Trusts are great tools to help clients achieve a variety of goals including, but not limited to:
- Avoiding probate of assets at death
- Reducing estate taxes at death
- Qualifying for Medicaid assistance
- Preserving an inheritance for a beneficiary with special needs or a disability
Knowing which trust you need should not be left to chance. Nor should administering a trust when the owner becomes incapacitated or dies. I invite you to consult with me about your goals, wealth and family dynamics so that together we can create a plan to meet your needs. I represent family member trustees as well as professional corporate trustees in guiding them through their fiduciary duties and responsibilities. For a two-part article Stephanie wrote that was published in The Florida Banker’s Journal called “Special Needs Trusts – The Wave of the Future.” Click Here: [Part 1] [Part 2]
The following are just a few examples of the types of trusts that we advise clients about:
Revocable Trust (Living Trust)
This estate planning tool provides a management plan for assets during the owner’s incapacity. It also achieves a second purpose of facilitating a private distribution of assets at death, thereby avoiding the Court probate process. The revocable trust identifies a fiduciary called a Trustee to administer, manage and invest the assets while the owner is alive as well as designating a successor Trustee when the owner is incapacitated or dies. The document also identifies the beneficiaries who will receive certain assets at the death of the owner (similar to a Last Will & Testament). However, it is necessary that assets be titled in the name of the revocable trust in order to avoid probate. Not all assets should be titled in the name of the revocable trust or designate the revocable trust as a beneficiary. It is therefore important to discuss this with your attorney.
Qualified Medicaid Income Trust
This planning tool allows a person with a chronic illness whose gross monthly income exceeds the Medicaid income limit to qualify for Medicaid assistance. After the trust is created a bank account is opened in the name of the trust and the monthly income that exceeds the Medicaid limit is placed into that bank account each month. The monies in the qualified income trust account can be used to pay for medical expenses if the client is living at home; if the client is living in an assisted living facility or a skilled nursing facility it is used to pay their patient responsibility.
An irrevocable trust is a legal entity where the terms of the trust do not allow revocation, modification, or amendment in any way. It may be used for tax planning purposes. This may be used as a tool in long term care planning and estate planning when determined by an experienced attorney based on an assessment of your particular situation.
Special Needs Trust
A Special Needs Trust can be created as a stand-alone document or, within a Last Will & Testament or, within a Revocable Trust to hold an inheritance for a child or an adult with special needs or a disability. The disability can be physical, mental, cognitive, or emotional. Special needs trust assets can be used for the sole benefit of the person with a disability to purchase services and products that will provide quality of life and quality of care. When the special needs trust is properly written it will result in the trust assets not being counted by the Medicaid agency or the Social Security Administration so the beneficiary does not lose their government benefits.
There are several types of special needs trusts. For example, a First-Party created special needs trust is used when a person receives a lawsuit settlement or, a direct inheritance. If the person with the disability is competent, they can sign the special needs trust agreement; if they are not competent the special needs trust can be created by a parent, grandparent, guardian or a court. Federal law requires that a first-party created special needs trust contain a “payback provision” that states when the beneficiary dies Medicaid is first entitled to be reimbursed up to the amount of Medicaid assistance paid for the trust beneficiary. After Medicaid’s lien is satisfied any remaining trust assets are distributed to the designated beneficiaries.
A Third-Party created special needs trust is created by a person who does not owe a legal duty of support to the person with the disability (also referred to as the trust beneficiary). This type of trust is not required to contain a payback provision.
Representation of Trustees
In Florida a Trustee has specific legal duties that must be fulfilled in order to properly administer a trust such as a revocable trust, insurance trust or special needs trust, and avoid personal liability. My firm uses its experience to counsel a Trustee about:
- The Prudent Investor Rule,
- Interpreting the trust agreement,
- Requirements for providing a trust inventory and accountings to the beneficiary(ies)
- The new Florida Trust Code
- Government benefit rules that are unique to special needs trusts, and much more.
You may have chosen a dear family member who is the most honest, well-intentioned and dedicated advocate serving as trustee for the beneficiary. They may spend hours speaking with doctors, social workers and residential counselors. They may use those trust funds to make the beneficiary’s life as comfortable and enjoyable as possible. However, if they cannot accurately account for every dollar spent from the trust, they are potentially liable. If the Trustee spends trust funds in a manner that violates an SSI or Medicaid program rule, then the trust beneficiary’s government benefits may be at risk.
I strongly recommend that a trustee not ‘cut corners’ by guessing what their responsibilities are without competent legal counsel. A trustee could be unintentionally violating the law which may result in being removed as trustee and/or being surcharged for failure to properly administer the trust. After consulting with me you will be educated and feel confident that you can fulfill your fiduciary responsibilities to the beneficiary(ies)
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