funds) is saying there is no contract. Where is the evidence? At worst, the funds received by the child or children are treated as they look, outright bequests with no strings attached.

A second issue is liability concerns. The funds you intend to care for the surviving parent are now exposed to the liabilities of the person chosen to hold the funds. Common liability risks include divorce, bankruptcy, or even a car accident.

A family with a loved one in a nursing home or on a government benefits program has a choice. Disinheritance is not the only option. Disinheritance is not the preferred option and the government even recognizes this fact by providing specific protection to specific estate planning strategies.

A Special Needs Trust allows you to leave a legacy of care for a loved one in a nursing home without handing over everything to pay nursing home bills. It is absolutely critical that this unique planning is done by an experienced Connecticut special needs attorney because these trusts are reviewed by government benefits agencies and in Connecticut they are usually reviewed by the Attorney General’s office. One mistake in the document and the assets of the trust could be used to pay for bills you did not intend to pay.

I have seen too many families torn apart by using disinheritance as asset protection. There is no need for it. You have a choice. Put your plan on paper and leave your family with some security.

Related posts:

1. Critical Medicaid Mistake #1
2. The Special Needs Trust – How to Secure the Future for Your Disabled Child
3. Critical Connecticut Medicaid Mistake #3

Rome v. Wilson-Coker (Ct. Super. Ct., No. HHBCV064012367S, Oct. 24, 2007).

Marjorie Rome is bipolar with a history of institutionalizations. She needs help and a certain level of benefits to receive treatment for her condition. Presumably with good intentions and a desire to help Marjorie, her father created a trust for Marjorie in his will. The trust was based on the model of a discretionary trust which vested discretion in the trustee to make or refuse distributions for Marjorie’s benefit.

Unfortunately, for some reason which I fail to comprehend, the trust language directed the trustee to make distributions as necessary for Marjorie’s “interest and general welfare, even to the extent of exhausting the entire Trust estate.” This is a big blunder if you want to include asset protection in your estate plan or trust and it cost the Rome family.

So eventually Marjorie entered a nursing home and applied for Medicaid. The Department of Social Services denied her application based on their determination that her father’s trust was available to Marjorie as an asset. The Trustee thought it was a good idea to deny distributions to Marjorie for nursing home costs, mistakenly believing that he actually had real discretion to do so.

Marjorie Rome later pleads her case to the Superior Court claiming that the trust is not available because the Trustee is refusing to make distributions to her. The court recognizes that the flawed language in her father’s trust gives Marjorie a right to compel distributions from the trust even if the Trustee refuses.

Her father made a mistake in his estate plan, and Marjorie had to pay for it. If you are looking for asset protection, do everything you can to make sure it works.

Related posts:

1. The Connecticut Medicaid Asset Protection Trust
2. Medicaid Asset Protection Questions
3. Reminder – Medicaid Asset Protection Workshop

I had hoped this would not become a snowballing trend because in many ways it is truly horrible. Unfortunately here I am writing about it again because Wal-Mart recently won an appeal to recover an entire settlement from one of their health insurance customers.

The customer suffered the injury and went through the process and expense to get the settlement, then Wal-Mart comes in after the customer did all the work and makes a claim for reimbursement of medical costs they paid. And to make it worse, they made the claim and were successful against the funds that went into a special needs trust.

Wal-Mart was paid, the attorneys were paid, and the injured person received nothing. If you ever pursue an injury lawsuit be sure your attorney has a plan for how to handle an ERISA reimbursement claim from your health insurer or you could end up with nothing to show for your time and effort at the end of the day.

You can read the full story here.

Related posts:

1. ERISA Reimbursement v. Special Needs Trust
2. The Special Needs Trust – How to Secure the Future for Your Disabled Child
3. Medicaid Recovery Law More Aggressive Than Ever

I am afraid the discussion of providing a secure future in case things do not go according to everyone’s own life plan happens all too infrequently based on the number of conversations I have had myself recently with families unaware of how critical it is to implement a plan to provide quality of life to a special needs child if the unexpected should happen.

What is the plan for educational needs?

Who will pay the medical bills if your child is no longer on your health insurance?

Will your child only survive with the bare minimum from government benefits programs or will you put in place a plan for the same quality of life you would provide?

Update: The original article “Providing for a Special Needs Child” is no longer available from the original site.

Related posts:

1. Critical Medicaid Mistake #2
2. ERISA Reimbursement v. Special Needs Trust
3. Estate Planning For Title 19

Families with special needs children often face difficult decisions about education. In many cases, public schools are either not equipped or trained to provide a satisfactory educational experience for special needs children. Where can you go to get the best for your child?

The Individuals with Disabilities Education Act (IDEA) was originally enacted in Congress in 1975. Significant amendments were added to the law in 1997, including tuition reimbursement provisions for special needs families that can not find a suitable educational experience in their public school system. Over the years there have been numerous cases across the country that have attempted to clarify the parameters of when a family is entitled to reimbursement under the 1997 amendments. As you can imagine, different courts came to different conclusions and interpretations.

Just last week the U.S. Supreme Court jumped into the fray showing an interest in establishing some uniform guidelines. The specific case was an appeal from the federal 2nd Circuit, which includes Connecticut, so the decision is binding for Connecticut cases.

The case (Board of Education v. Tom Freston, 06-637) centers on a 1997 amendment to the Individuals with Disabilities Education Act (IDEA), which requires states provide “free appropriate” public education for students with disabilities. The specific issue is whether that law requires children to first receive “special education and related services” from a public agency before their families pursue reimbursement.

An independent hearing officer ruled in favor of the Frestons, but Southern District of New York Judge George Daniels sided with the city. In a summary order in August 2006, the 2nd Circuit reversed Daniels’ decision, saying it would lead to absurd results.

In the 2nd Circuit opinion, Judge Edward R. Korman, the chief judge of the Eastern District of New York, said the city’s view of the statute would “place the parents of children with disabilities in the untenable position of acquiescing to an inappropriate placement in order to preserve their right to seek reimbursement from the public agency that devised the inappropriate placement.”

Nine days after hearing oral arguments in Board of Education v. Tom F., 06-637, the Court split 4-4, thereby affirming the 2nd U.S. Circuit Court of Appeals’ finding in favor of Mr. Freston — the boy’s father.

In its two-sentence opinion, the Court did not reveal the judges’ individual votes, stating only, “The judgment is affirmed by an equally divided Court. Justice Kennedy took no part in the decision of this case.”

It is a split decision and not a loud endorsement, but if you are a family with a special needs child in Connecticut your case for tuition reimbursement just got stronger.

This issue may be considered again by the U.S. Supreme Court as the split decision did nothing to resolve a split in authority with the 1st Circuit, where an appellate panel ruled that students must first avail themselves of the public school system before their parents seek reimbursement.

Related posts:

1. ERISA Reimbursement v. Special Needs Trust
2. Think Twice Before Giving Away Your Home

When the federal government enacted the Omnibus Reconciliation Act of 1993, however, it made it possible for you to 1) provide funds to support your special-needs child and 2) retain your child’s eligibility for federal, state and private charitable benefit programs such as SSI and Title 19 Medicaid.

The Omnibus Reconciliation Act of 1993 excluded from benefit program eligibility requirements the legacy left to special-needs children in a properly created Special Needs Trust. A Special Needs Trust may provide no advantage if it is not properly established.

How to Secure the Future with a Special Needs Trust

The Special Needs Trust is simple to establish, and it not only provides immeasurable peace of mind, it also gives you complete control over your child’s care.

You work with your estate planning attorney to appoint Trustees for your child’s Special Needs Trust. The Trustees oversee your child’s well-being and manage the estate you or anyone else leave for his or her benefit. So there is no need for a probate court to determine your child’s fate.

Unlike the guardian or conservator a probate court might appoint, these Trustees are people you know and trust. Relatives or close family friends can be appointed to supervise your child’s personal care.

To work with financial institutions and manage the estate, you may want to appoint a professional financial advisor, as a Co-Trustee.

As part of setting up your child’s Special Needs Trust, you provide detailed written instructions in the trust to direct the Trustee’s activities. By law, Trustees must follow these instructions to the letter. So you have a tremendous degree of control over your child’s education, housing, and other needs.

Best of all, the Special Needs Trust preserves your child’s eligibility for federal, state and charitable benefit programs such as SSI and Title 19 Medicaid. The only requirement is that the funds withdrawn from the Special Needs Trust must be for purposes other than those covered under the governmental and private benefit programs. The concept is fairly simple, but the execution is technical and complex. Special Needs Trusts are carefully scrutinized by government benefits agencies and one error in the language of the trust can undo everything it is designed to accomplish.

Related posts:

1. ERISA Reimbursement v. Special Needs Trust
2. Critical Medicaid Mistake #2
3. Celebrity Estate Plan – Leona Helmsley

Recently, U.S. District Judge John P. Fullam made an interesting decision in Mills v. London Grove Township. Judge Fullam strictly interpreted the insurance company’s claim for reimbursement to only exist against the ERISA beneficiary which in this case was the child’s father. The litigation on behalf of the child, Grace, was settled by placing the funds directly into a Special Needs Trust to provide ongoing care. Judge Fullam relied partially on this fact to deny the insurance company’s claim for reimbursement against the funds allocated to Grace’s Special Needs Trust.

This is an important decision for parents with children that have been injured and that use a Special Needs Trust to provide for their child. If the decision stands on appeal, parents can hope to preserve more of their child’s funds for their own care without reduction by insurance reimbursement claims.

You can read the full opinion here.

Related posts:

1. Wal-Mart’s ERISA Insurer Strikes A Special Needs Trust
2. School Choice and Reimbursement for Special Needs Families
3. The Special Needs Trust – How to Secure the Future for Your Disabled Child

Related posts:

1. The Special Needs Trust – How to Secure the Future for Your Disabled Child
2. Consumer Alert: The Estate Plan, or No Estate Plan?
3. Celebrity Estate Plan – Leona Helmsley

The perfect trustee (if there were such a creature) – would have all of the following characteristics: competence, the ability to act without conflict of interest and in the best interests of the beneficiaries, an understanding of your objectives and knowledge of your beneficiary’s needs, knowledge of the subject matter of the trust, experience, availability and willingness to serve, and proximity to your beneficiary. Obviously no trustee will meet all these criteria. A good trustee will satisfy many or most of them.

COMPETENCE. A competent trustee should be able to understand the nature of his or her specific duties, select a course of action to take, recognize the limits of his or her knowledge and capabilities, and have the maturity to secure professional assistance where and when needed.

ABILITY TO ACT IN THE BEST INTERESTS OF THE BENEFICIARIES. To fulfill his or her fiduciary responsibilities, a trustee should make all decisions in the best interests of the beneficiaries. In addition to following the terms of the trust while maintaining impartial and absolute loyalty to the trust beneficiaries, the trustee must have the objectivity and fortitude to make difficult and, perhaps at times, unpopular decisions. For instance, a trustee must assess the beneficiary’s maturity and capability of running a family business, whether it is the type of business in which the beneficiary should invest, and what the effects of saying “no” will have on this beneficiary, and “yes” to the others.

UNDERSTADING OF YOUR GRANTOR’S OBJECTIVES AND KNOWLEDGE OF YOUR BENEFICIARIES’ NEEDS AND CIRCUMSTANCES. Before making any important decisions, the trustee must understand your priorities (as to which preference or whose interest should take precedence) and goals as well as the financial needs of the beneficiaries. The trustee must also be aware of any special needs of a beneficiary. For example, a child might be physically or mentally challenged and require special care and treatment. These considerations must be incorporated into the overall financial and trust planning.

KNOWLEDGE OF THE SUBJECT MATTER OF THE TRUST. An individual trustee may be able to manage the few periodic and routine administrative duties if most of the trust assets consist of mutual funds. If the bulk of the trust assets consist of listed securities, the trustee should work with, or have access to a good investment advisor. Alternatively, a bank or trust company with a competent investment department that can handle the trust assets more effectively should be considered as a trustee (or co-trustee). However, if the trust assets mainly consist of a family-owned business or a unique piece of real estate, it would be helpful if the trustee has experience working or dealing with the business or assets (or similar ones of its kind) in question.

EXPERIENCE. The job of a trustee is often difficult, time-consuming and multifaceted. It is wise to select someone who, because of background and experience, is familiar with the duties and responsibilities that he or she will be asked to undertake. Consider choosing professional trustees to act as sole trustees or, often better yet, as co‑trustees. These persons or entities could share the trusteeship with family members or long-time friends who might have a close and caring relationship to the beneficiaries, but who lack the background and experience (and perhaps time and inclination) to perform the important functions required of trustees without assistance.

AVAILABILITY AND WILLINGNESS TO SERVE. Not only are a trustee’s duties difficult and time-consuming, but they can often extend over long periods of time. Obviously, you are imposing a tremendous obligation when you appoint someone as a trustee to handle, supervise, and manage the trust assets for young beneficiary(ies).

PROXIMITY TO BENEFICIARY. Your sister in California might otherwise have been an excellent choice as trustee – except that your grandson (the trust beneficiary) lives in Florida and has ongoing needs that must be attended to on a regular basis. In this case, it might be more practical and beneficial to appoint someone locally, perhaps to serve with your sister as a co‑trustee, so that there is a co-trustee nearby to make sure that the beneficiary’s needs are met on a timely and regular basis.

CONCLUSION

It is exceptionally important to be aware of the characteristics of a good trustee and employ them as criteria in the trustee selection process. A wise choice will significantly enhance the probability that your objectives will be accomplished with the least costs and conflicts.

Related posts:

1. Know Your Estate Plan – Executor and Trustee
2. The Special Needs Trust – How to Secure the Future for Your Disabled Child
3. Myths & Realities of Living Trusts in Connecticut