0:16 hello and welcome to trust and Estates weekly kicking off this week's editions of the way to wow shows I'm your host Kevin bemel and we're here uh well for this show every Monday at 10:00 amm um Pacific Time 1 pm eastern time and an hour in from each of those zones for Central and Mountain our purpose is to talk about all things related to trusts and Estates probate estate planning both from the perspective of um an individual or or maybe it's a a married couple who
0:52 need to do their own estate planning or from the per or from the perspective of professionals who are in involved in estate planning helping other people handle these very important matters or are interested in learning how to do so uh in order to augment their businesses So today we're going to talk about something called special need uh special needs plural trusts so if for people who have a loved one who has um I special
1:29 needs says it all typically we we say they have some kind of disability although it it doesn't have to be um a physical disability it could be an emotional issue they could be neurodiverse or something like that so creating a Special Needs Trust will help ensure that they have the funds available for whatever additional Services they may need or just for whatever Services they may need if if they're not able to work or um if
2:05 they're not able to earn enough money to support themselves okay so this is um uh an interesting and somewhat complex area of of estate planning or of trusts I'm going to talk about some basic issues now none of this is legal advice okay for those of you who've watched the show before you know I'm not a lawyer although I may sound like one that comes from having been a law clerk in another life okay um so this is some general information for you to have in and to
2:42 see if this might be something that you want to explore with your own advisors your your your lawyer your accountant both perhaps okay and and so let's I I you know as I oftentimes do I've put together a little um PowerPoint oops one second here I just realized I made a mistake on something there we go okay now we're going to try again there we are okay and let's see here we go slideshow okay
3:19 there we are all right so this is the show trust in Estates weekly and again for those of you who are uh regular Watchers of the show um you you know this graphic the three pillars of attainment um a a as we often do on trust and Estates weekly while we're dealing primarily in the Pursuits pillar and the finances realm we are also dealing with relationships primarily family although they could be friends and colleagues and um you know we may be dealing with our own identity as you
3:56 know someone who's taking care of a person oh wow that was weird um it just okay it did Advance itself all right so special needs trusts ensuring care for loved ones with disabilities so why would you do this well I mentioned one of the most important reasons a few minutes ago and that is that the your loved one may not be able to support himself now he he may be working um but that job may not pay enough um for him or her to be able to
4:31 support himself Andor the person really may not may not be able to work um and in fact they may be on um they may be receiving I should say uh government benefits so um um most of you are familiar with social security so a large part of the Social Security program is actually called um supplemental security income SSI and SSI is paid to those people who
5:07 are eligible for benefits um oftentimes they are not at retirement age okay so these are people with with disabilities of one sort or another okay and they qualify for a monthly payment in the same way that a social security recipient gets a monthly payment okay and by the way um these loved ones may also be receiving Medicaid okay Medicaid is a um State administered federal government uh supplemented payment for um medical
5:44 insurance okay and since both of these programs are government benefit programs they are means tested um which means that um the benefits can can vary and or uh and can be reduced if a person has means over certain limits okay I'm not going to get into that it's it's a that's a whole subject on its own um but suffice it to say that um if a loved one has a lot of assets um that may either
6:22 um result in them being denied government benefits or having those benefits reduced and so by um creating a Special Needs Trust their eligibility is protected okay so that's a um that's a very strong second reason for setting up a Special Needs Trust if it is the case with with your loved one that they're getting or or maybe uh you know that they're eligible even if they're not at the moment getting but they may be
6:57 eligible for government benefits so this is a way to um in essence protect their assets while also or I shouldn't say protect their assets maintain their assets um or give them Assets in a way that doesn't impair their eligibility for government benefits now I I want to mention as as a little bit of a side note so while a Special Needs Trust um will Pro will protect or may protect um eligibility for benefits okay it does not protect
7:32 from Medicaid estate recovery okay so this is a situation where um a a Medicaid beneficiary has been overpaid benefits and then when they when they die Medicaid will seek to recover that overpayment okay so if there are assets left in the trust when your loved one dies those are subject to Medicaid estate recovery okay but that's different than the person not being eligible for
8:08 Medicaid at all okay so a Special Needs Trust is can still be a a a wonderful vehicle for helping out your loved ones um even though in the like I said in the end if there are um assets left in the trust after your loved one passes away so so Medicaid may be able to um obtain Sumer all of those assets in order to in order to get reimbursed for an overpayment okay so now a Special Needs Trust can be um created to pay for a
8:45 variety of expenses they could be educational expenses they could be health care expenses they could be living expenses now and the the thing is the the trust can be set up so it can pay for any type of expense or it can be set up whereby it it may only cover certain expenses or it may cover all expenses except these other expenses okay so how the grantor or the trustor which is the person who sets up
9:21 the trust sets it up will determine which expenses the trustee can use funds for now it is important to note and I'm going to get into this more when I talk about trustees that a Special Needs Trust is for the benefit of the beneficiary the loved one whose care is being insured Okay and like all trusts the trustee is not supposed to use those those funds for the trustees benefit
9:59 okay so whatever expenses are being paid for okay those those expenses are for the benefit of the beneficiary now it the trust could provide for some kind of payment to the trustee okay and that will need to be specified in the trust documents when it's set up okay if there is no um payment mechanism for the trustee in the trust okay generally speaking the
10:34 trustee is going to be acting in an unpaid capacity now it is possible for the trustee to go to court and petition the court for payment okay and then it'll be up to the discretion of the Court okay but this is really something that should be dealt with at the time the trust is created whether or not the trustee is going to get paid okay let's let's let's move on to the next one now okay so let's talk about some of the um aspects of creating a Special Needs Trust okay unlike other types of trusts
11:13 a Special Needs Trust must be irrevocable meaning once it's created it cannot be changed so for example um if uh let's use a case where gror is not the beneficiary okay so let's say the grantor's um grandparents set up the special uh I'm sorry the beneficiaries grandparents are the grantors and they set up the Special Needs Trust once whatever assets they put in the trust
11:50 are in the trust they're not able to get them back okay that's the nature of an irrevocable trust in essence it becomes comes a separate entity from the grantors okay it's by the way a separate entity from the beneficiary as well all right now the reason this is important is because the irrevocability of the Special Needs Trust is what will give protection for El of eligibility for government benefits okay so if the trust were
12:27 revocable it would not protect government benefits eligibility okay so again um a Special Needs Trust is an IR a type of irrevocable trust now you can see already it's it can be pretty complex and and and the details are important in order that the trust will accomplish what it's out to do and and as a result then it needs to be drafted by an expert okay this is not something for an attorney who is unfamiliar with special
13:03 needs trusts to do you want to work with an attorney who specializes not only in estate matters but has done special needs trusts before and they're familiar with all the laws related to them in the state in which you know you're dealing Okay so this is not something to set up on your own this is not something um I I would say you know to go to a a par legal with
13:40 um this is something to um be to make sure you have you you're working with someone who knows the details okay in In a Special Needs Trust and then this is generally the case in trust anyway the devil really is in the details okay once the trust has been created and the way it's created is a trust a trust agreement is is written and it's signed and now now the trust exists however assets are not
14:15 automatically transferred to the trust the trust has to be funded okay now there's basically two ways that a trust can be funded one is it can be funded during the lifetime of the grantor or grantor so I'm just GNA use the singular going forward okay so the grantour um may have U let's say $100,000 okay and they transfer that money into the trust okay during their lifetime now another way to fund the
14:51 trust is as part of their estate plan they can fund the Special Needs Trust when when they die okay so in that case the funding would become would come via their estate okay now in the interim since the trust has no funds there's nothing in it to benefit the beneficiary okay but but that may be fine the person the grantor during his lifetime may be taking care of the beneficiary and and so there's no need for the Special Needs Trust to take care of that person the
15:27 concern is what going to happen to my loved one after I die okay so then after I die I'm going to have a provision in my estate plan whereby a certain amount of money is uh goes to funding the Special Needs Trust and at that point then you know the trustee of the trust will take on the responsibility of handling that money okay so those are two different ways that a Special Needs Trust can be funded all right and by the way
16:03 it could be um partially funded um during the grantor's lifetime with additional funding coming via the grantor's estate um when the grantor passes away all right next you must choose the trustee carefully this is one of the most if not the most crucial Choice you're you're going to make in creating a Special Needs Trust okay first of all the person needs to be trustworthy and I'm GNA talk about
16:41 that in in in a minute secondly the person needs to be able to understand how to administrate a trust okay so they need to know what they're doing they need to have some administrative and financial knowledge they need to have some understanding of dealing with a person who has special needs a person who has disabilities okay and they need to understand the obligation that they have
17:16 taken on this is being a trustee is not to be taken lightly okay so often times um the grantor of a special need trust will appoint a relative now that may be fine if the relative is honest knowledgeable and and has you know the understanding and the ability to deal with a person who has um disabilities okay but if the if the relative is a spendthrift now there's a danger because
17:53 as I mentioned um earlier um that trustee May may be tempted to use the funds for his own benefit at times and not purely for the benefit of the beneficiary okay so I'll give you an example I'm I'm what's known as an alternate trustee on a special needs trust that means if for some reason the trustee um is is unable to fulfill the trustees obligation maybe that trustee dies so then I step in and take over okay but as the alternate trustee I keep
18:29 an eye on what's happening with this speal with with the Special Needs Trust and what I've noticed in the last um period of time is a tremendous amount of money over 50% of the assets of the trust have been used um to little discernable benefit by the beneficiary okay now that's problematic okay especially because because the funds um that have been taken by the trustee have gone into the
19:05 trustees personal checking account now the beneficiary is a minor so there's nothing wrong per se with that however um there is there is no way to track what the money has been spent on and the trustee is not doing any kind of accounting okay so quite a bit of money has you know been taken out of the trust and and there's there's no accountability on the part of that trustee okay so you know this may be a matter by the way that'll have to be
19:41 taken up with the courts so we you know that's that's to that's to be determined down the line but better it would have been better if a trustee had been chosen who in this case wasn't known to be a spend Thrift frankly okay um it was a mistake on the part of The Grand Tour that happens okay um but you know word to the wise okay be very very careful who you choose as a trustee because in the end the success of the Special Needs
20:19 Trust as a vehicle for taking care of your loved one will largely rest on the shoulders of the trustee especially if the beneficiary is not really able to look after himself so he there may be no one keeping an eye on what the trustee is doing okay now in in the in the example I gave you since since I'm an alternate trustee I've and I I don't I don't get paid for doing this um I I I've made it a point to keep an eye on what's happening with the
20:55 trust but there may not be an alternate Trust or the alternate trustee may be as as is often the case like a bank for example they're probably not going to exercise any oversight on the current trustee um they have no obligation to and and they may not even realize they've been appointed as the alternate trustee okay so in that case and this is one of the dangers of a Special Needs Trust if the trustee is not scrupulously honest so then the your loved one could end up you know with little or any
21:32 benefits from the Special Needs Trust okay so again I I I I've said this already probably what three or four times make sure you choose your trustee carefully okay let's see how we're doing on time yeah we're doing all right all right next there are basically two types of special needs trusts a first-party trust and a thirdparty trust okay now a first-party trust is a situation where
22:08 the beneficiary is also the gror in other words the beneficiary is taking his own property and transferring it into this irrevocable special needs trusts th trust I should say singular this is a way for a a a special needs beneficiary to protect his assets while still remaining eligible for um government benefits Okay the reason it's called a first-party trust is because the there's one grantor and
22:45 one beneficiary so the first party is is also the beneficiary all right the other type of Special Needs Trust is a thirdparty trust in a third-party trust someone other than the beneficiary is the grantor or trustor those the the same party okay it could be the beneficiary's parent or grandparent or parents and Grand or grandparents okay but in any event they're third they're third parties they're other than the
23:20 beneficiary in this case and let's just use a a situation where it's the parent so a parent creates the trust and funds the trust from the parents assets okay that's what makes it a thirdparty trust okay and this you know these these um these two different types of Special Needs Trust um don't they don't operate any differently once they're set up it's just that um who funds who creates them
23:57 in fund them is really what distinguishes between the two okay um and um so um you know honestly I don't know which is is is more common although I suspect it's a third-party trust is more common okay oftentimes if someone is has special needs um you know they they they may not have assets on their own okay um but in any event um these are the two types okay and by and by the way on the Special Needs Trust it's not going to
24:32 say this is a first-party Special Needs Trust it's just it's it's it's these two types describe really who set it up and where the money comes from that's all once the trust is created it's it's irrevocable and so to a large extent it doesn't matter where the funding came from because now that it's in the trust it can't be pulled back by whoever the funer was the trust now stands on it own okay all right so those are the basics of a Special Needs Trust um and
25:07 uh here on the screen just a few ways that you can um get help ask questions make comments uh positive or negative um if you have any thoughts please do feel free to share them all of these links and some others will be in the show notes after this episode posts so um if if you do have any questions um or if you for example if you need a referral to um an attorney who uh specializes in doing these I'll be happy to um to make that referral for you I do know quite a
25:42 number of uh estate planning attorneys as you might imagine and so um happy to to do that um to help to help you out and I think we have just yeah the legal stuff so don't have to worry about that stop the share okay so so that's that's what I have for you today um special needs trusts are a a great um estate planning U tool I'll call it not really a vehicle but a tool they're a way to again take care of a loved one who is unable to take care of himself okay and
26:20 and um that way um you can have peace of mind um that when you're not no longer able to directly take care of of a loved one or maybe you have more than one loved one who needs this type of of of support your loved ones um they will um continue to um at least have um some of the fin some of their financial needs covered okay and again um I want to go back and emphasize this issue because it is so so
26:55 important who you choose as the trustee in the end is going to make the difference between this um between the Special Needs Trust actually helping your loved one or not okay so really take time to think about it um talk to um you know the the trust the person you're thinking about having the trustee you know get get an understanding of of of whether this person really will dedicate the time and understanding and
27:32 has the knowledge necessary to fulfill that position okay so that's Special Needs Trust and that's our show for today uh tomorrow is at at 11 a pacific time is business lessons from the military we're continuing and and in fact I think we're going to wrap up our discussion on um Cultural Literacy and cult cultural differences as an aspect of of um being in business or handling businesses okay and then on uh
28:07 Wednesday um at 12:30 pm Pacific time is uh people making money and we're going to talk about the issue of whether you should buy or rent your home now your home may be an apartment or a condominium or a single family residence or duplex whatever right in these days with um higher interest rates some of the highest interest rates we've seen in in quite a long time um it you know buying a home may be um difficult you may be priced out and you may be forced
28:42 to rent on the otherand depending on how a particular deal is structured maybe it still makes more sense for you to buy a home so we're going to look at those issues and and and show and and show how how do we break break these down how do we figure these out what are some of the issues involved okay so that'll be on Wednesday at 12:30 pm people making money and then seven days from today next Monday we will start over again with the next episode of uh trusts and Estates weekly so I thank you very much
29:19 for tuning in appreciate it before I let you go just a quick reminder um if you're not a subscribe rber to the Wait a While channel uh the Wait a While shows Channel on YouTube please do considering considering please do consider becoming a subscriber there'll be a link in the show notes and that way you'll be uh notified of all um anytime a show is is going live um and you will never miss a single episode so again thank you very much for joining me today
29:56 I don't want to say this morning because it's afternoon in part of the country um look forward to seeing you later this week and signing off Marie darling you are and ever will be my bell all the best folks