Special Needs Trusts The Very Basics: Part I: What Is a Special Needs Trust?

A Special Needs Trust, or SNT, is a type of trust established for the benefit of a person with a physical or intellectual disability.  A trust itself is simply a contract between the Grantor (who makes the trust) and the Trustee (the one designated to administer the trust).  Once funded, SNT assets will be dedicated in a specific manner to provide for the disabled beneficiary.

One fundamental goal of a SNT is to protect and preserve public benefits which the beneficiary receives or may receive in the future.  SNTs accomplish this objective by best ensuring that trust assets should not be considered “available resources” in determining a disabled person’s eligibility for needs based benefits.  

SNTs will be either First Party, Third Party, or Pooled trusts.  First Party SNTs hold assets of the disabled beneficiary which are transferred to the trust.  The beneficiary, parent, grandparent, legal guardian or court can establish a First Party SNT.  The beneficiary must be below age 65 and disabled when the trust is created.  First Party SNTs are irrevocable and the terms cannot be changed.  First Party SNTs sometimes are referred to as “Self-Settled”, “Medicaid Payback”, or “(d)(4)(A)” trusts.  Importantly, First Party SNTs must include a medical payback provision requiring that proper medical liens and costs are paid back from the estate of the beneficiary following the death of the beneficiary.

Third Party SNTs, most commonly referred to as Supplemental Needs Trusts, are established by someone other than the disabled beneficiary utilizing assets belonging to third parties (not assets owned or controlled by the beneficiary).  Supplemental Needs Trusts may be revocable or irrevocable.  Typically, Supplemental Needs Trusts are revocable until the death of the Grantor(s), then becoming irrevocable.

The assets in a Supplemental Needs Trust do exactly as the name suggests: they supplement or are beyond the government benefit programs.  If established properly, Supplemental Needs Trusts have no payback obligations.  Assets remaining in the trust after the beneficiary passes can be distributed according to the terms of the Supplemental Needs Trust.  Because there is no medical payback, Social Security carefully scrutinizes Supplemental Needs Trusts to determine whether the beneficiary in any manner funded or controlled the assets in a Supplemental Needs Trust.

Pooled trusts and other aspects of SNTs will be addressed in additional articles relating to Special Needs Planning.  For assistance with these Special Needs Planning issues, contact Michael Geiger at Geiger Law.

50 Years and 90 Million

Fifty years ago in 1973, over 90 million Americans placed their lives on pause to take in a major event.  Were they recognizing the Paris Peace Accords bringing an end to the participation of the United States in Vietnam?  No.  Were they celebrating or protesting the U.S. Supreme Court’s decision in Roe v. Wade?  Not even close.  Did they gather to figure out how to address OPEC’s 200% increase in the price of oil?  Nah.  Perhaps they joyously cheered on Secretariat becoming the first Triple Crown winner in 25 years?  Nope, but getting closer.

September 20 represents the fifty year anniversary of the “Battle of the Sexes” tennis match between Billie Jean King and Bobby Riggs.  Before 30,472 fans in attendance at the Houston Astrodome and 90 million television viewers, Billie Jean King defeated Bobby Riggs in straight sets (6-4, 6-3, 6-3) in this captivating, cultural exhibition tennis match.

Foremost, consider the viewership of 90 million in 1973.  Those figures rival current Super Bowl numbers.  In 1973, merely 50 million people watched the Super Bowl with the 90 million mark in viewership for the Super Bowl not achieved until the 1990s.  1973 television, quite simply, had not developed into the mega-entertainment medium which we take for granted today.  Across the country, television markets consisted of CBS, NBC and ABC national networks with some local stations in the mix.  Cable television remained an infant.  Many Americans received their news and sports over transistor radios or through newspaper accounts.  The King-Riggs match represented so much more than tennis for America in 1973 America.

1973 witnessed the Equal Rights movement in full swing.  Congress would not pass the Equal Rights Amendment to the United States Constitution with a state-by-state battle then set to determine if the ERA would be adopted.  The Battle of the Sexes tennis match hit at the heart of the cultural hot buttons of the time.

Billie Jean King, then 29 years old already with ten Grand Slam titles under her belt, played the determined underdog, well-focused on the task of defeating Bobby Riggs.  But every good tale needs a villain – enter Bobby Riggs.  Riggs, then 55 years old and well past his prime, had defeated tennis star Margaret Court earlier in 1973.  He viewed this new tennis match with King with disdain.

Leading up to the match, the outspoken Riggs embraced the male chauvinist role with quotes to the Press such as: “she’s a woman and they don’t have the emotional stability.”  Riggs added this gem: “women belong in the bedroom and the kitchen, in that order.”  Riggs channeled his inner P.T. Barnum to drum up interest in the tennis match.

Riggs’ showmanship continued during the match itself.  Riggs entered the tennis court via rickshaw surrounded by statuesque women.  He wore a warm up jacket with “Sugar Daddy” emblazoned across the back.  To show his contempt, Riggs wore the warm up jacket for the first three games of the first set of the match.  However, unlike his match against Margaret Court earlier that year, Riggs clearly appeared out of shape for the battle with King.  Billie Jean King rather easily volleyed shots past Riggs en route to her straight sets victory.

Billie Jean King used this new, larger than life, podium to help create the Women’s Tennis Association.  She threatened to boycott the U.S. Open Tennis Championship unless male and female athletes received equal pay.  The U.S. Open became the first major tennis tournament, and perhaps first major professional athletic championship, to offer equal prize money among the sexes.  King continued as a staunch advocate for equal rights, ultimately retiring in 1984 with 39 Grand Slam titles in singles and doubles championships.

As for Bobby Riggs, he made a lifelong friend in Billie Jean King until his death in 1993.  Many believed that this genuine, respectful friendship confirmed the extreme chauvinism as an act by Riggs leading up to the Battle of the Sexes.  But was there more?

Almost as quickly as the 1973 tennis match concluded, the rumors of Riggs throwing the match began to circulate.  Do not mistake, Billie Jean King outplayed Riggs in every manner possible.  Riggs simply did not appear as himself and completely out of shape for a match of this caliber.  Even before the historic encounter on the court, Riggs was a well-known gambler in Las Vegas.  He placed wagers on all sports, including events in which he participated.  Indeed, given his reputation as a gambler, the London sports parlors refused to offer wagering on the King-Riggs tennis match.

Vegas had no problem offering odds on the big match.  The oddsmakers installed Riggs as a heavy favorite.  The male oddsmakers figured that Riggs was a man battling a woman.  More seriously, Riggs had beaten then tennis number 1, Margaret Court, rather handily but a few months earlier.  Riggs could certainly handle a “lesser” opponent in tennis number 2, Billie Jean King.

The training regimen for Riggs leading up to that September included meeting with reporters and bad-mouthing women in general.  Announcer Howard Cowell quickly commented how Riggs appeared out of shape.  Riggs could not run down shots which he easily had done a few months earlier.  The heavily favored Riggs was in trouble from the first serve.  Who could gain with such an embarrassing loss by Riggs?

Of course, the group who bet heavily on “the girl” with favorable odds could clean up — the Mafia.  The Mob would need Riggs to throw the match.  Motive supposedly existed for Riggs.  Allegedly, Riggs owed the mob $100,000 in gambling debts.  To pay off the debt, Riggs had to beat up on Margaret Court which would drive up interest for a bigger match with Billie Jean King.  Riggs would then lose spectacularly to the underdog King with significant Mafia money bet on the underdog.  Such conspiracies easily come to mind after events have passed and all the pieces nicely fit in place.

Enter Hal Shaw.  Shaw worked as an assistant golf pro at a Tampa, Florida country club frequented by Mafia types.  Naming names, Shaw detailed meetings he witnessed and heard among these esteemed country club members.  Riggs’ $100,000 debt would be forgiven if he could defeat Court and lose to King.  Shaw waited until 2013 when he was on death’s doorstep to reveal these events he witnessed 40 years earlier.

Shaw’s account remains plausible when viewed in a certain light.  Riggs, a professional athlete his entire adult life, understood that preparing for any tennis match against any other professional player – male or female – required training.  In fact, even at age 55, Riggs seriously dedicated himself in preparation for his match with Margaret Court.    Thereafter, for the next four months, Riggs did not train for the over-hyped Battle of the Sexes.  Perhaps Riggs’ ego got the better of him.  However, this same ego did not get in the way in all the decades leading up to this event.  Seems unlikely.

After the Battle of the Sexes, Bobby Riggs spent most of his days tied in some manner to the gambling industry.  He served as a casino greeter and functioned as a resident celebrity at casinos.  The gambling and gaming bug never left him.  These facts in no manner establish or suggest that Riggs intentionally failed to prepare for his tennis match with Billie Jean King.  They do, nonetheless, confirm that Riggs operated comfortably within this Mafia-influenced environment.

Mob-influenced or otherwise, the King-Riggs tennis match in 1973 placed front and center equal rights issues among genders.  King nicely parlayed the event to achieve a degree of equality for the sexes at least in the world of tennis.  Fifty years later, we find the inequality of wages, inequality of opportunities, and inequality of promotions among the  sexes merely a footnote in the history books having achieved complete equality.  Oh.  Wait.  Perhaps we need another tennis match.

Honorable Mention in the Sports World for September 20.

In Baltimore, Maryland, in the final home game in the 1998 baseball season, on September 20, 1998, Cal Ripken, Jr., removes his name from the starting lineup of the Baltimore Orioles.  This step concluded The Streak of 2,632 consecutive baseball games in which Cal Ripken, Jr., started.  Ripken, humbly, always claimed that whether he started remained the Manager’s decision.  As his Manager noted with a healthy sense of history: “Only Cal or God can end the streak.”

In Estate Planning, we rarely address culturally altering events such as the Battle of the Sexes.  We do, nonetheless, address life altering or life changing circumstances.  Those leaving bequests and distributions appreciate that these gifts could alter life trajectories of others and may influence the paths of many others.  Whether through Statements of Intent, Distribution Guidelines, or Guidance to Trustees, messaging may accompany such gifts.

Perhaps we do not have – and do not want – an audience of 90 million.  Our work remains focused on more limited audiences of a few loved ones or charities.  I am OK with that dynamic and the critical differences we can achieve for others. 

Guardians of Your Own Galaxy

The most important item in estate planning for parents of minor children remains “Who will take care of our kids if something happens to us?”  Many considerations properly go into who to select as the legal Guardian for minors.  Parents, biological and adoptive, may decide who shall serve as Guardians of their minor children if the parents die.  Virtually every state requires that Guardians be nominated by the parents through a written, signed instrument.  A Will is the most-often utilized document for this purpose.  In the absence of proper Guardian nomination, a judge (and not your family) decides who will raise your children.

Nominate Guardians you trust to provide love and care for your children.  Also consider the ability and willingness of the Guardian to follow instructions or guidance left behind.  Guardians need not be family members if others may be better suited.  If you nominate a couple as Guardians, define what happens in the event of divorce.  If your Guardian does not live local, who will relocate?  A non-US citizen can be a Guardian, but plan carefully as many, many issues become implicated with that choice.  

Providing financially for your minor children’s well-being should also be spelled out clearly for the Guardians.  You could leave a lump sum amount to the Guardians to raise your children (really bad idea!).  Or, funds could be placed in a Uniform Transfers to Minors Act (UTMA) account.  UTMA accounts are relatively simple and have few transaction costs.  UTMA accounts need a Custodian, but not a Trustee.  However, UTMA accounts “age out” meaning that all assets become the property of child at a certain age (usually 18 or 21).  Or, funds could be placed in a Trust.  You can set the terms of the Trust; define life events (e.g., graduation) or ages for distributions; provide extended creditor or asset protection; and allow for Trust modification if things change.

If you have minor children, properly name and plan for a Guardian in your estate documents.  If you have not done so, contact Michael Geiger at Geiger Law for assistance with Guardians as well as all your estate planning needs.

I Have an Estate Plan.  I’m OK, Right?

We have been trained to regularly address aspects in our lives.  Each year we change the batteries in smoke detectors.  Every 3,000 miles we change the oil.  Every six months we (should) visit the dentist for a checkup.  We know that all parts of our lives need to be addressed and maintained.

What about our estate plans?  You spent all that time and energy to carefully craft that plan to address your wishes if you become incapacitated as well as after you pass.  It’s done.  Place it on the shelf and forget about it, right?  Your life is not static and neither should be your estate plan.  These vital documents need to be reviewed and maintained like everything else in your life.

What could possibly impact your completed estate plan?  Here are some gems:

Changes in the Law.  On January 1, 2020, a new federal law dramatically changed how inherited qualified retirement plan and 401(k) money would be treated for tax purposes.  Those changes impact the perceived benefits built into many estate plans drafted prior to that date.  Congress keeps changing the rules and your estate plan needs to keep up.

Your Family Has Grown.  Perhaps your family has grown with new children or grandchildren.  Perhaps your family doubled in size when you became a blended family.  Do your estate plan documents address these new additions?

Your Family Has Shrunk.  Divorce happens.  Do you still want your ex-spouse as your designated Health Care Agent to make life and death medical decisions if you are incapacitated?  Update those records!

Do not let your estate plan to become outdated.  Contact Michael Geiger at Geiger Law for assistance with all your estate planning needs, including review of your established plan documents.

COVID-19 As a Motivator

Estate planning involves so much more than getting a will.  In fact, most estate plan documents address circumstances which arise during your life.  One such vital planning document is the Health Care Power of Attorney (“HCPOA”).  It has taken the severe and far-reaching impacts of COVID-19 to pique my clients’ interest in HCPOAs.

With the background of the uncertainties brought about by this pandemic, let’s take a deeper look at one aspect of HCPOAs: the Health Care Agent (“Agent”).  In the HCPOA, you name the person(s) to make medical decisions on your behalf if you are too ill or you are unable to communicate.  The Agent will have the power to consent to treatment plans, accept or refuse treatments, and decide upon the medical care providers and facilities for you.  The Agent should be guided by your instructions in the HCPOA.  Consider the following factors in selecting your Agent:

Emotional Maturity.  When called upon, the circumstances will be stressful for the Agent.  The Agent needs to be able to think and act rationally in an emotional environment.  The person needs to be your advocate even if differing opinions are offered by loved ones.

Location and Willingness.  Ideally, the Agent should be close by and able to act on your behalf in the event of an emergency.  The Agent may also need to function over an extended period with access to you critical.  In this regard, the role could prove to be time consuming and emotionally draining.  The Agent needs the time to advocate for you.

Honoring Your Wishes.  The Agent’s duty is to make decisions in accord with your instructions, even if the Agent disagrees with your wishes.  The Agent must be someone who can set aside his or her own opinions and carry out your instructions no matter what.

Selecting an Agent could prove tricky.  We can assist in this choice as well as other choices to set up your estate plan.  Contact Michael Geiger at Geiger Law for assistance with these and all your estate planning needs.