Third-Party and Self-Created Trusts - A Modern Look

Written by Clifton B. Kruse, Jr., a well-known expert in the fields of estate planning and elder law, this updated edition of Third-Party and Self-Created Trusts explains the effect that governmental legislation has had on trust law and guides you through the maze of federal laws that affect planning for the elderly and disabled. Focusing on the effect of the Omnibus Budget Reconciliation Act of 1993 on trusts for older and disabled Americans, this guide includes the full text of this act and outlines how it affects the drafting of trusts, illustrated by a comprehensive chart showing OBRA 1993's effect on nine commonly used trusts.


Third-Party and Self-Created Trusts includes sample forms and language reflecting the most current rulings, dozens of real-world examples, and detailed endnotes that will help you:

• Draft trusts for individuals who have disabled children or elderly or disabled parents so that the trust beneficiary is not disqualified from receiving government entitlement programs
• Outline the necessary case law and language that should be considered when drafting wills and trusts for such clients
• Include language in the trust for disabled clients who may be receiving Medicaid and wish to retain a supplemental fund for themselves until their death.

In addition to updating the material from the earlier editions, the trust forms have been amended where appropriate.

List of contents

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

About the author

Rebecca C. Morgan

Boston Asset Management Chair in Elder Law, Center for Excellence in Elder Law
B.S.B.A., Central Missouri State University
J.D., Stetson University

Courses:
Aging and the Law (J.D. and LL.M. courses), Elder Law, Trusts and Estates, Disability Law

Rebecca C. Morgan is the Boston Asset Management Chair in Elder Law. Professor Morgan teaches a variety of elder law courses in the J.D. and LL.M. programs and oversees the elder law concentration program for J.D. students. She is the successor co-author of Matthew Bender's Tax, Estate and Financial Planning for the Elderly, and its companion forms book (Lexis), a co-author of Representing the Elderly in Florida, (Lexis), The Fundamentals of Special Needs Trusts (Lexis), Ethics in an Elder Law Practice (ABA) and Planning for Disability (Bloomberg BNA Portfolio) and co-author of Elder Law in Context (casebook, forthcoming Aspen). She is a member of the elder law editorial board for Matthew Bender. Professor Morgan has authored a number of articles on a variety of elder law issues and has spoken a number of times on subjects of elder law. She is the co-editor of the Elder Law Prof Blog, http: //lawprofessors.typepad.com/elder_law/ (with Katherine Pearson (Penn State)).

Professor Morgan is a past president of the National Academy of Elder Law Attorneys, past president of the board of directors of the National Senior Citizens Law Center, past chair of the American Association of Law Schools Section on Aging and the Law and of the Florida Bar Elder Law Section, and on the faculty of the National Judicial College. She served as the reporter for the Uniform Guardianship and Protective Proceedings Act. She served on the Florida Attorney General's Task Force on Elder Abuse and the Florida Legislative Guardianship Study Commission. She is a member of the American Law Institute (ALI), academic advisory board for the Borchard Center for Law and Aging, an academic fellow of the American College of Trusts & Estates Counsel (ACTEC), a NAELA fellow, and a member of NAELA's Council of Advanced Practitioners (chair 2012-2014). After a term on the Board of the ABA Commission on Law and Aging, she is a special advisor to the ABA Commission on Law and Aging. She is a member of the board of directors for the Center for Medicare Advocacy.

Professor Morgan was the recipient of the 2003 Faculty Award on Professionalism from the Florida Supreme Court Commission on Professionalism. She received the NAELA Unaward in November 2004 from President Stu Zimring for her accomplishments in the field of elder law. Professor Morgan, along with Professor Roberta Flowers, received the 2005 Project Award on Professionalism from the Florida Supreme Court Commission on Professionalism for their video series on ethics in an elder law practice. She received the 2006 Rosalie Wolf Memorial Elder Abuse Prevention Award from the National Committee for the Prevention of Elder Abuse. She received the Homer & Dolly Hand Award for Faculty Scholarship in May of 2008, and the NAELA President's Award from NAELA President Mark Shalloway in May of 2008. She received the Theresa Award from the Theresa Alexandra Foundation in 2008. Professor Morgan was the 2009 recipient of the Treat award from the National College of Probate Judges. She currently lives in Gulfport, Florida.

Phone: [phone] Email: [e-mail] Office: Elder Law (Gulfport)

Summary

Written by Clifton B. Kruse, Jr., a well-known expert in the fields of estate planning and elder law, this updated edition of Third-Party and Self-Created Trusts explains the effect that governmental legislation has had on trust law and guides you through the maze of federal laws that affect planning for the elderly and disabled. Focusing on the effect of the Omnibus Budget Reconciliation Act of 1993 on trusts for older and disabled Americans, this guide includes the full text of this act and outlines how it affects the drafting of trusts, illustrated by a comprehensive chart showing OBRA 1993's effect on nine commonly used trusts.


Third-Party and Self-Created Trusts includes sample forms and language reflecting the most current rulings, dozens of real-world examples, and detailed endnotes that will help you:

• Draft trusts for individuals who have disabled children or elderly or disabled parents so that the trust beneficiary is not disqualified from receiving government entitlement programs
• Outline the necessary case law and language that should be considered when drafting wills and trusts for such clients
• Include language in the trust for disabled clients who may be receiving Medicaid and wish to retain a supplemental fund for themselves until their death.

In addition to updating the material from the earlier editions, the trust forms have been amended where appropriate.

Product details

• Authors: Robert B. Fleming, Robert B. Fleming Jr., Rebecca C. Morgan, Bryn Poland
• Publisher: Ingram Publishers Services
• Languages: English
• Product format: Paperback / Softback
• Released: 03.10.2023
• EAN: 9781639052691
• ISBN: 978-1-63905-269-1
• No. of pages: 370
• Subjects: Social sciences, law, business > Law > International law, foreign law; LAW / Disability, LAW / Elder Law