Special Needs Law

Special needs planning is sort of what it sounds like, but is really much more, and comes in increasing forms and varieties.  It involves planning for those who are unable to fully care for themselves (whether caused at birth or by subsequent event(s)); for those who meet the legal definition of disability for social security purposes, and for those who have limited resources and income.  Jeff gives advice about the creation of different types of special needs trusts and ABLE accounts, which enable the disabled person to legally retain the government benefits to which he or she is entitled.  

Consulting & Advising

Jeff advises Trustees (individual and corporate) about how to administer these complex trusts.  And he advises any affected person (including other lawyers) about how to deal with potentially qualifying or disqualifying factors that might establish, increase, reduce or terminate a disabled person’s Social Security, Medicaid or other benefits.  This work includes advising about, and handling, administrative appeals and hearings in the rare instances they are required.

Estate Planning

Estate planning is usually considered the process of putting one’s affairs in order so that the things you own and cherish are handled the way you want at death, at the lowest possible cost and with the least amount of acrimony.  That is absolutely true, but it is also much more:  It also includes planning for an unexpected disability or health care crisis, as well as taxes and special assets, including closely held business assets.  Jeff has been practicing estate planning law for over 35 years, and has been fortunate to be recognized in numerous ways over the years as a top estate planner in the United States, and the top estate planner in Kentucky for 2011.

Jeff is the parent of two special needs children – ages 27 and 24 – and thus brings real life experience and passion to this area of his legal practice.  Jeff is the treasurer of the prestigious Special Needs Alliance which consists of the nation’s finest special needs lawyers, and has been quoted in such publications as The Wall Street Journal and Kiplinger’s Online.  

Jeff believes his experience raising two special needs children with his wife, ZoeAnn (okay, mostly raised by ZoeAnn), brings a particularly special value to his clients, but he is also quick to say that he learns as much from his clients as he hopes they learn from him.

The remaining buttons in this section describe some of the the variety of legal services Jeff provides and how he works in partnership with disabled persons, their families, other lawyers and advisors involved with their cases.

Special Needs Law

Third Party Special Needs Trusts

So called “third party” special needs trusts are created in an individual’s estate plan (Will or living trust) to care for a disabled relative or friend (i.e. the beneficiary) at the client’s death.  The person creating the trust is a third party, because the planning does not involve the disabled beneficiary’s own resources.  Because no-one has an obligation to leave assets to anyone other than a spouse at death, the trust fund left at the disabled beneficiary’s death may pass to whomever the person creating the trust wants (like other children or relatives, charity, etc).  During the time the special needs trust is active, the trustee must comply with the Social Security and Medicaid rules to make sure the disabled beneficiary is able to retain government benefits and we provide advice to help them do so.

Third party special needs trusts are creatures of common law.

First Party Special Needs Trusts

A first party special needs trust is like a third party trust, with three major differences:

  1. It is created with the disabled person’s own money (thus “first party” money), which may come to her in a variety of ways, such as:
    • An unplanned inheritance
    • An unplanned beneficiary designation of an ancestor
    • A personal injury settlement or judgment
    • A limited work history and savings
    • Etc.
  2. A first part special needs trust may only be created by someone under age 65
  3. Medicaid must be repaid with what is left in the trust (if anything) at the beneficiary’s death.  (Note:  the repayment applies to all Medicaid benefits received during the beneficiary’s lifetime.)

First party special needs trusts are creatures of federal law created by Congress in 1993.

Pooled Special Needs Trusts

Pooled special needs trusts are a type of first party special needs trust and are also creatures of federal law, but they are the only type of first party special needs trust that may be used by someone older than age 64 (although they may be used by someone younger).  They are called pooled trusts, because a bunch of disabled people pool their money for convenience (or necessity), but a separate account is maintained within the “pool” for the disabled person’s sole benefit.  A pooled special needs trust works just like a first party special needs trust during the disabled person’s lifetime, but a number of different things could happen with any remaining money in the disabled beneficiary’s account at his death, depending on how the pooled trust is set up (and how it is approved by Social Security or the State’s Division of Medicaid Services).  For example, part or all of the account could be:

  1. Used to repay Medicaid (again, the repayment may apply up to all Medicaid benefits received during the beneficiary’s lifetime);
  2. Remain in the pooled trust (a tax-exempt (nonprofit) entity, by definition) to benefit other special needs people or other non-profit entities;
  3. Have any excess returned to designated beneficiaries; or
  4. A combination of the above, as long as Medicaid is repaid before any money is allowed to pass to an individual outside the pooled trust.

A pooled special needs trust is a good option for smaller amounts of money, where someone wants professional management of their money by someone who understands how the money may and may not be used, is less expensive to set up than a stand-alone special needs trust, etc.  As such, a pooled trust should always be considered as an alternative to a private special needs trust.

ABLE Account Planning

ABLE (Achieving a Better Life Experience) accounts were authorized by Congress at the end of 2014 and began going  “online” in 2016.  More than half the states now offer them.  They are available to anyone who was disabled prior to age 26 and have the following major rules, benefits and limitations; some of which were expanded in the Tax Cuts and Jobs Act signed into law on December 22, 2017:

  1. They come under Section 529A of the Internal Revenue Code;
  2. Gifts of cash (only) equal to gift tax exemption ($15,000) can be added to the account (from all sources) each year;
    • Once met, the disabled person may now add funds up to the lesser of the federal poverty level for one person or the person’s compensation for the tax year, but only if a contribution is not made to an employer-sponsored retirement plan for that year.
      • Adequate records must be maintained.
    • The beneficiary may now also claim the saver’s credit for contributions to his ABLE account.
    • These 2017 additions sunset on 12-31-2025.
  3. The money in the account does not count against the disabled person for Social Security and Medicaid qualification purposes, even when the ABLE account exceeds $100,000 (at which time the disabled person’s SSI benefits will be suspended until it is again worth less than $100,000);
  4. The interest and dividends earned on the account are tax-free, just like any other 529 (education) account;
  5. The money in the account may only be used for “qualified disability related expenses,” which tend to be a little broader than the special needs trust allowances/uses;
  6. The beneficiary may have control over the use of the account;
  7. While a beneficiary may only have one ABLE account, they may choose which state’s plan they want to use (e.g.  they do not have to use Kentucky’s plan, called “STABLE Kentucky” which is being run in partnership with Ohio); and
  8. At the beneficiary’s death, any amount remaining in the account must be repaid to Medicaid, but only for Medicaid benefits provided after the ABLE account was established.

Government Benefit Advice & Troubleshooting

We advise our clients about the different types of government benefits which might be available to them at the federal and state levels, how to access and maintain those benefits, and how to deal with problems that may arise with those benefits.  If a problem cannot be resolved, we advise the client about options for fighting to access or maintain government benefits and fight for them during initial appeals, at administrative hearings before the Social Security Administration or the Kentucky Department for Medicaid Services, and, in the worst (and very rare) situations, in court.

Trust Administration

Like administering a trust described in the estate planning section of this website, proper administration of a special needs trust is very important.  Different, however, is the very complex and ever-changing landscape of government benefits rules and regulations which can cause problems for a beneficiary, his trust, and thus his government benefits . We work with the family and other advisors on choosing the right trustee (and other advisors) to administer a special needs trust (which might well be a family member) and how to avoid the many “gotcha’s” that can cause problems for a trustee, beneficiary, or both.  Whomever is chosen to serve in the various trust administration and advisory roles, we provide advice and guidance to try and make sure those gotcha’s are avoided.

Mediation & Trial Consultation

We work with trial attorneys (plaintiff or defense) in a consultative role to help them determine if the injured person meets the definition of “disability” for purposes of qualifying for government benefits, and the value of the potential benefits that come with that determination.  Accessing this information can often help the attorney and her client understand the total value of funds available to the injured person, and thus help them more easily settle their case.  We also advise the attorney (in conjunction with other experts) about potential “structured settlements,” obtaining reputable investment advice for settlement proceeds – to make sure the money lasts as long as possible – the use of special needs trusts described elsewhere, and how to obtain and maintain government benefits once the case is settled.

In fact, it is not unusual for the lawyers to agree to allow us to “switch sides” once the case is settled (usually from working with the defense lawyer to working with the plaintiiff’s lawyer and her client) to give the advice, and often prepare and help implement, the special needs trust and related services, mentioned above.

Neutral Litigation Services

Much like the services mentioned above, we can work as a type of consultant to work with both the plaintiff and defense in a “neutral” role to achieve the results mentioned above.  Such neutral services are entered into by agreement between the parties and our services are provided to give objective advice to both sides – again to help them settle their case.  This is done by agreement and is usually less expensive than each side hiring their own expert in the areas described in this special needs section.  Jeff particularly likes this type of service, because of its utility to both sides and the reduction of costs to either side alone.  

Trust Evaluation & Resolution

Because special needs trusts, laws and regulations, are so complicated, often mistakes are made in drafting, or simply arise because of changes in those laws or regulations.  Jeff works with trustees on evaluating the current effectiveness of a particular special needs trust, and if a problem is identified, ways to fix the problem through trust reformation or other means.

Estate Planning

Transfer & Related Tax Planning

It has often been said that nothing is certain except death and taxes.  Although federal estate taxes have become less relevant for many Americans, they (and, sometimes, Kentucky inheritance taxes) are still relevant for many of our clients, along with income taxes and other potential “gotcha” taxes.  

Jeff, along with his colleagues at Wyatt, Tarrant & Combs, LLP (”WTC”)(through our continuing partnership) are able to continue working together with our clients when these needs exist and to continue utilizing the various levels of expertise which have been available to our WTC clients for years.  Such specialized services might include, among others, transfer tax planning for closely held businesses, real estate, retirement accounts, assets intended to pass to charity, estate dispute resolution and estate & trust litigation, etc.  

Specifically, continuing as a partner in WTC allows Jeff to continue working with his estate planning clients and his colleagues at WTC in developing creative, unique and cutting edge solutions to difficult tax (and other) planning issues, as we always have.  Click here to learn more about the Wyatt, Tarrant & Combs estate planning team.

Wills

For some clients, a simple Will may be all they need to dispose of their assets at death.  A Will is simply a document, when properly prepared and signed, which disposes of your assets at death and names the person (called an Executor or Personal Representative) to finalize your affairs.  Very important to young parents, a Will also names a guardian (and usually a back-up guardian should your first choice be unable to serve) to raise your children until they become adults.  If avoiding probate (see Trusts button) is not so important to you, you might also create a trust for your loved ones in your Will and name a “Trustee” to manage that trust.

Trusts

There are many kinds of trusts, which are used for many different estate, tax and asset protection reasons, some of which include:

  1. The most commonly known type of trust is a revocable trust, which is often referred to as a “living trust.”  This is a written document that you enter into with a trustee (which may be you while you are alive and someone else takes over at your death or disability) and which forms as a type of Will substitute when you die.  If funded properly during your lifetime and through beneficiary designations that take effect at death, the trust assets will not go through the probate (i.e. court) process at death.  Some of the touted advantages of a living trust include:
    • Providing a management tool (like a power of attorney) for handling your financial affairs should you become disabled;
    • Providing privacy by having your assets pass at death outside of probate, which is open to the public;
    • Tax planning for your family at your death;
    • Creating separate trusts to protect your family’s inheritance from creditors and predators (such as new spouses) after you are gone.  These benefits can even be accomplished by allowing your child or grandchild to serve as his or her own trustee at the age you consider appropriate;
    • Etc!
    • By the way, any assets you may not have put in your living trust will get there through your Will, which will be drafted as a “pour-over” Will (so you will always need some form of Will; even if you create a living trust).
  2. Another somewhat common trust is an irrevocable (sometimes called “Crummey”) trust to hold life insurance or other assets in order to get them out of your taxable estate.  These trusts are sometimes set up as “grantor” trusts to enable you to pay the income tax on the trust’s earnings, which essentially enables you to transfer more wealth to your family.  There are many types of irrevocable trusts which often have funny acronyms, like “GRATS, GRUTS, CRATS, CRUTS, CLATS, QPRTS. QSSTS, etc.” and several types of creditor protection trusts.
  3. Special Needs Trusts

Durable Power of Attorney

A durable power of attorney is a document you create to allow someone else to handle your financial affairs for you.  It is called “durable” because it survives your disability and usually allows your family to avoid going to court to have you declared legally disabled (a process that requires a jury trial in Kentucky).  You may name one or more people to serve as your power of attorney (officially called an “Attorney-in-Fact”), along with contingent Attorneys-in-Fact.  Obviously you should only name people you trust to handle your money, but doing so will help avoid fights over who has the responsibility for doing so should you become disabled.

Living Will and Health Care Surrogate Designation

A Living Will is like a power of attorney, but it allows someone to make healthcare decisions for you if you are unable to do so for yourself (e.g. you are in a car accident and unable to give informed consent for medical procedures, including surgery, etc.).  The people you name are called “Health Care Surrogates,” although some people call them health care powers of attorney.  In addition to making medical decisions when you are unable to do so, you are able to describe what types of procedures you want, or do not want, should you be terminally ill with no reasonable chance of survival, and are unable to communicate your decisions when you are ill.  

In addition to stating these wishes in advance – for such things as the use of ventilators, the provision of nutrition and hydration, etc. – if you want, you are also allowed to let your health care surrogate make those final decisions based on your stated preferences, taking into consideration your condition and prognosis at the time when such decisions must be made.  Granting this particular power to your health care surrogate(s) gives a great degree of latitude in situations which are often not entirely clear.

HIPAA Releases

Although our Powers of Attorney and Living Will documents have a paragraph allowing the people you name in the respective positions to access your medical records and talk with your health care providers, this document emphasizes that point and makes sure your designees have that full authority under federal law.  In addition, you might give additional people (e.g. a young person who has time to run to your doctor’s office or the hospital to pick up medical records, etc.) this particular right, but not the substantial rights and responsibilities that come under under a durable power of Attorney or Living Will.

Probate & Estate Administration

As mentioned under Wills, probate is the court supervised process that occurs when you pass away.  Your Will is admitted into the court’s record, an executor is appointed who must follow a certain set of laws which describe the things your executor may and may not do.  It is also the place where your creditors (and potentially others) may file claims for past-due debts, claims for certain activities, etc.  The probate process is formal and must remain open for a minimum of six months after the executor is appointed.  The probate process is concluded when the court accepts the settlement the Executor files on your behalf.  We can advise your Executor where probate is required and help lead him through the process, or advise you of your rights as a beneficiary if someone else is named as Executor.

Guardianship and Conservatorship

As mentioned elsewhere, guardianship (where someone is needed to look over your personal affairs) and conservatorship (where someone is needed to look over your financial affairs) involves a jury’s determination that you are either fully or partially disabled.  It is to be avoided whenever possible!  Unfortunately, it sometimes cannot be avoided because the disabled person has not planned for this possibility, because people are fighting over the right to assist (or take advantage of) you, etc.  Where guardianship cannot be avoided, we will advise you of how the process works and how to meet your fiduciary responsibilities if you are appointed by the court as Guardian, Conservator, or both.

Estate and Guardianship Dispute Resolution

It is no tremendous revelation that sometimes people (especially family members) just can’t get along.  In these unfortunate situations, we try to work with family members and their lawyers to resolve their differences.  In the rare case where that cannot be accomplished, our team of estate litigators is available to work with us through the court process

Estate, Gift & Inheritance Tax Returns

When required, we prepare or review any estate, gift or inheritance tax returns that must be filed.  Often this is not necessary, but when it is, it can run from the very simple to the very complex.  We can handle the entire gamut of such return preparation in collaboration with your other financial advisors.  We usually ask your accountant or other tax return preparer to prepare any required income tax returns for you personally or an estate, trust, conservatorship, etc, and we are happy to review those returns if asked.

Charitable Planning and Nonprofit Organizations

We work closely with families and non-profit organizations on their respective charitable goals:  With families, on how their charitable legacies can best be fulfilled, and with non-profit organizations (i.e.charities) from “soup to nuts.”  We create all sorts of non-profit organizations – depending on the goals and needs – and advise them about how to properly run their organization.  Finally, we work side-by-side with donors and nonprofit organizations to develop charitable giving plans that are mutually beneficial and ultimately serve the community at-large.

Premarital Planning

Last, but certainly not least (we could go on forever) we work with individuals who are planning to marry to protect them in the unanticipated event of divorce, or upon their ultimate demise.  We make this process as palatable and easy as possible, while also protecting you, and perhaps your children from a prior marriage, a family business, previous money you may have inherited, etc.  We believe there is no reason for premarital planning to be adversarial or uncomfortable for either person, and encourage our clients as soon after engagement as possible, in order to help avoid last minute tensions.

Get in touch

If you’re interested in setting up a consultation, provide your contact information below. Please do not supply any confidential information. Policies regarding forming an attorney-client relationship can be found here. I look forward to speaking with you.