Administering the California Special Needs Trust: A Guide for Trustees and Those Who Advise Them

By Kevin Urbatsch and Michele Fuller

Administering a special needs trust (SNT) is a very important job, which often has a profound impact on the life of persons with disabilities. In most cases, the SNT trustee is providing the beneficiary goods and services that improve their quality of life. In some cases, the SNT trustee may be the only person looking to the beneficiarys welfare. Thus, the role of SNT trustee is often a more substantial role than in many other types of trusteeships. The great SNT trustee is a solid financial manager, accountant, record keeper, legal counselor, public benefits advisor, social worker, housing coordinator, civil rights advocate, guardian, and life coach. This is why author Kevin Urbatsch published his book titled Administering the California Special Needs Trust.

It has been five years since the book was published. The reception for it far exceeded expectations. There have been excellent reviews of how it has helped SNT trustees, beneficiaries, their families, and professionals who advise persons with disabilities. After reviewing the book, the Federal Financial Institutions Examination Council (FFIEC) flew Kevin to Washington D.C. to present to federal government bank auditors on what to look for when auditing corporate trustees when banks administer special needs trusts. Other than the numbers that change each year, like SSI or SSDI, the balance of the book was current and up-to-date. However, there were some subjects that were missing in the book plus a couple of big changes that occurred since publication, including the passage of the Affordable Care Act and the ABLE (Achieving a Better Life Experience) Act that provide excellent new tools for the SNT trustee.

Kevin recruited several of his professional colleagues to assist in preparing this Second Edition of the book including Michele Fuller, Robert Nuddleman, Herb Thomas, Courtney Kosnik, Scott MacDonald, and Daniel Cutter. With their assistance, Kevin added the following new chapters to the book Paying Caregivers, Paying Trustees Fees, Understanding and Utilizing ABLE Accounts, and Protecting the SNT Trustee. Kevin was also able to update and revise the information in the balance of the book and provide additional forms to make the job of being an SNT trustee safer and more efficient.

With the checklists, form documents and law summaries included, Administering the Special Needs Trust contains a wide range of information for those charged with the responsibility of managing an SNT for persons with disabilities.

• Language: English
• Publisher: iUniverse
• Release date: Oct 21, 2016
• ISBN: 9781532001734

Kevin Urbatsch

Kevin Urbatsch is a principal of the special needs and settlement planning firm, Urbatsch Law Firm P.C. in Walnut Creek, California. He is a nationally recognized expert in the unique planning needs of individuals with disabilities and their families. Mr. Urbatsch is a charter member of the national organization, the Academy of Special Needs Planners. He writes and is a frequent lecturer both locally and nationally on planning for persons with disabilities, primarily concerning special needs trust drafting and administration.

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Copyright © 2016 Kevin Urbatsch and Michele Fuller.

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.

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ISBN: 978-1-5320-0172-7 (sc)

ISBN: 978-1-5320-0173-4 (e)

iUniverse rev. date: 10/20/2016

Contents

About The Authors

Author Introduction

Legal Disclaimer

Chapter 1 Introducing Special Needs Trust Administration

What Is An Snt?

What Is A Settlor, Trustee, Trust Advisory Committee, Or Trust Protector?

Are There Different Types Of Snts?

Are The Different Types Of Snts Treated Differently By An Snt Trustee?

Why Should I Agree To Be An Snt Trustee?

How Difficult Is It To Be An Snt Trustee?

What Are An Snt Trustee’s Duties?

Where Are The Rules And Laws For An Snt Trustee Located?

What Public Benefits Program Rules Will An Snt Trustee Need To Understand?

Will The Snt Trustee’s Duties Change If The Person With A Disability Is Eligible For Only Some Of The Available Public Benefits?

What Type Of Disbursements Can An Snt Trustee Make For The Snt Beneficiary?

Can An Snt Trustee Be Responsible If He Or She Makes A Mistake In Administering An Snt?

What Are The Penalties If An Snt Trustee Is Responsible For A Breach Of Trust?

What Records Does The Snt Trustee Generally Have To Keep?

Does The Snt Trustee Have To Keep The Beneficiary Informed Of Trustee’s Actions?

Does The Snt Trustee Have To Invest The Snt Assets?

What Is The Snt Trustee’s Responsibility For Filing Returns And Paying Taxes?

What Happens When The Snt Beneficiary Dies Or The Trust Terminates?

Chapter 2 Avoiding Common Mistakes In Administering Snt

Mistake Number One: Not Reading The Snt Document

Mistake Number Two: Failing To Keep Current On Special Needs Trust Laws

Mistake Number Three: Confusing The Public Benefit Programs

Mistake Number Four: Confusing The Different Types Of Special Needs Trusts

Mistake Number Five: Snt Trustee Fails To Establish A System To Request Disbursements

Mistake Number Six: Snt Trustee Makes Distributions For Persons Other Than Person With A Disability

Mistake Number Seven: Distributing More Than Twenty Dollars Per Month Directly To Snt Beneficiary

Mistake Number Eight: A Snt Trustee Who Refuses To Make Distributions For The Snt Beneficiary

Mistake Number Nine: Failing To Distribute For Beneficiary’s Food Or Shelter When It Is Acceptable

Mistake Number Ten: Failing To Maintain Excellent Records And Failing To Properly Account For Trustee Actions

Mistake Number Eleven: Termination Of First-Party (D)(4)(A) Snt–Making Inappropriate Disbursements Prior To Medi-Cal Recovery

Chapter 3 Summarizing Trustee’s Legal Responsibilities

Where Does An Snt Trustee Find The Rules On His Or Her Duties?

How Should A Trustee Approach His Or Her Duties?

What Are A Trustee’s Legal Duties?

What Can Happen If An Snt Breaches A Fiduciary Duty?

How Does A Trustee Sign Documents?

Should A Trustee Hire Someone To Do An Evaluation Of The Snt Beneficiary?

Chapter 4 Understanding Public Benefits For Persons With Disabilities

What Are Needs-Based Public Benefits?

What Are Entitlement Public Benefits And Does The Snt Trustee Need To Worry About Them?

What Public Benefits Are Most Commonly Received By Persons With Disabilities?

Which Public Benefit Laws And Rules Does The Snt Trustee Have To Follow, Ssi’s Or Medi-Cal’s?

What Does The Ssi Program Provide?

What Are The Ssi Rules On Resources?

When Are Ssi Resources Counted?

How Do The Ssi Rules Define Income?

What Is Ssi Deeming, And Why Does A Minor Or Spouse Not Qualify For Ssi?

How Does A Beneficiary Qualify For Medi-Cal?

What Is Expanded Medi-Cal?

What Is In-Home Supportive Services (Ihss)?

Who Is Eligible For Ihss?

Can An Snt Trustee Jeopardize A Beneficiary’s Ihss Eligibility?

Can An Snt Beneficiary Receive Both Ssi And Ssdi?

Where Can The Trustee Find A Benefits Planner?

If The Snt Beneficiary Only Receives Medi-Cal And Not Ssi, Can Snt Trustee Pay For Food, Housing, Or Utilities?

Should An Snt Trustee Always Pay For An Ssi Recipients Food Or Shelter?

How Can The Trustee Receive Ssa And Dhcs Notifications And Otherwise Keep Informed Of Beneficiary’s Ssi And Medi-Cal Eligibility?

Does The Snt Trustee Have To Regularly Report To The Social Security Administration (Ssa)?

What Types Of Things Must Be Reported To Ssa?

What If The Beneficiary Works, What Needs To Be Reported To Ssa?

How Does A Trustee Find The Beneficiary’s Local Ssa Office?

What Needs To Be Reported To Dhcs If The Beneficiary Receives Only Medi-Cal?

If Ssa Notice Is Received Denying Or Reducing Beneficiary’s Ssi, What Should Trustee/Beneficiary Do?

Should The Trustee Also Be The Beneficiary’s Ssi Representative Payee?

Can An Snt Beneficiary Work And Still Keep Ssi And Medi-Cal?

What Other Public Benefits Must An Snt Trustee Know About?

What Are Section 8 Housing Public Benefits?

How Much Rent Does A Disabled Tenant Pay Under Section 8?

Do The Assets Of An Snt Beneficiary Count Against Section 8 Eligibility?

How Would An Snt Beneficiary Obtain Section 8 Housing?

Can The Special Needs Trust Be A Section 8 Landlord?

Does An Snt Protect Eligibility For The Section 8 Beneficiary?

What Should The Trustee Do If The Beneficiary Is On Section 8?

Where Can An Snt Trustee Find More Information About Section 8?

What If The Snt Beneficiary Is A Veteran?

Which Veterans Are Eligible For Benefits?

Does A Special Needs Trust Protect A Veteran’s Assets When Requesting Benefits?

Chapter 5 Understanding And Utilizing Able Accounts

What Is An Able Account?

Do All Persons With Disabilities Qualify To Use An Able Account?

Who Can Fund An Able?

How Many Able Accounts Can A Person With A Disability Have?

Do Able Accounts Need To Be Established In State Of Residence?

How Much Can Be Funded Into An Able Account?

How Big Can An Able Account Be Before Jeopardizing Public Benefit Eligibility?

What Happens If An Able Account Grows Above Limits?

How Is An Able Account Taxed?

What Are Qualified Disability Expenses?

Is There A Benefit For Paying Housing Expenses From An Able Account Rather Than An Snt?

What Happens To Funds In A Able Account On Death Of Person With A Disability?

Why Should An Snt Trustee Consider Funding An Able Account?

What Concerns Should An Snt Trustee In Determining Whether To Make A Distribution To Fund An Able Account?

A Chart Comparing Able Accounts With Different Types Of Snt?

Chapter 6 Knowing How Snt Distributions Affect Public Benefits

Do Distributions From Snt Affect A Beneficiary’s Eligibility For Public Benefits?

Even If An Snt Trustee Makes A Disbursement That Will Not Interfere With Public Benefits, Should The Distribution Be Made?

Where Can An Snt Trustee Find Help On Disbursement Requests?

Is There A Systematic Way To Decide If An Snt Distribution Will Interfere With Ssi Or Medi-Cal Eligibility?

What Are The Snt Trustee’s Legal Rights In Making Decisions About Distributions?

What Items Or Services Cannot Be Purchased By An Snt Trustee?

How Often Should The Snt Trustee Review The Snt Terms Before Making A Distribution?

What Does Sole Benefit Mean For First-Party Snt Distributions?

Can Snt Trustee Make Gifts To Beneficiary’s Friends Or Family Or Donations To Church Or Charities?

What Is The Effect On A Beneficiary’s Section 8 Eligibility When Making Snt Disbursements?

What Is The Effect Of A Trustee Buying Exempt Assets, Goods, Or Resources For Beneficiary?

What Is The Effect Of A Trustee Paying For Assets, Goods, Or Resources Not Identified As Exempt Assets?

What Is The Effect Of Paying For Services For The Beneficiary?

What Is The Effect Of Paying For A Beneficiary’s Medical Needs?

What Is Effect Of Disbursing Cash To An Snt Beneficiary Who Receives Ssi Or Medi-Cal?

What Is The Effect Of Paying For A Beneficiary’s Food, Shelter, And Utilities If Receiving Ssi Or Medi-Cal?

What Is The Effect Of Paying For A Beneficiary’s Clothes If The Beneficiary Is Receiving Either Ssi Or Medi-Cal?

What Is The Effect Of Paying A Beneficiary’s Credit Card Bill?

What Is The Effect On A Beneficiary’s Ssi Of Purchasing Gift Cards Or Gift Certificates?

What Is The Effect On Ssi Of Purchasing A Home Outright With Trust Assets?

What Is The Effect On Ssi Of Purchasing A Home With A Mortgage?

What Is The Effect On Ssi Of Selling A Beneficiary’s Home?

What Is The Effect Of Renting Out Rooms In The Beneficiary’s Principal Residence?

What Is The Effect Of Making Home Modifications Owned By A Beneficiary Or Snt?

What Is The Effect Of Making Home Modifications To A Home Owned By Someone Else?

What Is The Effect Of Buying A Car, Second Car, Recreational Vehicle, Or Boat?

What Is The Effect Of Paying For The Beneficiary’s Caregivers?

What Is The Effect Of Hiring And Ihss Worker As A Caregiver?

What Is The Effect Of Prepaying For The Beneficiary’s Funeral?

What Is The Effect Of An Snt Investing In A Business?

What Is The Effect Of Buying A Business And Distributing It To The Beneficiary?

What Is The Effect Of Making Payments On Behalf Of The Beneficiary’s Minor Child Or Spouse?

What Is The Effect Of Paying For A Restaurant Meal?

What Is The Effect Of Paying For Vacation Costs, Including Hotel And Restaurant Meals?

What Is The Effect Of Paying For Travel Companions For The Snt Beneficiary?

What Is The Effect Of Paying For Alcohol, Coffee, And Cigarettes?

What Is The Effect Of Paying For Dating Or Romance?

What Is The Effect Of Paying For Pornography?

What Is The Effect Of Paying For The Beneficiary’s Pets?

What Is The Effect Of The Snt Trustee Lending Money To The Beneficiary?

What Is The Effect Of Making A Distribution That Exhausts Trust Assets?

Chapter 7 Making Snt Distributions

Should A Trustee Set Up A System For Making Disbursements?

How Does A Trustee Make Appropriate Disbursements?

Can An Snt Trustee Use A Gift Card Or Gift Certificate For An Snt Beneficiary?

Can The Trustee Pay The Beneficiary’s Credit Card Bills?

Can The Trustee Give The Beneficiary A Bank Debit Card From An Snt Account?

Can The Trustee Give Cash (Or An Allowance) To The Beneficiary Or Reimburse The Beneficiary?

Can The Trustee Lend Snt Money To The Beneficiary?

How Does The Trustee Make A Purchase For A Home Using Snt Assets?

Should An Snt Trustee Consider Jointly Owning Real Property?

Can A Trustee Make Distributions For Home Modifications On Real Property Not Owned By Snt Or Beneficiary?

How Should The Trustee Make A Purchase Of An Automobile?

Can An Snt Trustee Hire A Caregiver For Beneficiary?

Can The Snt Trustee Hire The Beneficiary’s Parents To Serve As Caregiver?

Can The Snt Trustee Hire The Beneficiary’s Ihss Worker As A Caregiver?

Chapter 8 Hiring Caregivers

Can An Snt Trustee Hire A Caregiver For Beneficiary?

What Is The Effect Of Paying For The Beneficiary’s Caregivers?

What Is The Effect Of Hiring An Ihss Worker As A Caregiver?

How Should A Trustee Hire A Caregiver?

Should A Trustee Use A Home Care Agency Or Hire A Private Individual?

Can A Trustee Hire A Professional Care Manager Instead Of A Home Care Agency?

What Questions Should Be Asked Of A Potential Home Care Agency?

What Should The Snt Trustee Be Concerned About When Directly Hiring Caregivers

What Questions Should Be Asked Of A Potential Caregiver?

Will The Caregiver Hired Be An Employee Or Independent Contractor?

What Employment Issues Must The Snt Trustee Understand?

Who Should Be The Caregiver’s Employer?

How Should The Trustee Handle Caregiver And Other Snt Employees’ Taxes?

How Much Should A Caregiver Be Paid?

Does The Type Of Care Alter The Overtime Requirements?

Does It Matter If The Work Is Performed In The Home Or At A Facility?

Can An Snt Trustee Pay A Caregiver A Daily Or Weekly Rate?

What Is The Minimum Wage For Caregivers

When Is The Caregiver Entitled To Overtime?

Does The Employer Have To Pay For All Hours The Caregiver Is In The Home?

Does The Employer Have To Pay The Caregiver When The Caregiver Is Sleeping?

How Many Rest And Meal Breaks Does The Employer Have To Provide?

Can The Employer Deduct The Value Of Food And Lodging From The Caregiver’s Wages?

Does The Employer Have To Provide Paid Time Off?

What Forms And Posters Will The Trustee Need If The Trustee Is The Employer Of The Caregiver?

What Can An Snt Trustee Do To Reduce Caregiving Costs?

What Other Resources Can An Snt Trustee Review To Assist In Hiring Caregivers?

Can The Snt Trustee Hire The Beneficiary’s Parents To Serve As Caregiver?

Can A Trustee Hire Other Family Members To Provide Caregiving Services?

Can A Trustee Hire An Undocumented Worker As Caregiver?

What Happens If The Trustee Fails To Comply With Employment Laws?

Once A Caregiver Is Hired, What Should The Trustee Do To Monitor The Caregiver?

Chapter 9 Keeping Snt Records And Providing Accounting

What Is The Trustee Record Keeping Responsibilities?

What Information Should Be Recorded?

What Is The Procedure For Keeping Records?

What Happens If A Trustee Fails To Keep Proper Records?

Who Is Entitled To Review Trust Records?

Who Is Not Entitled To Review Trust Records?

What Are The Trustee’s General Accounting Requirements?

What Are The Accounting Requirements For A Non–Court Supervised Snt?

Who Should Prepare Non–Court Supervised Accountings?

What Must An Accounting In A Non–Court Supervised Account Include?

What Type Of Format Must The Accounting Be In?

How Can A Trustee Shorten The Length Of Time He Or She Is Liable For His Or Her Actions As Trustee?

Who Should Get A Copy Of The Non–Court Supervised Account?

Can A Beneficiary Waive A Trustee’s Account Requirement?

What Is A Court-Supervised Account?

What Type Of Snt Must File A Court Account?

Who Should File A Court-Supervised Account?

What Are The Legal Requirements For A Court-Supervised Account?

What Are The Judicial Council Forms?

What Judicial Council Forms Must Be Used In A Court-Supervised Accounting?

What Other Information Must Be Provided In A Court Account?

How Does Snt Trustee File Court Account?

How Must Notice Be Given By The Trustee Of The Court-Supervised Account?

What Happens At The Court Hearing?

What Is The Effect Of The Court Signing An Order On A Court-Supervised Account?

Chapter 10 Managing Snt Investments And Assets

Why Should A Trustee Set Up A Budget?

How Does A Trustee Set A Budget For An Snt Beneficiary?

What Is The Trustee’s General Duty When Investing And Managing Trust Assets?

Are There Any Exceptions To The Trustee’s General Duty To Invest And Manage Assets?

Should A Trustee Buy And Maintain Insurance On Trust Assets?

What Should A Trustee Do To Protect Beneficiary’s Personal Property?

Is A Trustee Allowed To Invest Trust Property Any Way He Or She Wants?

What Can A Trustee Invest In With A Court Supervised First-Party Snt?

What Can A Trustee Invest In With Non–Court Supervised Snts?

What If The Trust Document Or A Court Order Specifies How A Trustee Should Invest In A Way That Contradicts The Prudent Investor Rule?

What Are The Considerations In Developing An Overall Snt Investment Strategy?

What Steps Can A Trustee Do To Develop An Investment Strategy?

Can The Trustee Delegate The Investment Responsibilities To Another?

What Principles Should A Trustee Understand When Hiring A Financial/Investment Professional?

What Steps Should A Trustee Take When Hiring A Financial Advisor?

Can A Trustee Still Be Held Responsible For Breaches If He Or She Delegates The Duty Of Investment To A Professional?

What Type Of Monitoring Of The Financial Advisor Should A Trustee Do?

What Should A Trustee Do If He Or She Suspects Wrongdoing By A Financial Advisor?

Chapter 11 Filing Snt Tax Returns And Paying Taxes

Should The Snt Trustee Hire A Tax Professional To Help?

What Kind Of Tax Professionals Should Be Hired To Assist The Snt Trustee?

How Does An Snt Trustee Find And Hire A Tax Professional?

Is Adding To (Or Funding) An Snt By Gift Or Inheritance A Taxable Event?

Is Funding An Snt With A Litigation Recovery A Taxable Event?

What Tax Identification Number Should A Trustee Use For The Snt?

Should A Trustee (Or Successor Trustee) Notify The Irs Or California Franchise Tax Board When He Or She Becomes Trustee?

Should A Trustee Notify The Irs Or Franchise Tax Board When He Or She Is No Longer Snt Trustee?

How Does Income Tax Apply To Trusts?

What Are A First-Party Snt Trustee’s Reporting Requirements?

What Are A Third-Party Snt Trustee’s Reporting Requirements?

What Is A Qualified Disability Trust?

How Much Income Is Required Before A Third-Party Snt Trustee Has To File A Tax Return? What Tax Forms Need To Be Filed? Is There A Time Limit When The Forms Need To Be Filed?

Can A Third-Party Snt Trustee Seek An Extension Of Time To File Returns And Pay Taxes?

Is There A Penalty For Failure To File And Pay Taxes?

Does A Third-Party Snt Need To Pay An Estimated Tax?

How Is A Snt Beneficiary Taxed?

How Are Trustee’s Fees Taxed?

How Should The Trustee Handle Caregiver And Other Snt Employees’ Taxes?

When Would An Snt Be Subject To An Estate Tax?

When Would An Snt Be Subject To The Federal Gift Tax?

When Would The Snt Trustee Need To Be Concerned With Property Taxes?

Chapter 12 Protecting The Snt Trustee

How Does An Snt Trustee Get Into Trouble?

Can An Snt Trustee Be Liable For Actions Of Co-Trustee?

Can An Snt Trustee Be Liable For Actions Of A Predecessor Trustee?

Are All Trustee Breaches Actionable?

What Tools Are Available To Protect An Snt Trustee?

Can An Snt Trustee Obtain Pre-Approval For A Decision That Protects A Trustee From Liability?

What Can Happen To A Trustee That Is Found In Breach Of Trust?

Chapter 13 Paying Trustee Fees

How Do Different Types Of Trustee Charge For Their Services?

How Much Can An Snt Trustee Be Paid?

How Often Can A Trustee Take A Fee?

What Happens If The Trustee Wants To Increase Fee During Administration?

What Happens If Someone Disputes The Trustee’s Fee?

Can A Trustee Be Reimbursed For Costs Incurred During Administration?

Are There Any Practices A Trustee Can Do To Make Obtaining Fees Easier?

Chapter 14 Terminating The Snt

What Are Snt Trustee’s Legal Responsibilities On Snt Termination?

What Are The Snt Trustee’s Responsibilities In Terminating A First-Party Snt?

Step One: Send Notice To Government Agencies And Remainder Beneficiaries

Step Two: Review Payback Report From State Agencies

Step Three: Check To See If Exceptions To Medi-Cal Payback Apply

Step Four: Determine Priority Of Authorized Creditors

Step Five: Pay Allowable Funeral Expenses

Step Six: Pay Authorized Creditors

Step Seven: Making Final Distributions

Step Eight: Prepare A Final Accounting

What Are The Snt Trustee’s Responsibilities In Terminating A Third-Party Snt?

Step One: Payment Of Fees And Expenses

Step Two: Final Distribution

Step Three: Final Account

Chapter 15 Setting Up Systems For Efficient Snt Administration

What Are The Snt Trustee’s Initial Duties?

What Should The Trustee Be Looking For When Reviewing Trust Document?

What Recommendations Are There When Working With The Beneficiary And Others?

How Can A Trustee Document The Distribution Standard?

Why Should A Trustee Set Up A Budget?

How Does A Trustee Set A Budget For An Snt Beneficiary?

Is There A Systematic Way To Make Appropriate Snt Distributions?

What Distribution System Should Be Implemented?

What Recordkeeping System Should Be Implemented?

How Should A Trustee Keep Track Of Trust Assets?

When Should A Trustee Keep Track Of Trust Investments?

What Type Of Review Should A Trustee Do If They Are Concerned About Current Financial Advisor’s Trust Investments?

Should A Trustee Have An Investment Policy Statement?

How Should A Trustee Set Up An Accounting And Report Procedure?

How Does An Snt Trustee Prepare For Filing Tax Returns?

What Other Protections Procedures Can A Trustee Implement?

What Systems Can An Snt Trustee Utilize When The Trustee Will No Longer Be The Trustee?

Chapter 16 Finding Help Administering Snt

Where Can An Snt Trustee Find A Special Needs Planning Attorney For Advice?

Where Can An Snt Trustee Find General Information About California’s Public Benefit Programs?

Where Can An Snt Trustee Find Information On Not-For-Profit Agencies That Provide Services And Resources To Persons With A Disability?

What Government Agencies Are There Assisting Persons With Disabilities?

Who Can An Snt Trustee Hire To Assist With Public Benefit Eligibility For Persons With Disabilities?

Who Can An Snt Trustee Hire To Assist With Financial Planning For A Person With A Disability?

Who Can An Snt Trustee Hire To Assist With Tax Filing And Planning For A Person With A Disability?

Appendix A Fourteen-Step Summary In Beginning Snt Trust Administration

Appendix B New Snt Trustee Checklist

Appendix C Summary Of California Laws Concerning Trustee Duties

Appendix D Ssa And Dhcs Reporting Guidelines

Appendix E Special Needs Trust Summary For First And Third Party Snt

Appendix F Budget Planning Worksheet

Appendix G Beneficiary Disbursement Request Form

Appendix H Snt Distribution Public Benefit Decision Tree

Appendix I Checklist For Interviewing A Financial Advisor

Appendix J Sample Accounting Letter

Appendix K Checklist For Hiring And Managing A Care Provider

Appendix L Sample Caregiving Agreement

Appendix M Caregiver Timesheet

Appendix N Checklist On Death Of Beneficiary

Appendix O No-Brainer Snt Distribution List

Appendix P Sample Investment Policy Statement

Appendix Q Sample Petition For Court Account

Appendix R Trustee’s Time Log

Appendix S Sample Trustee Declaration For Fees

Appendix T Motor Vehicle Ownership And Maintenance Contract

Appendix U Loan With Beneficiary When Loss Of Ssi During Appeal

Appendix V Beneficiary Waiver Of Trustee Action

Appendix W Beneficiary Waiver Of Purchase Of Pre-Paid Funeral Contract

Appendix X Sample Notice Of Proposed Action

Glossary Of Commonly Used Snt Administration Terms

ABOUT THE AUTHORS

Kevin Urbatsch is a nationally recognized attorney in estate and settlement planning for persons with disabilities. He is a principal of the special needs and settlement planning law firm, The Urbatsch Law Firm P.C. located in California and is a principal of the Michigan Law Center, PLLC in Michigan. Kevin serves as National Director of the Academy of Special Needs Planners (ASNP), a national organization of special needs and settlement planning professionals. Kevin also serves as Editor-in-Chief of the NAELA Journal. Kevin is a Certified Specialist in Estate Planning, Trust, and Probate Law by the California State Bar Board of Legal Specialization. Kevin is also a fellow of the American College of Trust and Estate Counsel (ACTEC).

Kevin is a frequent lecturer to other attorneys, financial professionals, and families of loved ones with special needs. He has lectured before the Academy of Special Needs Planners, National Academy of Elder Law Attorneys, American Association of Justice, Professional Fiduciary Association of California, numerous California bar associations, and not-for-profit groups helping parents and persons with disabilities achieve their full potential.

He also is the author (or co-author) of the following books and treatises:

• Administering the California Special Needs Trust (1st Edition and 2nd Edition) published by IUniverse;

• The Future of Special Needs Planning in 2013 by NAELA Journal

• Special Needs Trusts: Protecting Your Child’s Financial Future (4th Edition), (5th Edition) (6th Edition) (7th Edition) published by Nolo Press.

• Original Attorney-Editor and co-author of CEB’s award winning publication titled Special Needs Trusts – Planning, Drafting, and Administration and author of Chapters:

o Chapter 8B – Qualified Settlement Funds

o Chapter 11 – Establishing the (d)(4)(A) SNT

o Chapter 12 – Pooled SNTs

Kevin is a charter member of the Academy of Special Needs Planners; member of the National Academy of Elder Law Attorneys (NAELA); the California Advocates for Nursing Home Reform (CANHR); WealthCounsel, the Bar Association of San Francisco, Probate and Trust Section; and the State Bar of California, Trust and Estate Section.

In 2013, Parenting Magazine named Kevin as one of the nation’s Top Child Advocates for his work in fighting for the rights of children with special needs. In May 2011, Kevin was presented the NAELA’s Presidential Recognition Award for his work in special needs planning. In each year from 2010 to 2016, Kevin was named a Northern California Superlawyer. In 2009, Kevin was named KRON-TV’s Best of the Bay estate-planning attorney for Northern California. Kevin has a perfect 10/10 rating by AVVO attorney rating service.

Michele Fuller is Founder of the Michigan Law Center located in Sterling Heights, Michigan. The practice focuses on elder law, special needs planning, Veteran’s Administration planning, and settlement planning, including a national practice establishing Qualified Settlement Funds (QSF). Michele is also the founder and President of Advocacy, Inc., a non-profit organization.

Michele is involved in several national organizations. She is an Advisory Board Member of the Academy of Special Needs Planners (ASNP), served as Chair of the 6th Annual conference, in addition to being a frequent presenter at their annual conferences and webinars. She is also a member of the National Academy of Elder Law Attorneys (NAELA) and is a charter member of the NAELA Michigan Chapter and serves on the board of directors. Michele is serving as the 2016-2017 Chair of the Elder Law and Disability Rights Section (ELDRS) of the State Bar of Michigan.

Michele was quoted in a New York Times article regarding utilization of pooled trusts. She was also the featured attorney in the Lawyer’s Giving Back section of Lawyers and Settlements. Michele is a contributing member of ElderCounsel, and has presented on special needs planning, the impact of the Affordable Care Act, and practice management .

Michele is a long-standing member of the Michigan Association for Justice (MAJ) and has given national and statewide presentations regarding special needs settlement planning and related issues. She has also presented for the Michigan Brain Injury Association of Michigan, the Michigan Guardianship Association, and the Institute of Continuing Legal Education. She is also proud to serve as council for national and statewide non-profit organizations, which administer pooled special needs trusts.

Michele was named the Women-in-Law Elder Law and Special Needs Planning Attorney of the Year for 2016 by Lawyer’s Monthly Magazine. Parenting Magazine also named Michele Top Special Needs Child Advocate in 2013.

Michele co-authored several nationally published articles, including Traps for the Unwary During Special Needs Trust Administration, in Estates and Trusts Magazine, the Future of Planning for Persons with Disabilities which was published in the Fall 2013 edition of the NAELA Journal, and Pooled Trusts: An Approach to Special Needs Planning for Families of Modest Means, published in the May-June 2013 edition of BiFocal, a Journal of the ABA Commission on Law and Aging. She also contributed to the November 2014 edition of the Michigan State Bar Journal, Planning for a Person with Disabilities. Michele is also co-author of a book entitled Special Needs Trusts: Protect Your Child’s Financial Future, 6th Edition, and NOLO Press. She is also author of Saving Grace, which is about an elder law client’s experience.

Michele graduated with Honors as a member of the James Madison College at Michigan State University with a Bachelor of Arts in International Relations. Michele then attended American University International Law Masters program and obtained her Juris Doctor from the University of Detroit Mercy School of Law.

CONTRIBUTING AUTHORS

Herb Thomas is a licensed California Fiduciary #86 and the owner and primary fiduciary of Herb Thomas and Associates Fiduciary Services. Herb is a graduate of San Francisco State University with a bachelor’s science degree in Health Sciences.

He has extensive experience serving families throughout California with special needs trusts, public benefits counseling and advocacy, estate/trust administration, and conservatorships. Herb is a member of the Professional Fiduciary Association of California, the Financial Planning Association, the American Society on Aging, and the National Organization of Social Security Claims Representatives. He is a lecturer on the subject of special needs fiduciary work and has presented to the Academy of Special Needs Planners and the Northern California Financial Planner Association Annual Conference

Herb has served on the boards of:

• Legal Assistance for Seniors, East Bay. An agency dedicated to ensuring the legal rights of elders, through education, counseling and advocacy;

• BIA4Autism: a non-profit that provides early intervention programs and services for children diagnosed with Autism Spectrum Disorder.

• Professional Fiduciary Association of California: a non-profit that provides ongoing education for licensed professional fiduciaries in the state of California

Before starting Herb Thomas and Associates, Herb served as the developer and coordinator of the Kaiser Permanente (KP), East Bay Community Benefits Advocacy program. The goal of this program was to find ways to subsidize KP’s members’ health care costs through the complex maze of public and private benefits (e.g., Medi-Cal, COBRA, HIPPA, etc.). Additionally, previously to his work in public benefits Herb served seven years as taxpayer delinquency investigator with the Internal Revenue Service. In this position he located taxpayers who had not filed federal income tax returns and assisted them with becoming compliant with federal regulations.

He is married with three children. Two of whom are grown. The youngest child is a vibrant and clever boy, who was diagnosed with autism at the age of 3.5. As a family they enjoy traveling to destinations like Russia, Brazil, Tanzania, Western Europe and to any beach in Hawaii. In his leisure time Herb enjoys tinkering with devices and repairing gadgets.

Robert Nuddleman is the owner and primary attorney at the Nuddleman Law Firm, P.C. He represents individuals and companies in federal and state court and various administrative agencies such as the California Department of Industrial Relations (Labor Commissioner), Equal Employment Opportunity Commission, Department of Fair Employment and Housing, and Unemployment Insurance Appeals Board. A significant focus of Mr. Nuddleman’s practice relates to wage and hour claims, breach of contract, trade secret protection, claims of sex, race, age, and pregnancy discrimination and/or harassment and accommodating persons with disabilities. Mr. Nuddleman advises and represents business clients in employment and business matters in an attempt to avoid litigation and reduce potential exposure to claims of all kinds in light of developing law. A particular focus of Mr. Nuddleman’s practice includes advising caregiver agencies, trustees, conservators, families, residential care facilities, care homes and others regarding wage and hour and employment laws in the elder care industry. Mr. Nuddleman frequently presents seminars and workshops regarding workplace disputes and compliance with federal, state and local employment laws.

Courtney Kosnik has worked in public accounting since June of 1996. She started as a bookkeeper for several small businesses and then as a senior accountant for a Metro Detroit CPA firm. During her time at the CPA firm she went to school and earned an Associate Degree in Business Administration with a Concentration in Accounting from Oakland Community College, graduating Cum Laude. Courtney sat for the Enrolled Agents Exam (the SEE) administered by the IRS in 2001 and passed her exam on her first sitting.

Courtney went on to open her firm, Better Business Tax & Accounting, Inc in Metro Detroit, in 2001. While balancing the care of her children, aging parents and a growing practice, Courtney completed a rigorous three year fellowship with the National Tax Practice Institute. Following her passion, all things related to the tax code, she is studying for the USTCP exam that will be administered in Washington DC in November of 2018.

Courtney teaches continuing education with the NTPI fellowship, which is run by the National Association of Enrolled Agents, at their annual conference in Las Vegas. She is involved in the Michigan Chapter of the NAEA and the National level of the NAEA. She has participated in FLY IN DAY, joining other Enrolled Agents in Washington DC to walk the halls of Congress and meet with Congressional members and their staff in an attempt to education them on various areas of the tax code and its impact on taxpayers.

AUTHOR INTRODUCTION

Second Edition:

In 2011, I authored and published the book Administering the California Special Needs Trust. Since that time, I have had many readers provide me with excellent reviews and thanking me for offering the book as a resource for the challenging job of serving as trustee of a special needs trust. In the past five years, there have been some significant changes in the world of special needs planning and administration. I felt it was time to update the book to the most recent law and policy. I also reached out to several colleagues to help add new chapters with more extensive coverage on specific topics and update the book in its entirety for more detailed coverage.

I was lucky enough to have experienced professionals agree to help me add new chapters and update existing information. The new chapters in this latest edition are: Paying Caregivers, Paying Trustee’s Fees, Understanding and Utilizing ABLE Accounts, and Protecting the SNT Trustee. In addition to the new chapters, the forms in the back of the book were updated and additional forms added to make the job of being an SNT trustee safer and more efficient.

I wish to thank the following professionals who helped me with this new edition. Attorney Michele Fuller aided considerably in this new edition by reviewing and revising the entire book. The following people also wrote separate chapters or updated and revised specific sections of the book: attorney, Robert Nuddleman; enrolled agent, Courtney Kosnik, financial advisors, Scott MacDonald and Daniel Cutter, and professional trustee, Herb Thomas. Thank you for your participation.

I hope you find this new edition helpful and informative.

Kevin Urbatsch

Original Edition:

For years, the authors have planned for persons with disabilities that included establishing special needs trusts, powers of attorney, advance health-care directives, and limited conservatorships and guardianships. All too often, once the documents were drafted and the clients left our office, there was little day-to-day guidance we could offer. In order to help our clients, we drafted a relatively short twenty-page (or so) document that discussed some details of managing a special needs trust. While it answered some questions, it also seemed to generate many follow-up questions due to the relative complex nature of special needs trust administration.

Over the years, we have heard a similar type of question from people confused about how special needs trust disbursements would affect the beneficiary’s public benefits or whether a trustee was authorized to perform a certain action. It was not only clients but also other attorneys (unfamiliar with public benefit rules) who sought advice on some of the unique issues that arose during special needs trust administration.

It is understandable that clients and attorneys who do not spend every day working on special needs issues are confused, but what is more troubling is that many public benefit agency caseworkers often misunderstand the rules governing their own public benefit programs and provide improper advice on how a special needs trust interacts with public benefit programs.

It was imperative that a resource be provided that would allow a trustee to feel more confident in his or her administration. We reviewed the existing publications, and none of them addressed the specific California issues that a special needs trust trustee would see on a day-to-day basis. Sometime in late 2009, Kevin tried expanding his client handout, but as he started working on it, we realized it was going to take a much more thorough treatment to provide the kind of guidance we felt was necessary. Thus, this book was born.

In writing any book, the author needs to decide who the book’s audience will be. In this case, we decided my audience is anyone who has taken on the responsibility of administering a California special needs trust. This could be a family member or friend who has never managed any kind of trust, up to and including a national bank trust department, which manages hundreds. Thus, the book provides some of the basics in trust administration, but it also provides a relatively sophisticated level of coverage of all aspects of special needs trust administration.

A challenge with special needs trust administration is that the law is ever-changing. Public benefit rules change. Tax laws change. Trust laws change. Therefore, if you run into a question that may have a serious impact on the person with a disability’s rights or with your role as trustee, it is important that you sign up for my monthly e-newsletter titled the Special Needs News, which provides monthly updates and articles on helping trustees and people with disabilities. I encourage you to go to my website and sign up to receive the e-newsletter. Remember though, no book can ever replace the advice from an attorney with experience in special needs trust administration on specific trust administration issues.

For this book, we decided to use a question-and-answer format to address queries as we have received over the years. We have also provided a summary at the end of each Chapter that summarizes the Chapter’s main points. We included footnotes of citations to legal authority, but this was really for the author’s benefit, so we could keep track of any changes in the law and update those things as they arose. We also decided to add a variety of checklists, form documents, and law summaries some of my clients have found helpful over the years. We hope that you find them helpful.

If you have any other documents or forms that you have found helpful, please e-mail me at [e-mail] or [e-mail] and I will include them on my website at www.UrbLaw.com or www.MichiganLawCenter.com for the benefit of all. Also, if you have any specific comments, concerns, or questions about this book, please contact me.

Finally, we want to thank you for taking on the responsibility of serving as a special needs trust. It is a challenging but rewarding service you are providing to persons with disabilities, and we hope that you find this book to be a valuable resource.

Kevin Urbatsch

Michele Fuller

LEGAL DISCLAIMER

This book was written with the intention of providing a resource for trustees of special needs trusts. It is not, and cannot, be a substitute for actual legal advice between an attorney and client. While the content of this book has been prepared by attorneys Kevin Urbatsch and Michele Fuller, it was done so for informational purposes only and should not be construed as legal advice but rather as the attorney’s opinion concerning the law and practice at the time of this book’s publication. The material posted in this book is not intended to create a lawyer-client relationship, and readers should not act upon it without seeking professional counsel.

I consider this book the beginning of a dialogue with the readers. If you are aware of an omission, error, or confusing section in this book, please share your knowledge with me. Send your comments to [e-mail] or [e-mail].

CHAPTER 1

INTRODUCING SPECIAL NEEDS TRUST ADMINISTRATION

T HIS BOOK DESCRIBES THE duties and responsibilities of a special needs trust trustee (sometimes the trust is called a supplemental needs trust or SNT), but it is the same type of trust with the same duties. A trustee is a person or entity that has the legal responsibility for managing a trust by following the rules set forth in a trust document and under California law for the benefit of the beneficiary of the trust. In an SNT, the beneficiary is the person with a disability.

Administering an SNT is a very important job, which often has a profound impact on the life of persons with disabilities. In most cases, the SNT trustee is providing the beneficiary goods and services that improve their quality of life. In some cases, the SNT trustee may be the only person looking to the beneficiary’s welfare. Thus, the role of SNT trustee is often a more substantial role than in many other types of trusteeships.

In order to do an excellent job, the SNT trustee must draw upon an impressive arsenal of skills to properly manage an SNT. The trustee must be comfortable navigating the multiple layers of rules and policies of various governmental agencies. The trustee must appreciate the beneficiary’s disabilities that may limit the beneficiary’s ability to communicate, manage their daily lives, locate housing, find employment, and become active citizens in the community. Thus, the SNT trustee is not only entrusted to assist with the financial management of a person with a disability’s assets, but may also be called upon to assist with the beneficiary’s personal protection and development. The SNT trustee is often also called upon to advocate for the beneficiary’s rights or to protect the beneficiary from discrimination (or from various types of predators).

The great SNT trustee is a solid financial manager, accountant, record keeper, legal counselor, public benefits advisor, social worker, housing coordinator, civil rights advocate, guardian, and life coach.

It is not a job for the timid.

In order to assist the SNT trustee, this book is set up in a question-and-answer format to highlight the different issues that will arise for the SNT trustee.

Critical Pointer: Please keep in mind that the guidelines laid out in this book are far from exhaustive. These guidelines are intended to alert trustees to their duties and to impress upon them the significance of their responsibilities. Please do not hesitate to ask for legal, financial, tax, or other advice, especially if the trustee is not convinced he or she knows the right answer. That advice may cost something in the short run, but the cost can be far less than it takes to fix a mistake later on. Remember that the trust will pay reasonable costs associated with trustees obtaining advice, but trustees could end up paying out of their own pockets for their failure to secure advice when needed. Use Chapter 16 to find help in administering an SNT.

WHAT IS AN SNT?

An SNT is a type of trust designed to provide a person with a disability with assets to enhance his or her quality of life while at the same time allowing that person to remain eligible for needs-based public benefits. The two primary types of public benefit programs that are protected by use of an SNT are Supplemental Security Income (SSI) and Medicaid (in California this program is called Medi-Cal).

There are many other reasons why an SNT is valuable:

1. investing the beneficiary’s assets in a way that will best protect the beneficiary throughout his or her lifetime to the maximum extent possible especially when the beneficiary is unsophisticated in managing his or her own resources;

2. protecting the beneficiary from financial predators who take advantage of minors or vulnerable adults who may not have the capacity to protect themselves;

3. paying all applicable taxes so the beneficiary is not later subject to penalties or fines for under reporting tax obligations;

4. providing supplemental lifetime support by purchasing additional items and services that make life more rewarding for the person with a disability;

5. protecting the beneficiary’s assets by having someone responsible for insuring and otherwise protecting trust assets;

6. providing a system of advocacy to preserve the civil rights of the person with a disability;

7. providing the funding for a safe and clean living arrangement so the person with a disability can live in the least restrictive environment;

8. reporting to the proper government, legal, and family when required by law or policy when using the SNT for the benefit of the beneficiary;

9. providing a system to provide ongoing and safe caregiving services that may also supplement In-Home Supportive Services (IHSS); and

10. offering opportunities so the person with a disability can enjoy all social and recreational activities that enhance his or her quality of life.

Critical Pointer: An improperly drafted SNT will cause the beneficiary to lose his or her benefits. There are many ways to draft an improper SNT; it may require payments to the beneficiary or require that payments be used for the beneficiary’s support. Thus, before someone agrees to take on the job of trustee, the trustee should have the trust reviewed by an experienced special needs attorney to make sure it was drafted and established correctly.

WHAT IS A SETTLOR, TRUSTEE, TRUST ADVISORY COMMITTEE, OR TRUST PROTECTOR?

In order to understand administration, it is important to know the terms for the different people who may be involved in the administration of the SNT:

• Settlor, Trustmaker, Grantor, Trustor: These are different names for the person or entity that created or established the trust. For example, if a parent created a trust for a child with a disability, then the parent would be named the settlor, grantor, trustmaker, or trustor of the trust, depending on the drafting attorney’s own convention of use. In California law, the term settlor is used; however, there is no difference in treatment if a trust document uses a different name.

• Trustee: This is the person responsible for administering the trust once it is established. A trust may also name successor trustees, who would be the persons responsible for managing the trust if the originally named trustee could no longer serve. A trust can have more than one trustee at a time. Be aware that a cotrustee can be held responsible for another cotrustee’s breach of a fiduciary duty. Thus, it is important that all cotrustees pay close attention to everything that is done in the administration of the trust. If there is any question or problem, it should be communicated to the other cotrustee or cotrustees immediately. As a general rule, where there are two or more cotrustees, all have to agree on all matters of trust administration. However, the trust document may create a different standard for agreement such as majority rule. In order to minimize the chances of being held responsible for someone else’s poor judgment or breach of duty, a cotrustee should be sure to make a written record of any points of disagreement about trust business. In extreme cases, a cotrustee may be required to blow the whistle on other cotrustees’ activities.

• Beneficiary: This is the person or entity that is to receive the benefit of the trust. The primary beneficiary of a SNT is the person with a disability. There may also be named remainder beneficiaries or sometime contingent beneficiaries; these are the persons who would receive the trust assets once the primary beneficiary either dies or there is a provision in the trust that would cause the assets to go to someone else. For example, an SNT could provide, I leave my assets to be administered for the benefit of my child with a disability for as long as he is alive, but on his death or upon his no longer being disabled, the assets of the trusts shall be distributed to my grandchildren. In this example, the remainder beneficiaries would be the grandchildren.

• Trust Advisory Committee: In some SNTs, there will be a group of persons called a trust advisory