- Disclosure
This Week’s Discussion:
Estate Planning Fundamentals for Individuals with Special Needs.
Presented by Steve Elville, Esq.
Managing Principal and Lead Attorney with Elville and Associates, P.C.
Sandy Spring Trust does not endorse or recommend the services of any person or entity not affiliated with Sandy Spring Bank.
The opinions and statements expressed by Steve Elville and Elville and Associates, P.C. reflect their own views and do not necessarily represent the views of Sandy Spring Trust.
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- Hello everyone. And welcome to Sandy Spring Bank's, Real Life Matters Professional Discussion Series. My name's Phil Fish. I'm a certified financial planner and an estate planning specialist with the Trust Division of Sandy Spring Bank. I've worked there for the past 20 years. I'm the host of this discussion series as I interview local professionals in the areas of law tax, finance and healthcare. And we're very fortunate today to have our guest, Steve Elville, with Elville Associates to talk about a very important topic, The Fundamentals of Estate Planning for Individuals with Special Needs. So Steve, thank you so much for taking time out of your busy day to join us. And why don't we start out with just a little brief background on yourself and your firm and then we'll get into the important topic that we're gonna discuss today.
- Thank you, Phil. It's great to be with you today and it's real privilege to share information about special needs planning. I am the Principal and Lead Attorney of Elville and Associates and we have offices throughout Central Maryland, and we've been working together for many years with you. So it's a real opportunity and privilege for us to educate. So we do estate planning in the conventional sense, we also do elder law planning and as part of that, and a big aspect of our planning is really special needs planning. And I find that it's just a joy to be able to be involved in the special needs planning community and I've had the real privilege of being able to educate at special needs schools and help parents throughout the state and be able to help guide them because there are so many nuances to this particular type of planning. And I find that the parents are so busy caring for their special needs loved one and persons with disabilities in their family, that they always don't have time to avail themselves of resources. So, that's really what we've been doing for the past 20 years plus.
- Yes, and I have known each other for quite some time. I've been with the bank for over 20 years now as a Trust officer with another bank and handled most of the special needs trusts at that location. So we've had kind of a common theme and conversation over the years and you've got a wonderful staff of attorneys I've gotten to know over the years. And so it's been a pleasure interacting with you. And so special needs is such a difficult issue because we deal with the parents and loved ones and family members of individuals with either mental or physical disabilities. And it is a terrifying thought of what happens when they're not there. When that generally the 24/7 caregiver, they are watching over this individual, providing them love and support and just that infrastructure that they need. And I know you and I both are challenged with individuals trying to plan for the idea of, well, when I pass away or if I become sick, what happens and how does my loved one continue to receive care? So and I chatted before today's conversation and we've got like five things we wanna talk about. The first one was creating an effective plan for the individual. So why don't we start there as far as just a broad starting point. If there's members watching, today's audience who might be starting that process of thinking, it can be overwhelming just where to start. So why don't we start at the beginning?
- Thank you, Phil. That's a great segue. So I like to always say, and I know you believe in the same thing that all planning is goal driven. So, you know, we know what our goal is, we can accomplish that. And I think part of it is just helping parents with loved ones with disabilities to really focus on what is it that they need to accomplish. Many times parents have been given access, or they've been exposed to a lot of resources, but it's sometimes hard for them, I've experienced, to really be able to think through those resources and they don't always have a team of advisors. They are so busy in their lives, making ends meet or just trying to take care of their loved one as you mentioned that they just can't really take the time. So I think that part of it is really what is the goal and obviously in special needs planning our general goal, although there's various aspects of it, is to enhance the quality of the person with disability's life to enhance the quality of their life to leverage means, tested benefits many times, sometimes not. There are occasions when we're not gonna do that. Really understanding the different types of benefits that are available. A lot of parents I've noticed, Phil are, depending on the age of the person with disabilities, are coming through a continuum. Let's say it's a young teenage beneficiary or someone who has not yet turned 18. There are issues of, well, what is their level of disability? Should there be a guardianship? Should there not be a guardianship? We're gonna talk about that today. But it's really just starting to understand what is basic estate planning about and where does special needs planning fit into that? So a lot of misunderstanding about the various types of special needs trusts, should that trust be provided inside of a will or a revocable trust, or should that trust stand on its own? Why would we use one trust versus another? And then how do we fund those trusts? What assets are really going to be there for the loved one? And really understanding the tools that are available today, because there's so much misinformation, misinformation about Medicaid, misinformation about DDA, misinformation about SSI, what can a trustee do and what can they not do? Parents have a big fear, in my experience, of housing issues, you know? Where will my child lives someday? All of those things are part of really being able to come to a conference room like yours or mine, and be able to sit and think, and actually be able to focus for a period of time on these issues and have them laid out for them so that they can understand them. So I would say choosing the right team of advisors, building flexibility into planning, understanding concepts like trust protectors, which may many people have never heard of before, understanding how will I provide for advocacy for my child? One of the biggest things that parents are concerned about, of course, as you know, are who is gonna be the trustee of the trust, but who also will be the advocate. How can I make sure when this happens, that there will be continuity of an advocate or for people who are up in years, maybe seniors who have special needs, loved ones, how to go ahead and introduce an advocate to the child now? To the adult or disabled child now and start paving the way for a transition. So I think it's a combination of being able to think, having things clearly laid out, understanding the differences between the various types of planning, understanding how to keep a child or a disabled loved one from ending up with assets in their own name that they shouldn't have, avoiding all that avoiding all that for the broader family, making sure that the broader family doesn't mess up the planning that you've done because they leave assets they shouldn't to a child, understanding resources, understanding advocacy, understanding the team of advisors, who trying to put it all together. And then one of the things that you and I have talked about so many times is making sure that the funding mechanisms are in place. Let's say a person is fortunate enough to be able to say, well, we have assets that we can envision will be funded into this trust someday. We've done well, we have sufficient assets. Well, even that person doesn't really know for sure how many assets they will have in the future. So should that person, you know, buy life insurance and fund the trust in a perfect life insurance. So all of these issues basically boil down to education, goals, having the right team of advisors and really having a place to think and be educated about it.
- And I think the challenge is, you know, I worked for Sandy Spring Banks, Trust Division, and we're one of the few banks that do handle special needs trusts. And it is a challenging assignment to be the trustee. It's a huge burden to place on family members. And as you and I know with family, sometimes there's an individual with special needs and there are siblings who healthy and busy and active and how involved do they wanna be? So they might wanna be involved as an advocate, but they might not wanna take on the burden of being the trustee and managing funds and handling it. And I think a lot of problems we run into is just a sense of overwhelming confusion. Like you said, so much information out there, special needs, trust estate planning is very specialized. There are, your firm and a few others do a lot of work in it which is important because you become familiar and you kind of know the different paths and you and I are both like navigators. We take clients from kind of point A and we say, okay, you wanna go here, there's two or three different paths. Here are the pros and cons of each and based on my years of experience maybe path A might be best for you for these reasons. Let's talk about it and get your thoughts. But there are so many moving parts. Estate planning on its own is complicated. Just a husband and wife with two healthy kids, you and I struggle to get those clients to do estate planning. But when you have an individual with special needs, it's like having a second marriage, a blended family, or a business owner. Those types of unusual scenarios, lots of real estate in lots of different states, you know? There are kinds of estate planning where it gets a lot more muddier and more challenging, but what drives both of us is if you don't do it, the consequences are horrific and horrible and can be catastrophic. Like you mentioned, individuals may not qualify for benefits because they received the funds or the trust may not get funded properly, or it may not be written in the right way to accomplish the goals. So, I think, you know, this leads into our next topic, which is public benefits, which is the reason a lot of these state plans are created is because an individual with special needs and receive benefits if they are both medically qualified, but also financially qualified. So I think that's a good time for us to talk about that, is why do we set up these trusts? Which we'll talk about later in order to maintain the benefits that are available for these individuals. So could you talk a little bit about those benefits?
- Right, and this is one of the most confusing parts, Phil. So I'm glad you raised this. And I also will throw this topic, understanding public benefits right in there with the topic of understanding the trust if the trustee is serving, we wanna make sure the trustee not only understands public benefits, but actually reads the trust. So we wanna make sure that they actually do that. And of course you do that at Sandy Spring. So, public benefits, what do I mean by that? Well, it's a very broad term. So I would say Medicaid is the big umbrella topic. It's the big umbrella and the sky of the public benefit system. So the Medicaid system is anywhere from what I would call three different categories of Medicaid. We have community-based Medicaid. If I were able to draw three categories I would say, this category is community-based Medicaid. I'm living in the community and I don't have a lot of resources, I don't have a lot of income and I qualify for housing, medical assistance, is what Maryland calls it. I qualify for food stamps and heating subsidies and all of those things because I'm in the community. That benefit is basically unlimited, state and Federal government, okay? If I were to go to the opposite end of that spectrum, I would say we have a long-term care Medicaid which is not necessarily what we're talking about today, but that's part of the Medicaid system and part of the confusion. We have community-based Medicaid and on this spectrum, we have long-term care Medicaid. So if I am eligible, if I'm in a nursing home and I'm getting skilled care, I can qualify for long-term care skilled Medicaid, which is funded by the state and Federal government, unlimited. So community-based Medicaid, unlimited, long-term care Medicaid, unlimited. In the middle we have what we would call the Waiver Programs, okay? And the waiver programs are something that the states can look at as optional. Now, many people who are gonna be listening to this presentation may have a special needs loved one who is on a Waiver program. And this could be the autism waiver. It could be on the, what we call the Adult Daycare Waiver. It could be the Community options Waiver, which is more for older adults, the DDA waivers, okay? So the waiver systems are a system of means tested eligibility and they're limited. So that's the first thing we have to understand is the differences between these types of Medicaid, okay? Then the next thing we have to understand is the difference between the types of special needs beneficiaries. And I hesitate to say this, Phil but I'm going to actually talk about the certain beneficiaries in these various categories. So we understand the different types of Medicaid, now let's talk about the types of beneficiaries that receive these types of benefits. So we have the person who receives Supplemental Security Income, SSI. So that's my first category. The current benefit $794 a month, okay? $794 a month, it doesn't sound like much, but that is going to add up over the years. And that's for food and shelter which also doesn't sound like much. But that person who receives that is also gonna receive medical assistance, okay? And in the old days this was very scary because if the person who was on SSI, supplemental security income, which most children are when they turn 18, if they're disabled and they turn 18, now it is possible to receive SSI as a minor, under 18, but that's in an impoverished household. So now the person's over 18, they're receiving $794 a month, they're receiving Medicaid, okay? And in the old days before there was Obamacare as we'd said, or expanded Medicaid, okay? This person would lose their benefits if they had more than $2,000 in their name and that would be it. So this is a means tested benefit. $2,000 is the limit this person can have in their name. So that's one type of beneficiary. And that is the prototypical person with disabilities, okay? Now, in the middle, we have someone who receives social security disability. And this is something that we're very familiar with. A person has a work record of their own, and they become disabled heaven forbid, and now they are on social security disability benefits. And as a result of that, that person, and they have their own work record, that person will get Medicare as a result of that Medicare. So if we stopped right there, the first category SSI is means tested, means tested. But this middle category is not means tested, that person who is getting social security disability on their own work record, that person could have a million dollars in the bank. and they're not going to lose their social security disability. However, many of these people in this middle category are also going to be eligible for Medicaid because maybe they need a means tested benefit in addition to Medicare. So this person in the middle many times will be someone who either has their own work record, or more often than not, they don't have their own work record, and this is the confusing part, the person who is on SSI at age 18, when their parent retires or has passed away, that person will become a disabled adult child for purposes of social security because they were disabled prior to age 22 and they will actually receive 50% of their parents' social security amount and at the death of the parent they will receive 75%. So my point is, there is where a lot of confusion lies. Most parents that are very dedicated parents that take care of their special needs loved one they are not aware of that their child will transition to if they were disabled prior to 22, to a disabled adult child status. And it's a very good thing because now they're going to receive this higher amount. So a person will start out receiving SSI in many cases, if they're a disabled adult child, they will transition, but a special needs trust is needed to protect the SSI beneficiary because of their means tested limits and that person that's in the middle category if they are also receiving Medicaid or means tested benefits. The special needs trust is needed for this person. So I just wanted to make the distinction. It's very confusing and I hope it's understandable in this presentation, the differences there. And then we have the person who is a HUD beneficiary. This is a person who lives in HUD housing, and we have to be careful with this category over here, because there's nothing wrong with HUD housing and quite honestly, there's some quite nice HUD housing I've seen recently, but it does have sensitivities to distributions from special needs trusts. So the special needs trust that distributes to a beneficiary or for the benefit, which is most of the time, what it's gonna be for the benefit of the beneficiary, any of those distributions can be construed by HUD to be something that will cause their rent to increase.
- Okay.
- So there are distributions that are, most distributions from a special needs trust are gonna be sensitive for HUD purposes and there may be a reason to use an able account, which many people on this call will understand that and an able account that distributes for the beneficiary can get around those HUD rules. So we have the SSI, the SSD beneficiary, and we have the HUD beneficiary. So it's just important to understand those fundamental public benefit rules. We didn't even get into how to maintain SSI benefits and the hazards there. If the person earns, earned an income, and we didn't get into any of the other nuances. But if we understand that, you know, there are different types of Medicaid or medical assistance, we have community-based waivers and long-term care. The waivers and the community-based medical assistants are gonna be the most important in special needs planning, especially the waivers and we don't wanna lose those waivers because those are means tested. And then if we understand the different types of beneficiaries, SSI, SSD, disabled adult, child status and HUD beneficiaries, we're going a long way to starting to understand why a trustee of a special needs trust, needs to make sure they are not doing something that will knock the beneficiary off of their benefits.
- And I think I have this envision of in your office, like a investigation board with all of those little strings, attaching different pictures and names and this is the challenge, it is so complicated. You dealing with legal issues and tax and benefits and the type of beneficiary and what are they eligible to receive, and how do certain types of trusts or distributions from trust affect those benefits? And that's why many times when we serve as trustee, we're not serving alone, we're working with legal advisor, maybe a tax advisor, people on the ground floor providing care management support and social support. It really has to be a coordinated effort and to ask one person to try and serve as trustee and navigate all of this on their own, but also to ask the parents to try and navigate this, the planning on their own, and just to try and figure this out without good counsel is very dangerous because if you head down the wrong path, the benefits programs, they're not gonna accept I didn't understand as a reason why you're no longer eligible for benefits. They're just gonna simply state, you're no longer eligible for this benefit because this is set up in the wrong way, sorry. And so, you know, whenever I meet clients who have an individual with special needs, the first thing I say is, we're gonna need a good estate planning attorney who does a lot of work in special needs because the legal documents you create are gonna be critical. Like you said, do we create a trust from your will? Do we create a revocable living trust that continues on and creates a special needs trust? Do we have a standalone special needs trust that can receive benefits from maybe your parents, the individual's grandparents or aunts and uncles, if they wish to send money because they direct distribution from a family member could, you know, blow everything out of whack. So, which leads us into our next topic which is, the special needs trust. So we have the individual who the family with the individual with special needs, there are different types of special needs, physical disabilities, mental disabilities, young beneficiaries, adults, one thing you and I've talked a lot about, which I don't think we'll cover today, but it needs to be in the back of everyone's mind is, we also have to plan for the incapacity of the parents. That the parents many times take care of the individual by just writing checks and making gifts. But if they become sick, their powers of attorney and revocable trust need to have special provisions to allow whoever's name to take care of the parents, to also take care of the individual with special needs. And then, like you said, we've got to figure out with beneficiary designations and joint accounts and trust accounts and individual accounts. How are we going to direct funds upon the death of the individual? And if we have healthy children, how do we create fairness and prevent a lot of hurt feelings? If we funnel all the funds into the special needs trust, and then the other children receive the funds only when that individual passes away, it can cause, you know, mixed feelings sometimes whether we're being disinherited through this process and it's very difficult. So, which leads us to our fun topic of the actual original documents that are going to kind of help navigate through this quagmire of law and tax and finance and healthcare which is a sometimes called, I think a supplemental needs trust, or a special needs trust, or different terms?
- Right. Right. And Phil, you do such a stellar job of fact-finding. So I just wanna emphasize just the detail that you just went into is so important. For example, I was focused in my last topic here about understanding public benefits as a general rule, but you just reminded me that I had leapfrogged over something that most trustees and most parents that are late, let's say, even establishing a trust, or down the road, they don't understand the public benefits that their child or loved one even receives now. So it's not only important to have a general understanding of public benefit, but to truly understand the benefits that the person is receiving as a threshold issue. And then you mentioned something that is absolutely huge. And I'm almost got cold chills when you brought it up because you must've been reading my mind, powers of attorney are probably the most important tool in estate planning. And what most parents don't realize or most grandparents, whoever's doing the planning, is that the powers of attorney are not only about taking care of you, but any person who is dependent on you. And that's a very, very big thing that you just brought up, Phil. The other thing that you brought up in my mind was, and I see that most parents do a pretty good job with this, that in their wills, even if they have a revocable trust plan, but in their wills, they're going to want to name guardians of their disabled child even if that child is now 25 or 30 or 40 years old. They still wanna name potential guardians, not just guardians of a minor. And you mentioned something about funding, and I know we need to get to those special needs trusts, but that led me to think about, not only this issue of fairness and how to fund, but the new ramifications of the Secure Act. So the ramifications of the Secure Act being, you know, that my disabled loved one is exempt under the Secure Act. And so therefore I may wanna leave more IRA or retirement type assets to the special needs trust because that person is eligible for a lifetime treatment of the deferral of tax versus someone else. So, very important question.
- Okay. we'll get to the special needs trust now. So, the bread and butter--
- That's a very interesting point because in the past before the Secure Act, we would kind of lean clients maybe away from using IRAs because of the tax issues but now we might be leaning clients. It becomes, Ooh, this provides a nice, longer... A trust now has the ability to stretch out the distributions from the IRA where a healthy individual receiving an IRA only has 10 years to do it.
- That's a huge.
- Especially for an 18 year old individual with special needs, that's an incredible tax benefit available to them all of a sudden.
- Exactly. So, the scary part is, and the good news is Uncle Sam says that your disabled loved one is exempt. They are called an Eligible Designated Beneficiary under the Secure Act and their special needs trust, or what Phil mentioned to me, you mentioned a minute ago about a supplemental needs trust, which I will distinguish between the two. That trust is also exempt. What the estate planning attorney or special needs planning attorney knows or should know in the back of their mind is, if that supplemental needs trust is not drafted properly, then we go from the greatest of treatments lifetime to the worst. It will go to only a five-year stretch out. It won't even get the 10. So you're right. We would typically in the past stay away from that, but now that's a very desirable thing to do and we have to jump through the hoops that Uncle Sam says we have to jump through. The trust is exempt, but it has to be drafted right to be exempt.
- Okay.
- And with that said, you mentioned what are the types of special needs trust? Well, the bread and butter, Phil is called the Third Party Supplemental Needs Trust. So I'm gonna say that again, the Third Party Supplemental Needs Trust. And that just means in nature, it's supplemental. It is really designed in the traditional sense to say, maximize public benefits. This is not always what we want, but maximize public benefits and means tested benefits for the disabled loved one and then use this money conservatively for their supplemental needs. To build a world of financial support above and beyond the safety net of the public benefit world. So this creating this safety net, okay? So, since the 70s or 80s maybe even the 60s, the idea has been to create a supplemental trust. So the third party concept simply means this, that mom and dad or grandparents or others except siblings, anybody else, a third party is leaving that money straight into that supplemental needs trust. It is not going to the disabled person therefore they never have ownership of it. And the government says, if you leave a trust like this for someone, and if we make it a discretionary trust, a Discretionary Trust under Maryland law, as opposed to a Support Trust, let's say I have a perfectly healthy child and I leave a trust for their health, education, maintenance and support, that maintenance and support standard is by definition, the opposite of a special needs trust. So that is going to be an available resource. I just kind of shot myself in the foot if I wanted to do that kind of planning for a disabled person. So we wanna have a discretionary trust under Maryland law and technically this would have a supplemental standard and that standard can be very conservative, supplemental needs only, or it can be more purely discretionary. And I'll give you an example, my child needs this particular device or this particular benefit or this particular thing, and I'm authorizing my trustee to pay for it despite the fact that it could have been delivered with no charge. It could have been part of the public benefit that my child could receive. So, the more discretionary standards says, we're not just trying to supplement my child's life, my trustee can actually violate that standard and use the trust funds for something that otherwise would have been paid for without my trustee having to pay for that. So we can be as conservative as we want or not. So the third-party Supplemental Needs Trust is what is used. If I have a will, I can put it right inside the will. That's the least expensive and least sophisticated thing to do. There's nothing wrong with it. It will preserve the child's benefits. It can have all kinds of modern devices in there and bells and whistles to make it best trust it can be, or it can be a standalone trust. And the standalone trust is really preferable in a perfect world. In a perfect world every person would have a standalone Supplemental Needs Trust where someone else during life, you mentioned this, Phil, another family member could leave a retirement plan, life insurance, other cash through a will or a trust, or the parents can fund it during life, okay? And what I like about it is it's tangible. It's something that the trustee can hold, you know, 30 years after the parents have gone and it's more easily amendable and it's just more substantial. But it doesn't protect the public benefits anymore than the one that's embedded in the will or trust. It's just a preferred approach. So the reason that parents and grandparents would want to use a Third Party Supplemental Needs Trust basically, is because it has no payback to the state of Maryland. So it has no payback. So now we'll get to the payback trust. So the third party trust we understand the money is coming from a third party, it is not the disabled loved one's money. A first party trust is a trust, and there's two types, The First Party Trust is a trust where the child or the adult child has received money they should not have received. They've received an inheritance or heaven forbid they've been injured in a car accident and received a big settlement, or someone's been injured on a train, there's a $10 million settlement. These are the kinds of trusts. And the first one is called the D4A Type. The D4A Type under a 42USC 1396P which is the Federal code, United States code, basically says that if this child is under 65, this person, and they received this money, they can still preserve the money for public benefit purposes and the attorney general approves this trust. It's sounds complicated but it's not. And the child themselves if they are competent, can actually establish this trust as per President Obama's law that was passed before he left office. But usually it is the guardian, a court or a parent that is establishing that trust. And that trust has to be funded through a special way of funding or the child can fund it themselves and that money is exempt. The problem is, that is what we call a sole benefit trust. So it's a little bit more conservative in what it can be used for, but it's still very, very good. And at the child's death, unfortunately, that trust has to be paid back to the state of Maryland. So, if there's been liberal spending on behalf of the child from that trust, then that trust will probably not have anything in it at the time of the child's death to payback to Maryland. But if there are funds in it, it must first be paid back to Maryland. and then to other beneficiaries. An example of this First Party Trust is a military retiree. A military retiree can now leave their military pension to a firstborn trust and that can be tremendous. It can be a source of income for many, many years. The second type is called a Pooled Trust. So a Pooled Trust is somewhere at something where, let's say that I'm over... You don't have to be over 65, but let's say that I'm over 65, I'm disabled and I have funds in my own name that I shouldn't have, I can kind of dump those funds into a pooled trust and become eligible for benefits. So there are pooled trust there, and both of those are called first party trust. Those are trusts where the child has received money versus a third-party trust where that's the real bread and butter of the planning that most parents and grandparents would do.
- Well, and I think a lot of times the first party trusts sometimes occur whether it's poor planning or no planning. If somebody leaves money to an individual with special needs and sometimes you can through, you know, court work, you know, kind of protect some of the assets through a first party trust but it's very sad because if they had done the proper planning and done the proper third-party trust and kept the money away from the beneficiary, then a lot more of the money would be protected and the future heirs, be it charities or other family members, would receive a lot more money. So which we find with estate planning and all kinds of areas. Whether it's owning a business or a farm or a large piece of land or, you know, any type of scenario, we always hate to see assets get directed to, you know, taxes or legal expenses or to cover the expenses that could have been paid for through other ways. It could have been reduced or eliminated with a proper plan. And so professionals like you and I are out there, you know, just saying, you know, whether you work with us or work with anyone, please work with somebody, get your affairs. But make sure on this on special needs that you're dealing with an attorney who is familiar with not only special needs law, but special needs law in the state where you are residing, because I do believe the laws are different in Delaware, New York, Florida, Maryland. That there is some nuance to doing estate planning broadly, but specifically estate planning for individuals with special needs based on where the client... Is it where the parents are resident or where the beneficiary is resident?
- That is a wonderful question you're raising. It is going to be where the beneficiary is. And I think that you're raising a good one Phil and that is, you know, as a parent who establishes a special needs trust, like a modern, special needs trust should provide that the trust can actually be changed to the new location. And that's an important point. Another thing that you raised that just kind of went into my head was IRAs. You know, you may know this already. I'm sure you do that, you know, the only IRA in the world that I'm aware of that can actually be owned inside of a trust without triggering tax, is where a child, someone with disabilities has been left an IRA, an inherited IRA that they receive, well, private letter rulings allow that IRA to be put into a first party trust. Now it wasn't great, right? Cause it's a first party trust, but that first party trust can own that IRA without the triggering of tax. And if we were to put the IRA in any other kinds of trusts, it would trigger tax. So that's an exception.
- We've covered a lot today. There's one other item I'd like for us to talk about as we finish out, which is making decisions about the future. Which is, you know, you and I work in this industry. And it's a heavy lift to talk about it because there's so many moving parts. And I'm trying to put myself into the shoes of, you know, parents who are trying to understand this complicated world of law tax, finance, healthcare, guardianships, trusts, powers of attorney and your head spins. And at the same time, as you said, they're busy trying to take care of the loved one. They might have jobs, they might have other family members other worries, concerns. and this isn't easy And you and I are both cross clients, you know, met with clients who've been trying to get this done for years and they've just always kind of started and kind of got stuck. And sometimes you or me or us working together, try and take that client's hand and say we can do this. We just gotta keep one step in front of the other, but the consequence of not doing it is so severe and we do find... I think you and I have both seen this, when clients get it done that sense of relief that they know in their minds when they go to sleep at night, that if something happens to us, there's a plan. But it can't just be the legal documents. So we get named as trustee and we stress decline. So I'll trust officers are not social workers. They're not care managers. They're advocates in some areas, financial issues, but we're gonna need a on the ground life plan, you know, housing, care, care management, and you and I both work with some wonderful organizations who provide that medical support, that social advocacy support which is so important. It might be a family member who's involved or a friend of the family, you know? But that does need to be a coordinated effort. And so I think a good finishing prod for us as we wrap up today's conversation is talk a little bit about how, not just about the drafting the documents, titling is critical. You've talked about wills and trusts in the will. That works as long as we don't have joint ownership or beneficiary designation shooting assets in different directions. So, revocable trusts work well. If the assets are in the name of the trust. Standalone trust work well if the assets are wrapped to that trust properly. So titling of assets is a huge issue. And so, but why don't we finish up today's conversation talking about, you know, kind of, we started broad with, you know, creating the plan. Part of that creating the plan is I guess, thinking about the future a little bit for that individual.
- Well, Phil, thank you again for framing this so well for the end of the presentation here. So yes, so people are overwhelmed. The world is overwhelming, the events. We're all running faster than we've ever run before. It's hard to take time to think. And I find that regardless of wealth or status of wealth, special needs doesn't discriminate. So people need professional advisors who care. I can just tell talking to you, you're very passionate and you are educational and that's what is going to open up an ability for a person or a couple to be able to become comfortable and have a sense of relief because they understand what their options are. Most people don't understand the system, they don't understand what's gonna happen tomorrow. And if we can just get through tomorrow, the DDA system, you know, the child has to get into the DDA system before they're 22 and if they don't, it's lost almost forever. There's a lot of pressure. There's a lot of education but who's gonna guide us through this. So a lot of parents do relatively good job with this and others don't. So we wanna avail ourselves of the resources that are available. You can't know what's available until you can take some time to think the underlying benefits, the advocates that are available, the housing options that are available. A lot of times talking about the trust structure itself. If the trust is more than just a bare document and the modern special needs trust has many components that people can educate themselves on. Then it starts to open up, oh, I never thought about that. I didn't realize my trustee can hire an advocate. I didn't realize that I could write up a Memorandum of Intent. I didn't realize that the Secure Act gives us a special retirement plan benefits. So that's kind of an educational piece and then having... I find that most special needs families don't really have a financial advisor that understands their needs. I find that that's the case, regardless of, wealth, they may have a financial advisor, more often than not they don't, but if they do, that person's not necessarily someone who really understands. And so having an advisory team, a financial advisor, Sandy Spring for example, an estate planning attorney or special needs attorney that understands public benefits and how to educate, and also the tax component, how, you know, having that, that team. And I would even add to that the advisor or the advocate, okay? And then allowing yourself to say, I'm going to, you know, become educated through a process. So I think number one, most families don't have time. And number two, they've never envisioned that there's a process available to be able to do this. And when they come out the other end of the process with caring advisors that only are advising about what is in your best interest, what are the options that are out there? How can we get from point A to point B? And I would say you just you start to feel... A lot of special needs parents are on certain web groups, or I guess chat rooms and so forth and you know, there's a lot of education or a lot of talk among parents. And I would say that a lot of parents will be referred to us or referred to you from those kinds of sources. But if you know someone who's struggling or you know someone who is... They wanna do the highest and best thing for their child, they just don't know how, and they have issues about housing, guardianship, what kind of trust to use? How do I educate my loved ones? Phil said it all, you said it all when you said, you can have the best special needs trust in the world, you could have the best revocable trust in the world, the best will in the world, but if you don't have the assets flowing properly, you could have a result that you're not expecting. So we should stay away from joint ownership. We should stay from leaving assets to siblings, because those could be lost in, you know, creditor issues, bankruptcy issues, tax issues, divorce issues. We wanna stay away from those informal arrangements, have a formal plan, give yourself peace of mind and use advisors that are gonna work together and give you peace of mind.
- Yeah. I know In our line of work, as a trust company, we are named as trustee. There are scenarios where we are trustee of trusts for individuals with special needs. And there's two scenarios, sometimes the client just names us in a document and it sits collecting dust. And we get a phone call when the client gets sick or die and we review and decide if we want to serve. And it's incredibly difficult because all of the knowledge of the parents is lost when they get sick or they pass away. The knowledge they have about that individual with special needs is gone, you know? And there may be some notes here or there but when we talk to clients, we say there's two paths when they work with us, is one is a reactive future assignment, one is a proactive where we're engaged. We manage some assets now, we put a team together. We work closely with the attorney. We look very closely at the account titling and we stopped building that team. We stopped bringing in the care management piece and the tax and talk about housing because many times the individual may be living in the parent's house and it's completely unrealistic for that individual to remain there. But if we don't have a plan, then as the trustee you're gonna have to evict the individual with special needs, forced them out of their home after the parents have just passed away which could be a horrifically traumatic event. But may have to be done because there is no plan for them to live in this 4,000 square foot house that isn't really designed to house one person. So, it is overwhelming, but it is incredibly rewarding as we help families. And you, and I've worked jointly on cases before where we've kind of, you know, you're on the legal side, within our trust division, we have lawyers, but they cannot draft documents. They cannot be the client's lawyer for obvious reasons because we're named in documents many times. And that's your role. And our role is to be the financial piece. So, but no, thank you, Steve. This has been a wonderfully in depth educational event. Before we wrap up today are there any final closing remarks you'd like to make before--
- No, I just wanna say it's a privilege to educate with you and I've worked with you for years and you're a such a stellar educator and always doing the highest and best things for people and it's a pleasure. And we enjoy just being a resource with you. So thank you. And I'd say, to anyone, you know, you can relax in this process because you're in good hands when you're with professionals that care and are guiding and, you know, the relationships that I've seen you create, Phil, you always say, you know, you want the win-win situation for everyone. And again, special needs does not discriminate regardless of your level of wealth and we educate, and I know Phil, you do too, no matter what. That is our goal.
- So, Steve, thank you so much for joining us today and audience, thank you for joining us. If you know this, when you logged on to our professional discussion series, we'll not ask your name and email, telephone, None of that. This is a community program. You'll find on the discussion series, interviews that I've held with professionals like Steve in law tax, finance, healthcare on various topics. Feel free to take a look at other videos and discussions. I also host a seminar library where I talk in more detail about the bank's role in how we help clients and more other factors. And on those programs we do ask for your name and how you heard about the seminar event, but we will not contact you in any scenario unless you ask. Steve's and my contact information are provided at the end of today's session and feel free to reach out to either of us, if we can help in either way. What we hope is that you might share news of this discussion library with others. It is a community event. You don't have to bank with Sandy Spring Bank to go to sandyspring bank.com, click on Wealth, click on the Professional Discussion Library and watch videos on various topics. We hope you enjoyed today's program. And if you bank with us, thank you. Sandy Spring Bank is the largest local community-based bank in the greater Washington region founded in 1868. I've been with the bank for over 20 years, and it is an honor and a privilege to be a part of the Sandy Spring Bank family. And if you bank with us, thank you so much for doing so. If you don't bank with us, I hope you might think about doing business with Sandy Spring Bank. Contact any of our staff and we will be honored to try and help you in any way we can on a personal relationships, banking, trust, investments, insurance, mortgages, you name it. We'd love to be of service. My name is Phil Fish and with Sandy Spring Trust, thank you for joining us today. I hope you're safe and have wonderful day.
