NAELA Summit

imageI have spent the last three days in Newport Beach at a NAELA (National Academy of Elder Law Attorneys) summit meeting. While the program was set up as classes hosted by a speaker/moderator, the summit has been interactive. Questions have been posed In the sessions and the audience responds with electronic devices to give an immediate poll of the opinions of the attendees, at which point members of the audience can choose to stand up and be heard on their ideas and views.
It has been interesting to see how the laws of the different states vary greatly on the issues and how other attorneys have overcome problems that we are also facing in California. I will be coming home with ideas and tips to improve our documents and help our clients solve practical problems from special needs trust administration, retirement benefits quandaries, and powers of attorney.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

Congress Approves Tax-Free Savings Accounts for People with Disabilities

A new law just passed by Congress and signed by President Obama will allow people with disabilities who became disabled before they turned 26 to set aside up to $14,000 a year in tax-free savings accounts without affecting their eligibility for government benefits.  As things stand now, a person diagnosed with a disability generally can’t have assets worth more than $2,000 without forfeiting eligibility for government programs like Medicaid and Supplemental Security Income (SSI).

Under the Achieving a Better Life Experience (ABLE) Act, the tax-free savings accounts can be used to pay for qualifying expenses such as the costs of treating the disability or for education, housing and health care, among other things.  The existence of the accounts will not compromise the individual’s ability to qualify for benefits like SSI or Medicaid as long as the account balance does not exceed $100,000.

States must set up programs for families to invest in the new so-called “529A accounts” and will provide investment options. The act takes effect at the beginning of 2015, meaning that states will have to act soon to regulate these new accounts. Once in place, ABLE accounts will become one more tool for families of people with special needs to use in order to protect their loved ones’ valuable benefits while enhancing their quality of life.

But because the accounts can hold only up to $100,000 without negative repercussions, and especially since they apply only to people who became disabled when they were young, most, if not all, families of people with disabilities will still need to consider setting up traditional special needs trusts if they want to properly care for their relatives with special needs.  Many of these trusts can also be drafted to protect the trust assets from Medicaid estate recovery if they are funded with money from family members and not the trust beneficiaries.

Although it may be easy to set up an ABLE account, there are many hidden pitfalls associated with spending the funds in the accounts, both for the beneficiary and for her family members.  Therefore, it is imperative that anyone thinking about establishing an ABLE account speak with her special needs planner first in order to make sure that all of the pieces of a special needs plan will properly align with the ABLE account.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

Three Steps to Choosing a Guardian for Your Child with Special Needs

Preparing a comprehensive estate plan to protect a child with special needs can be an emotional roller coaster. On the one hand, parents should be relieved that they are taking steps to guarantee that their child will be well cared for after they are gone. On the other hand, confronting one’s own mortality and having to decide who will manage the affairs of a child with special needs can be stressful.

Out of all of the decisions that parents of children with special needs have to confront, the choice of a guardian stands out as one of the most difficult because the person serving in that role will essentially step into the parents’ shoes and take care of the child. But parents don’t have to dread this decision, especially if they follow these steps:

1. Take Time to Choose, But Don’t Take Too Long

Choosing someone to become the guardian of your child is not a decision that should be made lightly, but this doesn’t mean that the decision should keep you up at night, either. Start by putting together a list of potential candidates. Don’t spend a lot of time worrying about the list; just write down anyone who could potentially serve. Then go through the list and eliminate anyone who, for whatever reason, doesn’t strike you as an optimal choice, keeping in mind that no one is going to be a perfect substitute for the original parent. Chances are, this ten-minute exercise will immediately winnow your options down to a couple of people. Once you’ve narrowed down your options, take some time to think about each person on the short list. But don’t get hung up on choosing a person yet; you will still have some work to do.

The key at this stage of the game is to not get overwhelmed with worry about your choices, especially since you haven’t even asked anyone on your list if they are willing to serve. One of the biggest mistakes parents of children with special needs make is getting so caught up in the decision making process that they don’t go ahead with their planning at all. Don’t let this be you — make your list, start to narrow it down, and then proceed to the next step. But whatever you do, don’t stop planning.

2. Talk to Your Potential Guardians and Make Sure to Encourage Honesty

After you’ve narrowed your list of potential guardians down to a few names, talk to each one (separately) and ask them if they are willing to serve. Don’t put these people on the spot with statements like, “If you don’t do it, I don’t know what we’ll do,” and encourage each person to be honest with you about his or her questions and concerns. Don’t look for immediate answers; give your potential guardians time to think about things and get back to you if they are on the fence.

This conversation may immediately narrow down your list, as some people may tell you that they absolutely will not or cannot serve. At the same time, talking face to face with your choices may help you to weed out a few more people.

3. Make a Decision and Put Your Plan into Action

After speaking with your prospective guardians you may be able to make a decision about who will serve. But if you still need to think about your choice, keep a few things in mind. First, you can always change your nomination at a later point, and, in fact, many people do. For instance, it may make sense for young parents to name their parents or older relatives as guardians while those people are still fairly young and then change their estate plans when the original nominee gets too old to serve. Likewise, as friends and family move away, parents may have to update their estate plans as the guardian they have picked for their child no longer lives in the area. Nothing is set in stone.

Here are some additional questions to consider if you are having a hard time choosing a guardian:
o Do I want my child to stay in his community and is the guardian willing to move here if she doesn’t already live here?
o Does the guardian have experience working with people with special needs?
o How does the guardian interact with my child specifically?
o Does the guardian have too much going on in his own life to care for a child, especially one with special needs?
o Does the guardian have children, how old are they and can the guardian take on another child?
o How old is the guardian? Do I have a backup in case he or she can’t serve?
o Does the guardian share my values about things like religion, education and finances?
Although the decision making process may not be easy for every family, it is a necessary one. Remember, the worst thing that you can do is to leave guardianship to chance, which is what will happen if you don’t have an estate plan that reflects your wishes. Once you’ve followed these simple steps and made your decision, put it into effect by meeting with your special needs planner and drafting the proper documents immediately. Again, don’t put it off.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.


What’s the Difference Between ‘Supplemental’ and ‘Special’ Needs Trusts?

You may have heard the terms “special” needs trust and “supplemental” needs trust and wondered what the difference is. The short answer is that there’s no difference. Here’s the long answer.

When the field of special needs planning began some two decades ago, trusts created for people with disabilities were generally called supplemental needs trusts. The thinking was that the purpose of the trusts was to supplement the assistance provided by Medi-Cal (Medicaid), Medicare, Social Security, Supplemental Security Income (SSI) and other public benefits programs whose level of support is meager at best.

With passage of the OBRA legislation in 1993 authorizing the creation of self-settled trusts under 42 USC 1396p(d)(4)(A), some practitioners called for distinguishing between these new trusts and third-party trusts often created by a parent, by calling the former special needs trusts and continuing to call the latter trusts supplemental needs trusts. But this approach never really caught on.

Instead, over time both types of trusts have come under the rubric of special needs trusts and the term supplemental needs trust has fallen away. The term special needs trust refers to the purpose of the trust to pay for the beneficiary’s unique or special needs. In short, the title is focused more on the beneficiary while the name supplemental needs trust addresses the shortfalls of our public benefits programs.

Special needs trusts now encompass both traditional third-party trusts and those under OBRA, which are often known as (d)(4)(A) trusts referring to the statute or as pay-back trusts referring to the feature that any funds remaining in the trust at the beneficiary’s death must be used to reimburse Medi-Cal (or the state Medicaid agency in states other than California), or as self-settled trusts referring to the fact that these trusts are created with the Medicaid beneficiary’s own funds.

Special needs trusts created with someone else’s funds, whether a parent, grandparent, or someone else, are often referred to as third-party special needs trusts.

In short, the reference to the trusts as supplemental needs trusts rather than special needs trusts is something of a survival. But whats in a name? Whether supplemental or special the trusts serve the same purpose of helping meet the needs of individuals with disabilities while still permitting them to qualify for vital public benefits programs.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

Stetsen National Special Needs Conference

I spent the last several days in Florida at the Stetson National Special Needs Conference and wanted to share some of the information that I found helpful at the conference.


I attended sessions with experts who opined on the effects on the Special Needs Community of the Affordable Care Act and the proposed ABLE legislation. There is a lot of confusion and disagreement on the impact of this legislation.

One immediate concern is with the on-line application process for the medical exchanges. One of the questions that must be answered to apply is whether or not the applicant is receiving Medi-Cal (Medicaid). If the applicant answers affirmatively, the session ends and the applicant cannot get a quote for the other possible insurances. This takes away the choice of paying for private insurance for a person with a disability without first giving up their benefits under Medi-Cal.


Currently, only one of the twelve death benefits available to veterans allow a special needs trust to be the beneficiary. Service members life insurance may name a special needs trust as the beneficiary. There is currently legislation in the house to allow additional benefits to designate a special needs trust as the beneficiary.


While this is not an area in which I practice, I attended a seminar to get an overview of the issues in education and the rights of the student and parents. We appear to be quite lucky in California with education for special needs, though still not perfect.


I went to a number of presentations that discussed the liability of trustees of special needs trusts. I have a list of suggestions for the trustees that we represent to help minimize their liability and maximize the benefits to the beneficiaries, which I will put into a future blog.


I particularly enjoyed the two presentations that I attended on designating SNTs as beneficiaries of IRAs and the effect to the RMDs (required minimum distributions). I learned not only the rules, but some creative ways to use them to maximize the benefit to the trust and ultimately the beneficiary.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

National Dissemination Center for Children with Disabilities (NICHCY)

Fact sheets are a great starting point for anyone who is living or working with a child who has a disability. Written specifically to meet the needs of parents and educators, NICHCY’s fact sheets on specific disabilities (e.g., autism spectrum disorders, cerebral palsy, Down syndrome) cover definitions, causes, characteristics, educational considerations and helpful organizations to contact for further information. Most also include available supports (by age group), tips for parents and teachers and a brief story about a child who has that particular disability.

Unfortunately the NICHCY lost its funding in September and will no longer be updating their website. The website is supposed to remain operational until September of 2014.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

Why Create a Special Needs Trust Before Your Child Turns 18?

Often, parents of children with special needs don’t consider creating a special needs trust until their child turns 18 or sometimes even later, when the child requires government benefits like Medicaid or Supplemental Security Income (SSI). But special needs trusts are tremendously versatile instruments that can do much more than simply protect a person’s access to government benefits. There are several reasons why parents don’t have to wait until their child turns 18 to create a special needs trust for the child’s benefit.

Estate planning. The number one reason to create a special needs trust before a child turns 18 is the same reason parents of children without special needs should have an estate plan — to provide stability and security for their family members should something happen to them. Creating a special needs trust before a child needs it ensures that the trust is there when it is needed, regardless of what happens to the trust’s creators. If parents of a child with special needs unexpectedly pass away having created a special needs trust, their estates will be held for the benefit of their child with special needs in a way that offers maximum flexibility for the child.

Gifts. Parents may want to establish a special needs trust for their minor child so that the child’s relatives can fund it with gifts. In fact, this may be preferred, because the special needs trust will provide proper management of those assets. Older relatives intending to leave an inheritance for a child with special needs can also give the bequest directly to the trust. Planning ahead guarantees that if the child requires government benefits when he is older, he will not have large amounts of money in his name that could affect his eligibility.

Life insurance. Sometimes, parents of a child with special needs want to purchase a life insurance policy that will help pay for their child’s care long after they are gone. Properly created special needs trusts can hold life insurance policies and manage the proceeds from those policies once the parents have died. Life insurance trusts are also good ways for parents with larger estates to reduce their estate tax liability. The earlier parents start funding the life insurance policy, the greater the benefit for their child with special needs. Since this funding can begin well before a child turns 18, it makes sense to create a special needs trust to hold the policy and its proceeds, even though the child is not yet receiving government benefits.

Home ownership. Special needs trusts can own homes for people with special needs, reducing the risks of placing property into the hands of someone who may not be able to properly maintain a home.

Care management. These trusts can provide care management as well as a structure for family involvement in the daily activities of a person with special needs. In addition, experienced special needs trustees serve as great resources for families seeking additional care options for their children.

Planning early and constantly updating and improving a special needs trust can be the difference between a moderately useful trust and an incredibly effective one. In most cases, the trust will be unfunded during the parents’ lives, whether the child is over or under age 18, but having it available can be important for the reasons outlined above. A qualified special needs planner can help parents of younger children create and manage a suitable special needs trust that works for their child before, and after, the child turns 18.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

Representative Payees

The Social Security Administration (SSA) manages the two largest government benefit programs for people with special needs, Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). Many of the people with special needs who receive these benefits are qualified to manage their own money and can make other financial decisions for themselves. The SSA sends these people their own benefit check each month.

However, when a person with special needs cannot make important financial decisions, either because of her disability or because she has not reached the age of majority, the SSA sends the benefits directly to a third party, known as a representative payee, who is charged with managing the funds for the beneficiary. When a parent or caregiver signs up to be a representative payee, they often do not take the time to truly explore what they are getting into, which could lead to trouble down the road. Here are a few key things to remember about being a representative payee.

It’s Not Your Money

The funds you receive are the beneficiary’s funds, not yours. When you agree to be a representative payee, you are responsible for managing the beneficiary’s money for their benefit, not yours. In almost all cases, this means that you are not allowed to charge a fee to be a representative payee. It’s easy to lose track of the beneficiary’s funds, especially when family finances are mixed together. As a representative payee, you must ensure that the monthly payments get to, and are used for, the beneficiary and no one else.

Don’t Commingle

The best way to ensure that the beneficiary’s funds are used for their benefit is to segregate the funds in a separate bank account. This account should reflect the beneficiary’s ownership of the funds, and should not be a joint account with the representative payee as the other owner. Instead, the bank account should be titled in the name of the beneficiary, with the representative payee noted on the account, i.e., “Your name, as representative payee for your child’s name.” Obviously, this can be difficult when you are serving as the representative payee for a minor child who lives with you. In these cases, the SSA says that the child should have his own savings account, even if most of his benefits are being spent out of the family’s checking account.

File Your Representative Payee Report

The SSA requires that a representative payee file an annual accounting called the Representative Payee Report. This report details what you, as the representative payee, have done with the beneficiary’s funds during the previous year. If you have kept accurate records of the beneficiary’s funds over the course of the year, the report will be very easy to fill out. Commingling funds, or not keeping accurate records of expenditures, can lead to an incredible headache when it comes time to file the report. Not filing the report, on the other hand, could lead to your removal as representative payee.

Know the SSI Rules

If you are serving as a representative payee for a person receiving SSI benefits, your job is made even more difficult by the SSI program’s stringent income and asset rules. For instance, SSI beneficiaries can have only $2,000 in their name in order to be eligible for benefits. As representative payee, you must make sure that you know the rules regarding asset accumulation and their effect on the beneficiary. You must also deal with any lump-sum payments that the beneficiary may receive as “past due” SSI benefits, which have their own set of rules. In a worse-case scenario, not knowing the rules can lead to loss of benefits and the possibility of overpayments that the beneficiary must repay from her own funds.

Get Help

As you can see, being a representative payee is a difficult job that should not be undertaken lightly. The SSA offers information for representative payees at, but the best way to make sure that you have a handle on your duties is to speak with a qualified special needs planner, who can explain the intricacies of the system and give you tips that fit your particular family member.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

October is National Special Needs Law Month

In honor of National Special Needs Law Month, Sugai & Sudweeks will publish a series of blogs on Special Needs topics. We hope that you will find them useful and informative.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.