Florida Estate Planning Lawyer Blog

A Florida Supplemental Needs Trust (SNT), also known as Florida Special Needs Trust, is a unique trust designed to benefit an individual with a disability. Supplemental Needs Trusts can be broken down into two categories, third party and self settled. In a well-executed SNT, an unlimited amount of assets can be placed in the trust for the benefit of a disabled person without jeopardizing their qualification for government benefits. These trusts are designed to provide for the extra care and costs above that which governmental benefits supply.

The self settled, or self created, supplemental needs trust has been officially recognized by Congress to benefit individuals under the age of 65, who have a physical or mental disability.
When creating a self settled SNT it is important to know that any assets remaining in the trust at the death of the disabled beneficiary will be used to reimburse the state for Medicaid benefits paid on behalf of the beneficiary. If there is a balance left over it will be distributed to the remainder beneficiaries identified in the trust document.

On the other hand, third party SNT can be created by anyone who is not obligated to support the beneficiary. As long as the third party SNT is irrevocable, the trust assets will not be a countable resource for Medicaid purposes. Explicit language must be used in this trust in order to guarantee the trust resources are not countable assets. In contrast to a self settled SNT, a third party SNT can distribute any remaining funds in the trust after the death of the disabled beneficiary to whoever the grantor designates as the remainder beneficiaries. There is no requirement to include the State for benefits received.

Very sensitive issues are involved when applying for government benefits such as Medicaid and Social Security. Asking for assistance from a Florida Estate Planning Lawyer or Jacksonville Estate Planning Lawyer can help you find comfort knowing that a Supplemental Needs is set up correctly.

When a Florida Trust is created, the creator of the trust designates a trustee to monitor the trust. There is great responsibility that comes with being the trustee because this individual, or group of individuals handles the distributions to the beneficiaries according to the terms of the trust document. The terms may place numerous restrictions on the distributions made to beneficiaries or the trust may give broad discretion to the trustee to make the distributions. In addition, Florida law places additional requirements on a trustee that may not be apparent from the reading of the document. Circumstances can arise where a trustee wishes to resign their position as trustee.

In order to resign your position as trustee in Florida, you must comply with Florida statutory law. Florida Statute § 736.0705 governs the resignation of a trustee. It says that a trustee may resign if at least 30 days notice is given to all qualified beneficiaries, the settlor (creator) of the trust if still living, and all co-trustees. A trustee can also petition the court for resignation and then may be relieved of their position with the courts approval.

This does not mean that the trustee will escape liability for acts done before the trustee’s resignation. If the resigning trustee has committed some breach of their duties to the beneficiaries, they can still be held accountable for those acts. For more information on your Florida Revocable Trust or if you have any trust administration questions contact a Florida Trust Lawyer today.

The Trials and Heirs blog\ recently had an article about how to avoid exploitation of the elderly by a family member. They recommend

1 Getting Expert advise who knows the ins and outs of estate planning. I would also recommend using a Florida Estate Planning Lawyer who is familiar with Florida Elder Law.
2. Be careful of Joint accounts as they can take the money or create ineligibility for nursing home coverage.
3. Consider "Springing" Powers of Attorney or as we call them contingent Durable Powers of Attorney as they only give powers once you are incapacitated.
4. Choosing Wisely which may mean not choosing a family member or the oldest child because of emotional reasons.
5. Having Checks and Balances by using more than one person to make decisions and to avoid fights.
6. Selecting someone to monitor your accounts. This person can be a trusted advisor and should have the ability to question and stop inappropriate actions.

These are issues that should be dealt with in Florida Estate Planning as well as to avoid abuse of the elderly. To discuss your concerns or issues contact a Florida Estate Planning Lawyer

Florida Special Needs Trust Lawyers & Florida Supplemental Needs Trust Attorneys.

Florida Families who have disabled children had a greater need for a Florida Estate Planning Lawyer to prepare for the possibility that they do not outlive their children. When people have disabilities or special needs, its important to parents to provide for their welfare while you are alive. There are also significant advantages to creating a Florida Special Needs Trust or a Testamentary Special Needs Trust.

When assets are left to an individual with special needs in a normal trust or outright, it could disqualify the individual from government benefits as well as require that any remaining assets be paid to the government for reimbursement of services provided during the individual's life.

By using a SNT or Florida Special Needs Trust one can usually choose a remainder beneficiary, that is who will receive any funds that are not used by the individual with the disability during their life.

In addition, without a Florida will with a valid guardian clause, the state will determine if your child ends up in foster care or who will be the guardian over your child.

Contact aFlorida Trust Lawyer to discuss how a Florida Trust Lawyer can help you and your family.

The following fifteen common assets and applicable beneficiary designations should be reviewed to make sure they will not be paid (or given) directly to the special needs child:

(1) IRA, 401(k) and other retirement benefits.
(2) Life insurance (including employer-provided life insurance) benefits.
(3) Accidental death and travel insurance benefits provided through credit cards when a person purchases a plane ticket, etc. using that credit card.
(4) Annuities.
(5) Savings Bonds.
(6) Any property not subject to the parents’ will or trust.
(7) UGMA or UTMA accounts.
(8) TOD, POD, ITF designations on accounts, savings bonds, or securities.
(9) Inheritances, gifts, or bequests through another person’s will or trust (if not paid to a third-party created and funded SNT).
(10) Deeds.
(11) Joint accounts.
(12) Jointly owned property, including jointly owned real estate.
(13) Final paycheck (including unused vacation and sick pay).
(14) Collectibles, antiques and family heirlooms.
(15) Personal injury and wrongful death proceeds payable to a parent’s estate (in contrast to personal injury and wrongful death proceeds payable, by law, directly to the special needs child).
(16) Homestead laws that give the surviving spouse a life estate and the minor children a vested remainder interest (as does Florida law in certain instances).

An alternative to a stand alone third-party created and funded SNT is to have the parents’ last will and testament or their revocable living trust contain third-party created and funded SNT provisions.

A third-party created and funded SNT can have a trust protector. At a minimum, the trust protector should can have the power to: (i) direct the trustee’s actions; (ii) receive financial-investment statements and accountings; (iii) terminate the trust (and have the assets be distributed to the remainder beneficiaries), (iv) remove and replace a trustee, and (v) direct or approve the reformation or amendment of the trust to reflect changes in the law and in order to comply with the trustmaker’s intent and purpose.

For tax reasons, a trust protector should not be “related or subordinate” to the settlor or the trust beneficiaries, within the meaning of IRC section 672(c).

The thirteen benefits of an inter-vivos stand alone third-party created and funded SNT are:

(1) The trust can be established by the parents (or by any third party, such as the grandparents) for the benefit of the special needs child.

(2) The trust provides for the investment and management of the special needs child’s inheritance by a third party - the trustee.

(3) The persons establishing the trust (such as the parents or grandparents) decide the terms and conditions of the special needs child’s inheritance and who is to receive the balance of the trust funds when the special needs child dies - rather than having to reimburse the government for Medicaid and/or “cost of care” benefits provided to the special needs child. One of the significant differences between a between a third-party created and funded SNT and a first party SNT is that there is no Medicaid payback requirement for a third-party created and funded SNT, and a third-party created and funded SNT should not contain a Medicaid payback provision.

(4) The trust does not have to be for the “sole benefit” of the special needs child; other children of the parents can be current beneficiaries (although it is generally recommended that the special needs child be the preferred beneficiary vis-a-vis the other current beneficiaries).

(5) The persons establishing the trust can name who should serve as the initial trustee and as the successor trustees, thereby avoiding the risk of the probate court appointing a “stranger” as a trustee.

(6) The trust avoids family conflict, since the trust spells out who gets what, when, how, and why.

(7) The trust avoids a probate court guardianship for the special needs child’s inheritance.

(8) The trust (if properly drafted and administered) maintains the special needs child’s eligibility for government benefits (assuming the child is otherwise qualified to receive government benefits).

(9) The trust coordinates government benefits and trust assets to meet the special needs child’s lifetime needs.

(10) The special needs child can be any age (i.e., the trust is not limited to a special needs child under age 65).

(11) The trust can provide for the appointment of an independent advocate for the special needs child, regardless of whether the child has a guardian, as well as a Trust Advisory Committee to advice the trustee concerning distributions for the benefit and well being of the special needs child.

(12) The trust protects the special needs child’s inheritance from being seized by his or her creditors, and avoids the imposition of a Medicaid lien.

(13) The trust can be “simple” or “sophisticated,” depending on the amount and type of assets that are used to fund the trust.

The principal purpose of a third-party created and funded SNT is to provide an inheritance for the special needs child without risking the loss of important government benefits such as SSI, Medicaid, etc. Consequently, it is important that grandparents and other relatives (including the siblings of the special needs child) not leave an inheritance outright to a special needs loved one.

Fortunately a parent’s stand alone inter-vivos third-party created and funded SNT can be structured to receive gifts, bequests, and inheritances from grandparents (and other relatives/friends) for the benefit of the special needs child. This avoids the grandparents (or other relatives/friends) having to prepare a separate third-party created and funded SNT.

There Are Many Ways A Special Needs Child Can Receive An Outright Inheritance and Lose Means-Tested Government Benefits. A special needs child can receive an outright inheritance in indirect ways. For example, if the grandparent’s will leaves his or her estate to “my descendants, by right of representation,” and the parent of the special needs child predeceases the grandparent, actually or presumptively under the requirement for survival (typically 120 hours (or 90 days for GST tax purposes)), a portion of the deceased parent’s share of the grandparent’s estate will pass outright to special needs child, and possibly disqualify the child from receiving certain government benefits.

Another way, that is not so obvious for a special needs child to receive an outright inheritance, is when an unmarried adult sibling dies without children and leaves his or her estate to his or her “heirs” and the decedent’s parents are also deceased. In such instance, the decedent’s special needs sibling (as an heir of the decedent) will receive an inheritance.

The trustee of a third-party created and funded SNT is given complete discretion in making distributions to or for the benefit of the special needs child. Thus, who should serve as the trustee of a third-party created and funded SNT is important.

The selection of the trustee involves many considerations, including the trustee’s ability to understand and respond to the needs of the special needs child; the trustee’s knowledge of government benefit programs and the effect that trust distributions will have on the special needs child’s government benefits; the trustee’s health, integrity, reliability and financial acumen; the trustee’s potential for a conflict of interest if the trustee is a current or remainder beneficiary of the trust; the potential for adverse income and transfer tax consequences if a family member serves as a trustee and is also a current or remainder beneficiary of the trust, etc.

Caution: Due to SSI and Medicaid rules and for various tax reasons, neither the special needs child nor his or her spouse should serve as trustee of either a third-party or first- party SNT.

There are five estate planning options available to parents concerning their special needs child:

(1) Distributing assets outright to the special needs child (not recommended since the assets may disqualify the child from receiving means-tested government benefits);

(2) Disinheriting the special needs child (generally not recommended since the child will have no “safety net” if government benefits are subsequently reduced or eliminated);

(3) Leaving property to another family member with the “understanding” that the property will be used for the benefit of the special needs child (generally not recommended since the arrangement is not legally enforceable and the sibling’s creditors (including a potential ex-spouse) may be able to seize the assets);

(4) Establishing a third-party discretionary support trust for the special needs child (generally not recommended since the trust will, in many states, disqualify the child from receiving means-tested government benefits); and

(5) Establishing a third-party created and funded SNT for the special needs child (highly recommended since the trust will not disqualify the child from receiving means-tested government benefits).

If an irrevocable inter-vivos third-party created and funded SNT is established by the parents or grandparents, the parents’ (or grandparents’) wills should specify the source for the payment of any death taxes attributable to the trust if any part of the third-party created and funded SNT is included in the parents’ (or grandparents’) gross estate. These trusts should not include a Medicaid Benefits payback clause. If its not drafted properly you can create a requirement to reimburse Medicaid.

Tax planning should not be ignored when preparing an estate plan that involves a special needs child.

There is a general (and incorrect) assumption among some estate planners that taxes are of little or no concern to families of special needs children.

Income taxes, estate taxes, gift taxes, and the confiscatory generation-skipping transfer (“GST”) tax should all be considered and dealt with when preparing an estate plan. Equally important are the income and transfer tax consequences of a special needs trust.

Five Essential Estate Planning Documents For A Special Needs Family. At the minimum, a special needs child deserves a parent’s continued stewardship and guidance, even though the parent may be incapacitated or deceased. Therefore, the parents of a special needs child should typically have the following five estate planning documents prepared:

(1) Last will and testament.

(2) General durable power of attorney for financial affairs (“GDPA”). The parent’s GDPA should permit the agent to make discretionary non-support distributions to or for the benefit of the special needs child, and to establish a SNT for the benefit of the special needs child.

(3) Durable medical power of attorney.

(4) Revocable living trust. During a parent’s period of incapacity, the parent’s revocable living trust should contain language that permits the trustee to make discretionary non-support distributions to or for the benefit of the special needs child. Upon the parent’s death, the special needs child’s inheritance should be distributed to a third-party created and funded SNT previously established by the parent.

(5) Third-party created and funded SNT.

In addition to the usual hurdles that parents face when preparing an estate plan (e.g., who should be the guardian, trustee, executor, etc.), the parents of a special needs child are faced with five unique estate planning challenges:

(1) How to provide for all of their loved ones without jeopardizing the special needs child’s current (or potential) eligibility for means-tested government benefits such as SSI and Medicaid;

(2) How to design an estate plan that supplements the special needs child’s means- tested government benefits and enhances the quality of the special needs child’s life;

(3) How to treat the other children equitably while adequately providing for the special needs child;

(4) How to make sure there are sufficient funds available at a parent’s death to care for the special needs child; and

(5) How to provide for the proper supervision, management, and distribution of an inheritance for the special needs child through a third-party created and funded SNT

Of these five unique estate planning challenges, above items 4 (sufficient funds) and 5 (proper supervision and management of the funds) typically prove to be the most difficult to implement. This is especially true: (i) if the majority of the parents’ estate is composed of retirement benefits (see, Section 9, below, concerning retirement benefits), (ii) if the proposed trustee is inexperienced in administering SNTs, or (iii) if there is an experienced trustee available that is knowledgeable about special needs (typically a corporate or professional trustee), its minimum annual fee is too high relative to the proposed size of the SNT.

When creating an Florida Estate Plan your lawyer should ask about special needs.

Mitchell Port a California lawyer posted a link to an article on the California Tax Attorney Blog about an article on the State Bar Website which provides information on estate planning. Although this is a California bar website, many of the same issues and considerations are important to Florida residents interested in Florida Estate Planning. Much of the information is also found on The Florida Estate Planning Lawyer Blog which primarily deals with Florida issues.

1. What Is Estate Planning?
2. What Is Involved in Estate Planning?
3. Who Needs Estate Planning ?
4. What Is Included in my Estate?
5. What Is a Will?
6. What Is a Revocable Living Trust?
7. What Is Probate?
8. To Whom Should I Leave My Assets?
9. Whom Should I Name as My Executor or Trustee?
10. How Should I Provide for My Minor Children?
11. When Does Estate Planning Involve Tax Planning?
12. How Does the Way in Which I Hold Title Make a Difference?
13. What Are Other Methods of Leaving Property?
14. What If I Become Unable to Care for Myself ?
15. Who Should Help Me With My Estate Planning Documents?
16. How Do I Find a Qualified Lawyer?
17. Should I Beware of Someone Who Is a "Promoter" of Financial and Estate Planning Services?
18. What Are the Costs Involved In Estate Planning?

If you or a family member fees that a Florida Estate Plan will benefit you please contact a Florida Estate Planning Lawyer.