Making some tough resolutions about family

And in despair I bowed my head; “There is no peace on earth,” I said; “For hate is strong, and mocks the song of peace on earth, good-will to men!”  Then pealed the bells more loud and deep:  “God is not dead, nor doth He sleep; the wrong shall fail, the right prevail,” with peace on earth, good will to men—Henry Wadsworth Longfellow, American poet, December 1863

Wearing my “Mother Byrd” hat, I am so proud to introduce our guest columnist today – attorney Joshua Winger. Josh is an associate attorney at Byrd and Byrd and has been with us for more than five years, not counting his work during summers and Christmas breaks.  He is the “special needs” guru in our office, and today suggests some action you may need to make a part of your New Year’s Resolutions.  Here’s Josh:

Do you have a family member or friend who is unable to manage either his own money or property?  Would this person be able to manage any money or property you might wish to give to them, either while you are alive or after your death?  Furthermore, does this loved one receive government benefits (most commonly Supplemental Security Income (“SSI”) or Medical Assistance (“Medicaid”)?  Receiving your gifts of money and/or property, or any bequests from a deceased family member can easily disqualify the individual and make them ineligible for the benefits from the government that they now receive.

The above questions for your consideration are not meant to refer to a ne’er do well child who is immature and whose money always seems to burn a hole in his pocket.  In today’s context, we are discussing the lack of ability to handle business affairs due to a physical or mental difficulty or disability. In our culture and in the legal world, these individuals are said to have special needs.

For money or property already belonging to the special needs person who needs to get qualified for government benefits (or to keep from losing the benefits) the solution typically is to create a properly-drafted and government-approved federal first-party special/supplemental needs trust. The individual, with appropriate help, transfers his money and property to the trust without penalty for the purpose of applying for government benefits.  There are very specific rules for such a trust, such as how the money and property can be used, and you should always seek a knowledgeable elder law attorney licensed in the applicable state for assistance in preparing the trust.

If you want your own money or property to be used for the special needs person’s benefit, typically creating a properly-drafted third-party special/supplemental needs trust is the best option.  (Legalese Alert!  Does that sound like exactly the same trust mentioned in the last paragraph?  Hint:  One says “first-party” trust and the one in this paragraph is a “third-party” trust.)  Unlike first-party special/supplemental needs trusts, there are a wide variety of third-party supplemental needs trusts to consider for each unique, individual circumstance.  For example, some third-party trusts are created under U.S. federal law and some are created solely under applicable state law.  So, some third-party trusts are in effect while you are alive (“inter vivos”) and some become effective when you pass away (“testamentary”).  Circumstances vary in determining which approach to take and a knowledgeable elder law attorney licensed in the applicable state should be retained to assist.

Another critical issue to consider when establishing these types of trust is to ensure that the special needs person is not the direct designated beneficiary for any of the money or property that may be coming to him during his lifetime.   For example, a special needs person is often incorrectly designated as beneficiary of a family member or friend’s life insurance policy or retirement plan.  They are often designated as beneficiaries in the wills of family and friends. Such an error can disrupt or disqualify the special needs person from government benefits.  Instead, a solution often is to designate the Trustee of a properly-drafted special/supplemental needs trust as the direct beneficiary of any such asset.  The trust instructs the chosen Trustee to use all trust assets for the benefit of the special needs individual.  While they are used for the individual’s benefit, the law does not consider the assets under such a trust to be the property of the individual, but the property of the Trust with all assets used for the individual’s benefit.

Clearly, there are many issues to consider regarding the care of a special needs person.  Described above are just a few of the items that must be considered.  Retaining a knowledgeable elder law attorney licensed in the state where the special needs individual resides is crucial.  Someone knowledgeable, who has executed these types of trusts in the past, should evaluate the specific situation.  Then, with accurate information, the attorney can prepare the right trust to secure appropriate care for the individual while alive, and distribute his property as he or his family desire at his death.

There are some things I didn’t tell you at the top of the column because I don’t want to really embarrass Josh.  After all, he is a grown man, an attorney and a husband and father.  Maybe folks won’t read down quite this far?  Toby and I have known Josh from the moment he was born!  When he was a toddler, he used to cry to stay at our house rather than going home.

Wouldn’t you be proud of him, too?

Happy New Year to all of you!  Thanks for reading.  Stay well and let’s have lots of fun together in 2014.