Written by Robert T. Nickerson

​When many people hear the term “estate plan”, they assume that the direction only flows from adult to child; as in once something happens to the parent, when the child (assuming their an adult) will be the beneficiaries to their assets. What most don’t know is that there are situations in which it can go to opposite direction as well. This is called a “reverse estate plan”. 
 
To start, it’s usually not about ensuring that parents can inherit from adult children (though that can also be the case). What it is about is creating some wealth opportunities for the family after taxes. 
 
As time flows and parents retire, it’s common that the adult children will end up in a higher tax bracket as their own income increases. Reverse estate planning ought to be considered especially if mom and dad don’t end up using all their lifetime estate and gift tax exemptions. The goal overall is using the estate plan to transfer assets in a more tax advantage way. 
 
A good example would be that a irrevocable trust is set up. You have adult children that make the transfer (which would be assisted through an estate planning attorney). The parents then have a legal irrevocable trust crafted as a way to pass on those lifetime exemptions to their grandchildren or great-grandchildren. Though this would mean it couldn’t be changed once everything is officially signed, this would create very little federal tax. 
 
What could also happen is using loans to help with assets that appreciate. So instead of taxable money being an asset for beneficiaries, the adult child would make personal loans to their parents. The parents then use that to purchase assets that can appreciate while also paying back that loan. That can be completely tax free! The parents can even make those assets lifetime gifts, by classifying them as lifetime exemptions. 
 
These are just some examples of how these methods can be done from child to parents through estate plans as a way to reduce to tax burden. One of the reasons that I wanted to bring this up is because by 2025, this law could be changed.
 
The 2017 is set to expire after 2025 in which the lifetime exemptions would be cut in half. Rather then wait, I would suggest thinking about a reverse estate plan tactic to handle assets you’d rather not be taxed on. It can benefit the family, but especially the children you’d want have a beneficiaries. Excess exemptions are only good to use for a limited time.
 
The Nickerson Law Office can help guide you through potential estate planning that can ensure a lower or even no tax burden, depending on your assets or the kind of trust that needs to be set up. Click on the button below to contact us for more information. 

Written by Jill Roamer J.D. 

The Americans with Disabilities Act (ADA) is a broad-sweeping federal law meant to eliminate discrimination against those with disabilities. The ADA doesn’t specifically address polling places, but Title II requires equal voting rights for those with disabilities. As such, state and local governments must ensure that those with disabilities have physical access to polling places. In addition, reasonable modifications of voting procedures are required to meet an individual’s needs.

However, new trends in voting laws over the last couple of years are being hailed as discriminatory towards those with disabilities or mobility issues. Those with disabilities or mobility issues oftentimes use non-traditional methods to cast their votes: mail-in ballots, ballot drop-boxes, curbside voting, or inciting the help of another at the voting booth. Altering these methods is often the focus of these new laws. The Brennan Center for Justice states that “Between January 1 and December 7 [2021], at least 19 states passed 34 laws restricting access to voting. More than 440 bills with provisions that restrict voting access have been introduced in 49 states in the 2021 legislative sessions.”

Up first is the new law in Texas, which was effective in December 2021. Voters who mail in their ballots must now provide their driver’s license number on the ballot (or the last four digits of their social security number if they do not have a driver’s license); that number must match the number provided on their voter registration. For some, their voter registration paperwork was submitted years ago, and they may not remember what number was provided. Or, the voter may not be aware of the new requirement and not provide that information on the ballot.

In addition, the new Texas law has additional requirements for assistants at the polling location. The voting assistant must now sign a form containing their information and take an oath. There are now criminal penalties if the assistant helps the voter in any way that was not authorized by law or pre-approved with voting officials beforehand. These additional requirements will likely deter folks from assisting those with disabilities when voting. Finally, the Texas law now bans 24-hour voting and drive-through voting, and adds provisions to bolster the authorities of poll watchers.

Georgia’s S.B. 202 modified the rules regarding absentee ballots. The old law allowed an absentee ballot to be requested up to 180 days before the election. Under the new law, that timeframe is decreased to 78 days and cuts off the ability to request such ballot 11 days before election day. Absentee voters must now include their driver’s license number on the ballot. Georgia’s new law also limits the number of drop boxes that can be instituted.

Finally, there is now a ban on curbside voting in Alabama; all ballots and voting machines must remain inside the polling place. While it is understandable that legislatures want to make voting more secure and fair, how does this interact with the rights of those who are disabled? Is there a way to maintain security and privacy while still affording accommodations for those who need it? For a handy list of all the recent bills and laws involving these issues, click here.

The Nickerson Law Office is committed to helping families with loved ones with special needs. Click on the button for more information about how we can help put you at ease and ensure your future is secure. 

Written by Jill Roamer J.D. 

A First-Party Special Needs Trust (SNT) and a Third-Party Supplemental Needs Trust (SNT) are used when a beneficiary would like access to extra funds without jeopardizing their eligibility for public benefits. Let’s review some key differences between these trusts.

The First-Party SNT is irrevocable and is used when the assets funding the trust belong to the beneficiary. This would be if an individual has money in the bank, or comes into money, such as via a settlement or inheritance. If the funds are obtained through a settlement, an MSA subtrust may be needed. (More on that in a bit.)

Public benefits programs will let that individual still have access to the money, via the terms of the trust, but a payback provision is required. The payback provision states that after the individual has passed away, any remaining funds must be paid to the state to the extent the state expended Medicaid funds on that individual. Any funds remaining after the state has been repaid can be distributed to residuary beneficiaries.

For social security benefits, in order for the corpus of the First-Party SNT to be a non-countable asset, the First-Party SNT must have been funded before the beneficiary’s 65th birthday. (See POMS SI 01120.203B.) If the beneficiary has a structured settlement and those payments extend beyond the beneficiary’s 65th birthday, the additional payments to the trust after the 65th birthday will not be a countable asset so long as the settlement was reached and the payments began before that magical birth date.

The federal statute that keeps the corpus of a First-Party SNT from being a countable asset for Medicaid-eligibility purposes is 42 U.S. Code § 1396p(d)(4)(A). As such, a First-Party SNT is oftentimes called a d4A Trust. Per that Code section, the trust must be funded before the beneficiary’s 65th birthday.

The beneficiary of a First-Party SNT must be disabled within the definition of § 1382c(a)(3). A First-Party SNT must be established by the beneficiary, a parent, a grandparent, legal guardian, or a court.

A Medicare Set-Aside (MSA) subtrust is needed when certain types of settlements are reached, such as a Worker’s Compensation claim or injury settlement. If a settlement is reached in a case where future medical payments will be made from the settlement money, Medicare wants to ensure the settlement funds designated for that purpose will be preserved. So those funds are placed in the MSA subtrust to be used for future medical expenses.
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A Third-Party SNT is funded with assets that never belonged to the beneficiary. As such, a payback provision is not required and thus the terms of the trust are more favorable. This trust is used when someone wants to put their own money aside for the beneficiary’s care and benefit. There are no age restrictions on when the Third-Party SNT must be established.

The Third-Party SNT can be revocable or irrevocable. However, the revocable Third-Party SNT in ElderDocx is designed so as to become irrevocable on certain events: upon the death of the Grantor, when the trust is funded with retirement account benefits, or if someone other than the Grantor funds the trust with a specified dollar amount.   While the Third-Party SNT is revocable, it is a grantor trust and the Grantor will be taxed on the income of that trust. If someone other than the Grantor funds the trust with a large dollar amount, the Grantor would likely not want to be taxed on the income from those funds.

The Grantor may choose to make the trust irrevocable from the onset if she knows that retirement account funds will be funded into the trust, if someone other than the Grantor plans on funding the trust with a substantial amount, or if she otherwise doesn’t want to be taxed on the trust income. Also, if the Grantor dies while the trust is revocable, the funds in the trust will be included in the Grantor’s estate; she may not desire that outcome and so she may design the Third-Party SNT as an irrevocable trust.

The First-Party (Self-Settled) SNT and Third-Party SNT are just two of the trusts available in ElderDocx. Other trusts you can generate using ElderDocx include a Revocable Living Trust, Medicaid Asset Protection Trust, Medicaid Family Protection Trust, Veterans Asset Protection Trust, Miller Trust, Sole Benefit Trust, Parental Protection Trust, and Secure Supplemental Needs Trust.

Written by Jill Roamer, J.D. & Marcheasa Minium, J.D. 

Trusts are certainly not the most perspicuous of legal inventions, but they can be a critical part of any family with a loved one with special needs. Experienced professionals understand the nuances of the various types of trusts available, what language is necessary, and which trust would benefit a client in a given circumstance. But for those of us who need a little refresher, let’s get back to the basics and take a dive into some of the lingo and concepts of special needs trusts.

What are Special Needs Trusts?
A special needs trust is a type of trust specifically used for special needs planning. This trust allows a beneficiary to preserve access to public benefits while being able to benefit from trust assets on some level.  As with all trusts, the Trustee manages trust assets for the benefit of the beneficiary. 

What about distributions during the lifetime of the beneficiary?  The trust can be designed where the Trustee can only make distributions that supplement government benefits, a supplemental distribution standard. One thing to keep in mind is that even if there is a supplemental distribution standard in the trust document, that standard really is discretionary if the beneficiary is not currently on public benefits.  The trust document dictates that once the beneficiary is on public benefits, distributions may not supplant, impair, or diminish those benefits. 

Or, the trust can be designed so that the Trustee can also make distributions that supplant government benefits, a supplemental and discretionary distribution standard. To supplant government benefits means to replace or decrease those benefits.  So, the Trustee may distribute trust assets, knowing that the distribution could decrease the amount of government benefits received by the beneficiary, if it is in the best interest of the beneficiary. And, of course, the Trustee can also make supplemental distributions.  

First-Party SNT
A first-party special needs trust, also referred to as a d4A trust (due to its location within the US Code), is a self-settled trust. This type of trust is funded with the assets of beneficiary, who is also the applicant of government benefits.  The assets are used for the beneficiary’s personal benefit only. To curtail a Medicaid transfer penalty, this individual must be under the age of 65 when the trust is established and the individual establishing the trust must be either the beneficiary; a parent, grandparent, or legal guardian of the disabled beneficiary; or a court.  If the individual is over age 65, a transfer penalty may be imposed when applying for certain long-term care Medicaid benefits.

The state must be the remainder beneficiary of any funds remaining in the d4A trust after the death of the beneficiary, up to the amount the state expended on benefits for them. In some states, the specific state Medicaid agency must be listed in the trust agreement.  For most states, however, it is sufficient to give a generic reference to the state in the payback provision.  After any government agencies are repaid for benefits received, any remaining trust assets is distributed to residuary beneficiaries.

A typical client that may benefit from a d4A trust would be one that has assets to preserve while still desiring to qualify for benefits.  Maybe this client won an award or settlement and was already on public benefits and would like remain on those benefits.  Maybe this client was the recipient of an inheritance and doesn’t want their new found wealth to disqualify them from benefits. 

A subset of the d4A trust is one with a Medicare Set-Aside (MSA) sub-trust.  This MSA is oftentimes required when there is a personal injury or worker’s compensation settlement. Medicare has an interest in preserving a certain amount of the proceeds of the settlement so they aren’t dissipated while Medicare is left paying for future medical expenses. So, a requirement of the settlement agreement may be to set aside a certain amount of the funds for future medical bills that Medicare would otherwise be forced to cover.

Third-Party SNT
A third-party trust special needs trust, also known as a supplemental needs trust, is a trust funded by assets that belong to someone other than the beneficiary. This type of trust is not specifically authorized by US Code; there are no age limits for this type of trust to curtail a Medicaid transfer penalty.  However, if the beneficiary has the power to revoke, terminate, or sell the trust for their own benefit, then it is a countable resource for Medicaid purposes. Otherwise, it is usually exempt. And because the assets used to fund the trust never belonged to the beneficiary, a payback provision is not required.
A common client scenario for a third-party SNT would be an individual with means who would like to set aside money for the care of a disabled friend or family member. This can be done during the lifetime of the donor or as a part of their estate plan.  A typical estate plan usually contains contingent special needs trust provisions which direct the share going to a beneficiary who is on public benefits into a third-party supplemental needs trust.

Pooled Trusts
A pooled trust, found in the US Code under 1396p(d)(4)(C), is also known as a d4C trust. It is established and managed by a charity or non-profit organization and is funded by the disabled person, for that individual’s sole benefit. The fundamental idea is that an individual’s trust is a subaccount within a master trust, a collection of other individual trusts. The managing entity oversees the collective individual trusts within the pool as a whole. The arrangement minimizes expenses for the individual trusts.  This type of trust may need a payback provision, depending upon the particular trust’s joinder agreement and may have age limits, for pre- and post-age 65 transfers, depending upon state law. A typical client may be one with minimal assets to fund into the trust, so that a traditional d4A trust would be fiscally unreasonable.

Sole Benefit Trusts
A sole benefit trust, authorized by subsection 1396p(c) of the US Code, is a hybrid trust. This type of trust is used to preserve the assets of a Medicaid applicant. The grantor funds the trust for the benefit of a disabled person under age 65 – or for a disabled child or spouse of any age – typically without suffering from transfer penalties for those transfers. This trust is often used as a life preserver during Medicaid crisis planning.

Of course, the rules of a particular state may have restrictions or create additional requirements for a sole benefit trust. In some states, a payback provision may not be required if the trust is actuarially sound – a model explained in a previous ElderCounsel blog.  Typically, the sole benefit trust must either pay out all assets within the beneficiary's life expectancy, be payable to the beneficiary's estate upon death, or include a payback provision reimbursing the state.

Nickerson Law specializes in special needs trusts and is more then happy to walk through the various types that could benefit your loved ones. Click on the button below to get into contact about how we can provide your family a bright and safe future.