North Carolina Estate Planning Blog : North Carolina Estate Planning Lawyer & Attorney : Trust Counsel, PA : Trust Administration : Serving Chapel Hill, Durham, Raleigh, Pittsboro, Orange County, Chatham County

A New Social Security Program Operations Manual System (“POMS”) Section Regarding Early Trust Termination Provisions for "Self-Settled" Special Needs and Pooled Trusts is set forth below.  This will not affect SNTs established with the assets of a third party, such as a parent.

Provided by Sharon Kovacs Gruer, CELA and Richard A. Courtney, CELA

SI 01120.199:
A. Introduction to early termination provisions and Trusts
1. Effective date of instructions regarding early termination provisions and trusts. These instructions are effective 10/1/10 and are to be considered informational until that date. Do not apply the policy or procedures in this section prior to 10/1/10.

2. Applicability of early termination provisions and trusts
This section provides the policy for evaluating special needs and pooled trusts established with the assets of an individual on or after 1/01/00 and that contain early termination provisions. If certain criteria are met, such trusts can be excepted from counting as a resource under Section 1613(e)(5) of the Social Security Act (the Act). If those criteria are not met, such trusts should instead be evaluated under Section 1613(e) of the Act.  [emphasis added.] For more information about evaluating trusts under Section 1613(e) of the Act, see SI 01120.201 <https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120201> .

Use the instructions in this section to evaluate the following types of trusts:
· Special needs trust established under Section 1917(d)(4)(A) of the Act
For information on special needs trusts established under Section 1917(d)(4)(A) of the Act, see SI 01120.203 <https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120203> .

· Pooled trusts established under Section 1917(d)(4)(C) of the Act
For information on pooled trusts established under Section 1917(d)(4)(C) of the Act, see SI 01120.203 <https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120203> .

3. Case processing alert regarding early termination provisions and trusts
Trusts are often complex legal arrangements involving State law and legal principles that require obtaining legal counsel. Therefore, the following instructions may only be sufficient to recognize that an issue is present that should be referred to the regional office (RO) for possible referral to the Regional Chief Counsel. When in doubt, discuss the issue with the RO staff. Many issues can be resolved by phone.

B. What is an early termination provision?
An early termination provision or clause would allow a trust to terminate before the death of the beneficiary. Commonly, such provisions or clauses provide for termination of the trust when, for example, the beneficiary is no longer disabled or otherwise becomes ineligible for Supplemental Security Income (SSI) and Medicaid, or when the trust fund no longer contains enough assets to justify its continued administration.

• Email This
• Print
• Comments
• Trackbacks

Special Needs Trusts (SNTs), also sometimes referred to as Supplemental Needs Trusts, are used to provide supplemental benefits to disabled or elderly persons receiving governmental benefits (such as Medicaid and SSI) while not disqualifying them for the benefits. 

There is a distinction between "self-settled" or "first party" trusts, which are funded with the disabled persons own assets, and most often called special needs trusts, and "third party trusts", which are set up by another person and funded with that person's money.  The latter are often referred to as supplemental needs trusts.  The laws regarding SNTs are very complex, and such trusts should be drafted only by attorneys experienced in that area of the law.

The administration of SNTs is also complex.  Only certain types of expenditures are allowed.  The wrong type of payments from the trust can disqualify the beneficiary from receiving governmental benefits.  I currently serve as trustee for several SNTs - given the many needs of a disabled beneficiary, it can be a demanding job.

For examples of what expenditures from an SNT are allowable, and those that aren't, click "Continue Reading."

• Email This
• Print
• Comments (4)
• Trackbacks

Governor Bev Perdue recently signed into law Session Law 2009-267, which:

• modifies North Carolina General Statutes Section 36C-2-203(a)(9) to state the proceedings may be brought before the Clerk of Superior Court to create a trust.
• Adds a provision to NCGS Section 36C-4-401 providing that a court may create a trust, including a trust pursuant to 42 USC Section 1396p(d)(4) [Special Needs Trust].
• Adds Section 36C-4-401.2, which provides that any interested party may petition the court to establish a trust pursuant to 42 USC Section 1396p(d)(4.

The changes are effective October 1, 2009.

The new laws will be extremely helpful, as Special Needs Trusts under 42 USC Section 1396p(d)(4) must be established by a parent, grandparent, legal guardian or court.  If there is no parent or grandparent is is willing and able, and no guardian, the only way to protect Medicaid and SSI benefits by using a Special Needs Trust is by having one created by the court.

• Email This
• Print
• Comments (1)
• Trackbacks

I recently posted a link to an article on Special Needs Trusts - here's another one from the Wall Street Journal, which quotes several well known lawyers, including Barry Nelson in Miami, who has a special needs child himself.

• Email This
• Print
• Comments
• Trackbacks

A recent article in the Baltimore Sun discusses the special planning that should be done by parents of children with disabilities.  I think the article is good, although it it states that one should contact a lawyer OR financial planner who is an expert in the area.  While enlisting the advice of a knowledgeable financial planner might not be a bad idea, it is an absolute must to have an expert attorney involved as well.  Financial planners cannot prepare wills or trust documents.

North Carolina also has at least one non-profit organization that offers "pooled" trusts - Life Plan Trust.

• Email This
• Print
• Comments
• Trackbacks