Trusts are a legal tool often used to pass wealth to a spouse or to the next generation, usually with rules attached. A trust is a formal legal relationship where a property owner (the Settlor or Grantor) conveys legal title to a third party (the Trustee) who then holds or uses trust property for the benefit of a person (the Beneficiary). Most trusts are written, but a trust can be established orally or can arise by operation of law.
Not everyone needs a trust, but they can be game changers when used for the right reasons. Here are a few reasons to consider using a trust: (1) controlling how your property is used by beneficiaries; (2) privacy and avoiding probate; (3) tax planning or public benefits planning; (4) disability and special needs planning; and (5) creditor protection. Trusts can also be used to avoid ancillary probate estates if you own real property in another State.
If you decide to use a trust, be certain you understand what your trust is supposed to accomplish. Knowing the purpose of the trust will help you communicate your goals with others and will give your lawyer the ability to determine whether you really need a trust, or whether some other, less complicated, legal tool would be a better fit. If the right tool for the job is a trust, then decisions need to be made regarding whether to establish it during your lifetime (a Living or inter vivos trust), or at death (a testamentary trust). Should the trust be revocable or irrevocable? Should all of your property be placed in the trust, or should you funds it with a portion of your estate? Who will serve as trustee? What rules should be included in your trust agreement regarding how trust property is used? If someone tries to sell you a trust without helping you answer these questions, then you’ve found a hammer salesman – someone who thinks every problem looks like a nail.
Introduction to Trusts for Elders and Special Needs Beneficiaries
Introduction to Trusts
Why Protect Assets?
What is Supplemental Security Income?
What is Medicaid?
Why use a Special Needs Trust?
What can a Special Needs Trust pay for?
Trust Formation and Structure
Creating the Trust
Trust Instrument and Essential Terms
The Trustee
Beneficiaries (of Trusts)
Purpose (of the Trust)
Revocation, Modification, Termination
Spendthrift Provisions
Discretion and Distribution Standards
Construction (Construing the Trust)
Funding the Trust
Funding, Generally
Sources of Funding
Trust Administration
Administration, generally
Administration and Investments
Investment Decision-making process
Income and Principal
Compensation
Accountings
Bond
Declaratory Judgment
Distributions, generally
Trust Ownership of a home
Distributions to family members
Medicaid Trust Rules
Trust Rules, generally
Self-Settled Trusts, generally
Third Party Trusts, generally
Income Only Trusts
Special Needs Trusts
Pooled Trusts
Sole Benefit Trusts
Funding Issues Associated with Special Needs Trusts
Distributions from Special Needs Trusts
SNT Accounting
Eligibility for Veteran’s Aid and Attendance
VA Aid and Attendance, generally
Treatment of Trusts
Revocable Trusts
Irrevocable Trusts
Tax Issues
Resources:
BLOG POSTS
Estate and Gift Tax Exclusion Amounts
The amounts below are the estate tax exclusion amounts as provided by the IRS. Unless Congress takes action, in 2026, the exclusion amount will revert to the pre-2018 level ($5,490,000) per deceased person. You can, however, use your exemption now. On November 26, 2019, the IRS clarified that individuals taking advantage of the increased gift […]
Do I need a Gun Trust?
Gun trusts were developed so gun owners can pass their firearms to beneficiaries or heirs at death (or disability) without creating unintended legal problems. Some people (e.g., convicted felons) are not allowed to own guns. Some weapons require a specific license. The trust is intended to prevent beneficiaries who are not allowed to own guns, […]
Medicaid’s “any circumstance” test for trusts
Medicaid’s “Any Circumstance” Test for Trusts In case you missed the memo, Medicaid doesn’t like trusts. The rules relating to trusts you create with your money or property are found at 42 U.S.C. § 1396p(d). To put this discussion in context, we’ll begin with the sections relevant to the “any circumstances” test, but the full […]
SNT Trustee Ordered to Reimburse Some Conservator Expenses
SNT Trustee Ordered to Reimburse Some Conservator Expenses In Weidner v. Stevenson (Cal. App. 2nd Dist. May 13, 2024), Roberta Davis established a special needs trust inside her living trust for her disabled adult son, Daniel. Daniel was under a conservatorship. Daniel’s aunt, Charlyne, was the successor trustee of the trust after Roberta’s death, while […]
SNT Payback Provision Enforced
In Agency for Health Care Administration v. Spence (Fla. App. 3rd Dist May 22, 2024) the Court of Appeals reversed a probate court order authorizing distributions from a special needs trust without first reimbursing the Medicaid agency. Ryan Spence was a disabled child adopted by Kathleen Spence. After Spence was killed, a settlement agreement allocated […]
Claim that Trustee Breached Fiduciary Duty Backfires
When someone accepts the position of trustee, he (or she or it) must act for the benefit of the trust and its beneficiaries. In Bates v. Howell (Ga. App. 2019), Emily Howell decided that the trustee of her aunt’s trust breached his duties. She then went to court without giving anyone else notice (an ex […]
Modifying a trust can be a taxable event
On November 28, 2023, the IRS Office of Chief Counsel published a memorandum addressing whether modification of a grantor trust to add a tax reimbursement clause constituted a taxable gift. It concluded that it does constitute a taxable gift by the trust beneficiaries because the addition of a discretionary power to distribute income and principal […]
SSI Decisions finding no penalty where beneficiary over 65 funds a pooled trust sub-account
The federal Medicaid statute authorizes the use of individual self-settled special needs trusts for individuals under the age of 65. See 42 U.S.C. § 1396p(d)(4)(A). It also authorizes any applicant, regardless of age, to establish a self-settled pooled special needs trust sub-account. 42 U.S.C. § 1396p(d)(4)(C). An open question not addressed in (d)(4)(C) is whether […]
New Form Approving Special Needs Trust Accounting
Recently we received a document we haven’t seen before which informs Medicaid recipients that their special needs trust accounting was approved. Obviously, there is probably a different form telling some individuals that their accounting was not approved, but we haven’t seen that form yet. The new form is below:
Special Needs Alliance publishes new Disability Handbook
Recently the Special Needs Alliance published a new handbook for individuals with disabilities and their advocates. The SNA states: “The intent of this handbook is to explain some of the terms related to services and supports for people with disabilities, to introduce the process of transitioning from child services to adult services, and to provide […]
