Stautz Law

Tag: Benefits Planning

  • Use Cases for Supplemental Needs Trusts (SNTs)

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    Good morning. It’s Andy Stautz at Stautz Law. I am back for another discussion of supplemental needs trusts. I’m recording this right on the heels of my first discussion of how supplemental needs trusts came about and what they do.  

    When Do I Need an SNT?

    Today’s topic is OK. I understand what supplemental needs trust is. When do I use one? What should I be thinking about? And obviously this is an individual determination, right? This is why you talk to an estate planning attorney. This is why you should, you know, call me for specific advice about your situation. But today I’m discussing general considerations.  

    SNT Use Case 1: Continuing Family Support

    So the most common use case for an SNT – Probably — is the situation where some family members, let’s say parents, have a disabled child who is receiving benefits. And the parents help support the disabled child with various needs over and above the government benefits while the parents are alive. So parents are living. They’re taking care of their disabled child. That situation is great and can continue indefinitely.  

    Obviously the parents resources don’t count toward the child’s resources when they’re freely given . . . (there’s a separate “deeming” rule that you need to consider) . . . but. In general. There’s no problem with the benefits recipient having too much money because the money is still the parents’, right? It’s just given from time to time as needed.  

    The parents can use discretion. They can decide for themselves, you know how much or when or what for and stay on the right side of the benefit, you know, assets, resources, income rules.  

    Problem is, the parents don’t live forever, so the parents are worried after they die, what happens to their disabled child. How can they keep going with the support they were giving? Yeah. How can they do it?  

    History of SNTs

    So. Uh. It used to be way back, like, pre-1993. Older than I am believe it or not. That there was no statutory authorization for these extra trusts. You could try to get around it, but there’s no alternative. So it was just a matter of perhaps giving an inheritance to a sibling and then saying oh sibling like, please continue taking care of your brother or sister. Lots of potential behavioral problems there, even if it worked legally.  

    When Make an SNT? Testamentary vs. Inter Vivos SNTs

    So the supplemental needs trust steps in there and says OK, well, you can. The parents can in their will create a supplemental needs trust to carry on what they were. You know that extra support they were giving their child.  

    You can create an inter vivos special needs trust and kind of have it all set up working ready to go before death, which has some advantages, obviously, in terms of, you know, probate, smooth transition, you know, continuity there. So that’s one big situation.  

    SNT Use Case 2: Personal Injury SNTs

    The other big situation is. Personal injury or workers compensation victims, plaintiffs. Uh, you know catastrophic accident where there is someone who’s been really injured. Probably then is relying on some government benefits to pay their health care costs.  

    OK, well, what about the money from a settlement? Or a workers compensation reimbursement. Can you save any of that or keep that from all being going right away to existing government-paid bills?  

    And so that’s another common place where setting up a supplemental needs trust is often used.

    Conclusion

    So we’re at 5 minutes. That’s just two use cases, and I didn’t even get into considerations. So we’re just going to have to come back for more later. But I hope you enjoyed this talk.  

    Obviously you need individual advice about your situation, so call or book online so we can talk about your situation, give you specific legal advice. That’s all for now though. Thanks. Bye. 

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  • Supplemental Needs Trusts (SNT) Basics

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    Good morning. It’s Andy Stautz at Stautz Law. I’m back today with another talk about basic estate planning techniques. Today’s topic is Supplemental Needs Trusts or SNTs for short. This is a concept I mentioned in another video and I realized I had never really explained what supplemental needs trusts are or how they work. So we’re going to do that today.  

    What’s the Point of a Supplemental Needs Trust?

    SNTs are a creature of benefits programs, really. So the basic situation is this: Medicaid, Supplemental Security Income are the two big examples of means-tested benefit programs, where the beneficiary receives benefits from the state. (The government, that is.) Because the the beneficiary has no resources, that is, assets, and also no income. You know, within certain low limits.  

    So then the question is, What if a family member or a charitably minded individual–You know, whoever–If you want to give a Medicaid beneficiary and SSI beneficiary some extra help. Maybe that’s a little bit of extra income to buy . . . nicer things than the really bare bones Government benefits will provide.  

    Well, you can’t give the beneficiary that income or those assets outright because they’ll they’ll be disqualified from their benefits. And that’s not a result you want, because for people who receive those benefits, it’s usually a big deal in their in their financial life.  

    So the basic problem then is “OK how do you give a benefit recipient those extra resources without disqualifying them for benefits?” And that’s what the Supplemental Needs Trust was invented to do.  

    It’s called supplemental, because the idea is it’s over and above that bare bones, government benefits level. Right. So it’s a trust to provide a little bit extra to the beneficiary benefits recipient.  

    Why are SNTs Allowed?

    And so as you can imagine, there’s a basic tension there, right? That usually the government wants anybody who can afford it to stay off of those benefits to preserve resources for the people who really need it. So if the government wanted to be really aggressive about that, it would say no, you can’t even have any extra, because as soon as someone wants to give something to you, it means you’ve got more– too much, above the limit.  

    But the policy tension is kind of “OK, but we don’t want to discourage family members from helping their disabled loved ones” or you know, whatever the case, maybe we don’t want to discourage private charity here.  

    Statutory and Legal Authority for SNTs

    So the supplemental needs trust is written into the statute. There are three sections in the Revenue Code that let you make these trusts with specific requirements to make sure that they’re actually supplemental and not, You know, huge disguised gifts that would be disqualifying.  

    So that’s the basic concept and the basic policy tension there. I will explain in future videos — this one’s already getting long — considerations on when to use it. Some alternatives.  

    Conclusion

    But the basic idea is the supplemental needs trust lets you give money, give some extra resources to a person on benefits without disqualifying them from those benefits.  

    Is a Special Needs Trust the Same as a Supplemental Needs Trust?

    And so if you see special needs trust, that’s another name. But I like supplemental needs trust because it emphasizes the purpose of the trust as a supplement to those benefits.  

    So until next time, thanks for watching. This is Andy Stautz at Stautz Law and call me with your questions. 

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  • Inheriting a House on SSI

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    Good morning. It’s Andy Stautz at Stautz Law. Today we’re back for another talk on estate planning topics. Today’s talk is very niche, OK? What we’re talking about is giving a house or receiving a house to someone who’s on benefits.  

    I’m specifically talking about SSI, but this applies to some others as well.

    … As you know, those programs are means tested. Well, not all of them, but the the programs we’re talking about are means tested benefits programs. That means you can’t have. Uh. Too much property, otherwise you’ll be disqualified and the government will say, you know, no, it’s on you to pay for your care or whatever the case may be. 

    So. 

    Can I Inherit a House and Keep My Benefits?

    Then the question is, well, what about giving an inheritance to that person, especially a house? So a common scenario is you’ve got two family members who are living together and one of them owns the house and the other one’s on benefits and wants to keep living in the house. After the first one passes.  

    The Right Way to Preserve Benefits: Special Needs Trusts

    You know that could be parent-child that could be, you know, two spouses; that could be siblings, whatever. The correct way to do this, the best way to do this is with a third party special needs trust. Or in some sense in some cases, uh, an irrevocable asset protection trust. You know, because that way you just you keep it out of the… you keep it out of the estate, you keep it out of the countable assets. That like, that’s the textbook way to do it. 

     OK, the problem is those trusts and those planning techniques are more expensive and more complicated, kind of, to understand and to implement. So some people don’t want to do that. Either they can’t afford the few thousand dollars it’s going to be to set it up, or they don’t trust it or, whatever the case may be.  

    The Quick-and-Dirty Way: Excluded Assets

    So the hack we’re going to talk about today and it really is a hack, I don’t, you know… far from recommending this universally…  

    But a key point to remember is that a house is… A house in which the benefits recipient lives… is an excluded asset under SSI rules. And I’ll try to put a citation in the text version of this.  [Citation to SSA Handbook Here!]

    So in theory you can pass a house to an SSI beneficiary without triggering any problems for them in terms of immediate spend down or other needs. That only applies if it’s already that person’s primary residence, so you know kind of the situation where two people are living together.  

    Risks and Considerations to Giving a House to SSI Benefits Recipient

    And it’s risky, right? Because who knows what’s going to change in the circumstances between when you come up with that simplified plan and, you know, the death and actual transfer of assets 

    But it is kind of … it’s kind of one thing to keep in mind is. OK, you can pass some assets. To someone on benefits, you can do it as long as they’re excluded, non countable, you know. Whatever.  

    So again, the textbook way to do this is with a special needs trust. That way you’re keeping it totally out. You know, that’s the right way to do it: keep it out of their estate. Don’t make it count as their property. 

    But you could pass excluded assets and they’d still be excluded, that works. That’s the idea. That’s the idea.  

    How to Give Your House to SSI Recipient

    So obviously this is very case by case determination, but it’s a… it’s a situation that comes up occasionally. UM. I almost hesitate to talk about it because I I don’t want people out there running and say “ohh. I’ve got this. This is going to work,” you know, but it’s a possibility.  

    And one thing I talk about with my clients is what level of complexity and cost they want. Right, because sometimes you want the Cadillac plan. Other times you want something. That’s just. Like. That’s something, something simple.  

    So if you come into a planning meeting with me, we’ll talk about that. We’ll discuss your situation. You’ll get actual advice rather than just a general discussion like this. So I look forward to talking to you about that. You can book a planning meeting online. The link to follow. Or you can give me a call and I look forward to working with you soon.  

    Thanks! Bye. 

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    Book your initial planning meeting with Stautz Law and we’ll discuss your individual needs. No obligation.

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