Special Needs Trusts

Philip Fish, CFP<sup>®</sup> and Estate Planning Specialist with Sandy Spring Trust

(18:07 mins.) Phil Fish, CFP® and Estate Planning Specialist with Sandy Spring Trust discusses the important issue of Special Needs Trusts: Trusts that are established to provide protection and financial resources to individuals with special needs. Phil talks about many of the important issues to consider:  Having the right legal documents in place. Selection of the right decision makers to serve as future trustees. Preparing those trustees for their future assignments. Proper titling of assets to coordinate with the legal documents. Management of trust assets under Fiduciary standards. Handing the incapacity of the parents while also caring for the family with special needs.  Coordinating medical and social support with the financial support from the trust.

Reference Materials Seminars


  • Question

    Special Needs Trusts


    - Hello everyone and welcome to Sandy Spring Bank's Real Life Matters discussion series. My name is Phil Fish and I'll be your host today as we talk about special needs trusts. This is a very difficult topic. For those of you watching you might have a loved one, a son, daughter, brother, sister, family member who's an individual who has special needs, and we're gonna talk today about the establishment of trusts that are designed to provide protection and support to those individuals. And so today, over the next 30 to 40 minutes, I'll just be giving you a brief overview and then I'll open up the opportunity to call me or send me an email and we can certainly engage in a more detailed conversation because these types of trusts are very unique and personal to each individual and to each family. My name's Phil Fish, I've worked with Sandy Spring Bank for the past 21 years and I've been in the industry for over 30 years. I was formally a trust officer and I handled a lot of special needs trust in my former career and I speak publicly on this issue and others. On the Sandy Spring Bank website you'll find our seminar library that's filled with discussions on various topics, and you'll also find our professional discussion series library where I interviewed local professionals in the areas of law, tax, finance and healthcare, and the is actually a discussion with Steven Elville, a local attorney, on special needs trusts if you'd like to gain some more information. But thank you for joining us. If you bank with us, thank you. Sandy Spring Bank's been a part of this community since 1868. We're the largest local community-based bank in the Greater Washington region and we are who we are because of clients like you who choose to bank with us. But if you're new to Sandy Spring Bank and you don't bank with us, we hope you might consider our services on any issue. So thank you for joining our event today and I hope we can be of service. At the end of today's presentation my contact information will be on the final screen and there's a contact fill button on the website, or you can call the bank and just ask to speak to Mr. Fish and you'll be directed to my attention. I'm a salaried officer of the bank's so there is no cost or obligation to speak with me. I'd be happy to answer your questions. So I hope you're either safe at home or at your office, and that you have a pad of paper, a pen and pencil and you'll be able to take some notes on today's discussion. We are gonna talk for about 30 to 40 minutes. We're gonna do a brief overview of these issues, and obviously it's much more complex than that, but we wanna get people thinking about the importance of planning for the protection of a loved one. So a special needs trust is established upon, generally upon the death of the parents to take some money that they wish to leave for the benefit of the son or their daughter or another family member, and the reason we're establishing these trust is that the individual may be facing an incapacity or physical or mental health issue and they may be receiving benefits, and these benefits may be needs based, meaning that they are eligible for the benefits because the individual does not have any assets. So if the individual inherited a large sum of money, they may be disqualified from receiving those benefits. So many family members will establish a trust that's for the benefit of that individual, but the assets are kept legally separated from the individual so it doesn't impact their ability to receive those benefits. These trusts can be established in a couple of different ways. Some clients will have a will and within the will they will establish a trust upon their death. That's called a testamentary trust. They may have a revocable living trust that they establish while they're alive. And upon that death that revocable living trust may become irrevocable and will move into a special needs trust for the benefit of their family member. And some clients have a standalone trust that they work with their attorney on, and they establish this trust. It may not have any assets in it to begin with, but then they may direct assets there upon that death, or sometimes during their lifetime to fund the trust over time. It doesn't really matter how we establish the trust, but what we do stress is we want you to be working with a good, strong, local estate planning attorney, excuse me, somebody who is knowledgeable and somebody who does quite a lot of work with special needs trust. It's very important that the documents that you establish for this individual are well-written, they comply to the state's requirements because we wanna make sure that they are going to work with the goal of protecting the individual and allowing them to continue to receive benefits. So please make sure you're working with an estate planning attorney who's knowledgeable about the state where you reside and does quite a lot of work in this area. You don't have anyone, we can certainly talk and we can refer you to some local attorneys that we work with. We have lawyers on staff at Sandy Spring Bank's trust division, but they're not allowed to draft legal documents because many times we are named. One of the roles we serve in at Sandy Spring Trust is to be a trustee of these types of trusts and other trusts, to manage trust assets on behalf of individuals and to help individuals who might be named in the role of trustee. So the first step, having the right legal documents in place, the trust, the wills, the powers of attorney, and I talk about different documents in different seminars. Next step we have to select a decision-maker. Who's gonna be the trustee of the special needs trust. It could be the bank, it might be a family member. We would talk in more detail one-on-one about the options of who do you name. Just realize it's a lot of work and a lot of responsibility to place on an individual shoulders. Many times the bank could be named to ease the burden on the family member that you're thinking of naming, either by helping them be the trustee or maybe we become the trustee and that family member becomes a trust advisor to us to help us take care of the individual that you're looking to protect. Once you have the documents and you select your decision-makers, it's very important that you establish communication with whoever you've named in the documents. Talk to them about the trust that you're establishing for your family member. Make sure they're aware of where the documents are kept, who your lawyer is, your accountant, access to safe deposit box, online pass codes. They're going to need a host of information not just to take care of the individual with special needs, but to take care of you. What if your health declines? And now this individual is gonna to have to do two roles, take care of you during a bit of illness and then also take care of your family member who needs help and when you pass away, settle the estate, establish the trust for the individual and then serve in the role of trustee, or maybe coordinate with the bank if the bank's named in some role. Once you establish the trust through your legal documents, there may not be any money in the trust for your individual with special needs at this point, it may be a trust that's established to be funded at the later time. You've named your decision-makers, you've had communication with them, the next thing we wanna talk about is titling of assets. Your legal documents are the foundation, everything kinda flows from there, but the way your accounts are titled have to work in harmony with your legal documents. Individual accounts, joint accounts, trust accounts, assets titled in a revocable living trust, beneficiary designations, all of these account tight links have to work in symmetry with the documents to make sure that your wishes are honored and the assets flow the way you want it to. So if you have a son with a disability and you establish the legal documents but you have retirement accounts that simply name your son as the sole beneficiary, then your son's going to legally inherit those assets and the plan won't work as you had hoped it to. And worst case scenario, your son may become ineligible to receive certain benefits because they've received these funds and they weren't protected by the trust that you established. So again, beneficiary designations, account titlings become very important. The trust assets are gonna have to be managed for the benefit of the individual maybe for 10, 20, 30, 40, 50 years. One of the roles Sandy Spring Bank's trust division serves is the professional management of assets under federal fiduciary standards. We get hired by family members to manage their personal assets, their retirement assets. We can help manage trust assets as well. Sometimes we do that in our role as a trustee and sometimes we are hired by an individual trustee to help them serve in the role and to help them manage the assets that are held within the trust. The management of these assets becomes very important, especially in today's environment of a stock market that's uncertain and low interest rates or changing interest rates. On staff we have professional portfolio managers. They're not commissioned, they're not brokers, they professionally manage assets and they understand what it means to manage assets in a trust for the benefit of another individual and we can really help families accomplish that goal. Incapacity of the parents is a really difficult transition we have to work through. The parents may have established a trust for their son or daughter who has a disability and the benefits for their son or daughter would begin when the assets flow into the trust upon the parents passing away. Well, what if the parents become sick? What if they become incapacitated? But then the decision-maker is gonna have to step in and take care of the mother or the father, but also make sure that the son or daughter who has needs is being taken care of as well. We need to make sure that there are special gifting powers embedded in the revocable living trust and the financial powers of attorney to make sure that the decision maker named has the legal authority to step in, manage the parent's assets, but also release money down to the individual who needs help. While the parents are healthy they might do that just by writing checks or paying bills, but we need to make sure that the documents are set up properly to deal with the incapacity of a loved one and make sure that the individual with special needs doesn't lose that connection to help before the trust for their benefit is fully funded upon the death of the parents. When the parents pass away, it's a very difficult time for the whole family, but it can be a very emotional time for the individual with special needs. We have to think about housing issues, where is this individual currently living? Are they living with their parents? What happens if the parent's health declines and we have to change the living location of the parents, how do we handle living location of the individual who needs help? So there's a lot of proactive work that we need to be thinking about. Once the trust is established, then sometimes the bank steps in as the trustee, we do this work in one of two ways. Sometimes we are just named in a document and then we get a phone call and a request comes in for Sandy Spring Bank to serve as a trustee for these types of trusts. We call that a reactive arrangement, we kind of get the phone call and then we react. It's not the way we like to handle these types of trusts. What we prefer is to work proactively with the parents while they're alive and healthy, establish a relationship with them by managing some of their investment assets, work with their attorney, talk about the documents, get to meet the individual with special needs and the other family members who may be involved in the relationship and prepare for transition. Gives a chance for the parents to work with us and for us to work with them, and we really find that proactive relationship works extremely well. If you have questions about how the bank can help, feel free to reach out to me. My name's Phil Fish, my phone number is 785-4112. My contact information will be established at the end of today's discussion. So when we look at special needs trusts, it is a type of a protective trust and we have a discussion on our library on protective trust, trust established for individuals who might need help, young beneficiaries, beneficiaries with health issues, addictions, might be trouble handling finances. So there are lots of different protective trusts established to protect an individual. A special needs trust is just a type of protective trust that may be a little different in that it's specifically designed to make sure that the individual continues to receive care and benefits that they might be eligible to receive. But the fundamentals of the trust are really the same. You have a governing document, you have assets to flow into the trust, you have trustees named in the document who are responsible for managing and dispersing the assets for the benefit of the stated beneficiary who's named within the documents. So if I had a brother who had a disability, my parents might establish a trust for my brother. They might name me as a trustee, or they might name the bank as the trustee and name me as a trusted advisor or trust protector, somebody who could communicate with the corporate trustee and we can build a partnership together. Every trust relationship's unique. And today, all I've wanted to do is kinda make you aware that Sandy Spring Bank does and will help individuals or family members who have an individual with special needs. We have a wonderful trust division with over 40 salaried professionals, trust offices and portfolio managers and support staff and we realize how important this issue is for the families who have a loved one who needs that special amount of care. One thing to think about is that a trust company though is not a social kind of care management piece. Our trust officers are going to manage the trust and disperse the assets but they're not going to have the ability to go visit your son or daughter three times a week. So we do need to talk to families about a care management component as well. That may already be in place, in which case it's really helpful for us to become familiar with it and build a relationship with those care providers. But if it's not in place then we need to have a conversation of how to put it into place. Special needs trusts require combination of financial, prudent management of the funds, the role of the trustee, but also a kind of on-the-ground support system for the individual to make sure that they're getting the care that they need. These things are complicated and they can be overwhelming. Over my 30 plus years of doing this I've helped lots of clients create plans for individuals with special needs, and it's incredibly rewarding work because I see how fearful they were of thinking about what happens if we're not here. A special needs trust cannot replace a parent or a family member, but they can provide a mechanism to safeguard funds that are allocated to that individual, make sure the money is managed prudently within federal standards, make sure the money's released for the benefit of that individual without disrupting the other benefits they might be receiving. We can help you in any way, please reach out. We would love to engage in a conversation, talk, maybe we can't help directly, maybe we can just give you some things to think about. But on behalf of the community, just if you're providing care for an individual with special needs, thank you. It's such hard work, it's so demanding, but it's such important work and if we can help you in any way, please let us know. On behalf of Sandy Spring Bank, thank you for joining our discussion today. Please take a look around the website at our other discussions, please also venture into our professional discussion series where I interview local professionals in law, tax, finance and healthcare. If we can help you in any way, let us know. We hope you're safe during this difficult time. Now, on behalf of Sandy Spring Bank, thank you and have a wonderful day.

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