Grandpa died, left everything to a trust. I have questions...

[mickeyd]

It was Grandpa's money and he has a spendthrift daughter who might spend it all in year one. Follow the rules and get to know the lawyer VERY well. Your wife has a roll in this and needs to understand every aspect of the trust.

Another reason for your wife/you to understand the deal-she will become a beneficiary of the corpus eventually.

 

[Scrapr]

This thread title was not what i was expecting in the body. On the recent topic sidebar it says

Grandpa died and left everything to a....

I was sure it was going to be finished with ...Stripper, or GF. Maybe his loyal dog. I keep clicking on it though

 

[yclipse]

Someone may have already made this point, but -

Since your wife is the trustee, she is the one who should receive the request and dole out the money if she determines the request is justified. There is no reason for the lawyer to be involved, making a charge for each transaction. Save the lawyer for legal issues.

And her mother could certainly be given an "allowance" to handle a month's worth of little things.

 

[Buckeye]

A low income, low asset person can be "dual eligible ". That is, eligible for both Medicare and Medicaid. As you know, Medicare alone doesn't cover all expenses

It sounds like she might have a Special Needs Trust to protect her Medicaid eligibility. Is her income just SS with the Medicaid only covering her medical copays? Or is some of her income SSI? Paying for certain things (housing related expenses and food) will decrease SSI but paying car insurance won't. There's a good NOLO book on Special Needs Trust and what to do and not do for the person on SSI and/or Medicaid. The TrueLink card is approved, by name, by the govt to give the beneficiary of the trust some controlled independence.

 

[Buckeye]

Doesn't seem right that someone can be the beneficiary of a $400,000 trust and also collect from medicaid, a program implemented to serve those who are truly poor and unable to work. Yet, I have heard people boast about gaming medicaid: paying lawyers to redistribute assets so as to avoid the claw back provisions, preserving big inheritances for offspring, and forcing foolhardy taxpayers to cover long term care for elderly parents. So, I shouldn't be surprised that a trust beneficiary can be subsidized by taxpayers.

My disabled friend who is on SSI/Medicaid has a Special Needs Trust that holds her inheritance from her deceased mother. I am the trustee and she will never own or control the assets in the Trust. The main thing the trust protects is her healthcare and I'm guessing that's the main issue for the poster.

 

[Buckeye]

Someone may have already made this point, but -

Since your wife is the trustee, she is the one who should receive the request and dole out the money if she determines the request is justified. There is no reason for the lawyer to be involved, making a charge for each transaction. Save the lawyer for legal issues.

And her mother could certainly be given an "allowance" to handle a month's worth of little things.

If it's a Special Needs Trust, avoid giving cash directly to a beneficiary. Use a TrueLink card and fund the attached account. It doesn't count as handing over cash.

 

[Buckeye]

Not same situation at all but here's some info to consider.

We have an adult diabled daughter. She has Medicaid and more recently Medicare.
The Medicare is way more useful for her for medical needs. BUT the medicaid qualifies her for many state services like community support, habilitation, etc.
She must not have more than 2K in her name.
She has an ABLE account that helps her. She has a special needs trust to hold our assests she will inherit.

I'd recommend finding an elder care/special needs attorney.

Best of luck.

Will you use a family member or a friend as her trustee? If you do, buy them the NOLO book on Special Needs Trusts to read now.

 

[ERD50]

If it's a Special Needs Trust, avoid giving cash directly to a beneficiary. Use a TrueLink card and fund the attached account. It doesn't count as handing over cash.

I suspect a lawyer, IRS, or other Fed agency would disagree with that.

Income is income, whether it comes from a trust or any other source. The principal is likely protected, but I would think the that income is just that, income.

Anyone else have knowledge on this?

-ERD50

 

[Texas Proud]

Have not read the whole thread but am with PB4 on first page...


Why have the lawyer? Unless GP set it up that requires a lawyer I would get rid of him/her.


I took over my mother's finances the last 10 years of her life... it can be a pain but my problem was actually trying to get her to spend on things she needed. Sometimes I would not find out for awhile she needed something.


I can be tough, but what else are you going to do? Let them get into financial trouble? I think not as you would probably have to bail them out with your own money.

 

[Buckeye]

I suspect a lawyer, IRS, or other Fed agency would disagree with that.

Income is income, whether it comes from a trust or any other source. The principal is likely protected, but I would think the that income is just that, income.

Anyone else have knowledge on this?

-ERD50

Yes, it will be income for the beneficiary on her tax form but it does not affect eligibility for benefits if funds are used on things other than housing (and related items like utilities) and food. And, even if funds are used for food and housing, the penalty is limited to approximately $300 per month (1/3 of current max. monthly benefit). A good chunk out of a $700 benefit but sometimes it's necessary to take the penalty to keep the beneficiary from being homeless. If you hand over $500 in cash for the beneficiary to spend, the penalty for that month is $500 and not capped at $300.

Get the NOLO book on Special Needs Trusts and read the SS regulations for people collecting SSI. You will see the TrueLink card mentioned by name as being an acceptable method. TrueLink Financial explains it on their website, NOLO explains it in the book, and the TrueLink card is literally named specifically in the regulations.

 

[Buckeye]

Yes, in our case the lawyer is the Trust Protector and can change the corporate trustee if they are not doing their job.

Does your lawyer charge you annually for being the Trust Protector? Or only if there is an issue and the lawyer must get involved? While getting up to speed to serve as a trustee for my disabled friend, I read some real horror stories about trustees and trust protectors in collusion so the beneficiary was basically screwed and couldn't get out of the current arrangement. And, of course, the beneficiary had no funds available to hire an independent lawyer and the trustee wouldn't authorize funds to be spent on another attorney. Beneficiaries can be left powerless to protect themselves from self-serving trustees and trust protectors.

 

[ERD50]

Yes, it will be income for the beneficiary on her tax form but it does not affect eligibility for benefits if funds are used on things other than housing (and related items like utilities) and food. And, even if funds are used for food and housing, the penalty is limited to approximately $300 per month (1/3 of current max. monthly benefit). A good chunk out of a $700 benefit but sometimes it's necessary to take the penalty to keep the beneficiary from being homeless. If you hand over $500 in cash for the beneficiary to spend, the penalty for that month is $500 and not capped at $300.

Get the NOLO book on Special Needs Trusts and read the SS regulations for people collecting SSI. You will see the TrueLink card mentioned by name as being an acceptable method. TrueLink Financial explains it on their website, NOLO explains it in the book, and the TrueLink card is literally named specifically in the regulations.

OK, interesting. So it sounds like a way to help validate that the money is for 'needs' not 'wants'.

-ERD50

 

[Buckeye]

OK, interesting. So it sounds like a way to help validate that the money is for 'needs' not 'wants'.

-ERD50

Well, actually no because the person receiving SSI disability/Medicaid gets penalized if the trust (or anyone else) pays for any housing related expenses or food. But that penalty is consistent with the philosophy of SSI which is meant to cover the basics, such as food and housing. (How anyone can actually live on $700 a month and not be homeless is for another day. My friend has been on the housing list for 7+ years but she is very low priority as a childless adult.)

The TrueLink debit card and attached account limits spending while giving the user some autonomy. If $500 per month is put into the TrueLink account from the trust account, then that's all the beneficiary can spend on her own. The trustee owns the TrueLink account and can block categories of transactions to control where the money is spent. TrueLink advertises the card for special needs trust beneficiaries, recovering addicts, and the elderly. The only fee is a flat $10 per month.

Technically, the trust can purchase virtually anything but, as the trustee, I have to find the balance between current consumption and making her money last the rest of her lifetime. Housing is the most difficult issue because she lives in the Seattle area where housing costs are astronomical.

The beneficiary in the original post is in a much better situation in that she was given a house. But, as all homeowners know, houses can be money pits and repairs, taxes, utilities, normal maintenance, etc. could be a real drain on her trust. Big bucks when it's time for a new roof or furnace. My beneficiary wants a 'place of her own' but she could end up house poor unless she moves away from friends and family to a much lower cost area.

And the beneficiary in the original post has to be careful that housing expenses paid by the trust (because she can't afford them) don't zero out her SSI (if she is getting any) and disrupt her Medicaid. Different states have different policies regarding the linkage of SSI and Medicaid. If she has to take a $300 max monthly penalty, that could be more than her SSI. In some states, if there is no SSI income, the person becomes ineligible for Medicaid. They need to be careful. I would spend some money on an elder law attorney that specializes, not dabbles, in Special Needs Trusts. But read the NOLO book first! Educate yourself as much as possible and use the attorney to answer questions or clarify things you don't understand. The whole thing will give you a headache but it was important to me to help a friend preserve the trust assets so she doesn't end up homeless at 85.

 

[Brat]

It is my understanding that a Special Needs Trust is not for necessities. My Mother's trust set aside my sister's share to go to her disabled son (reasons for which I will spare you). Mother did not know that grandson was on SSI. I shared that information with Mother and her attorney. What the attorney told Mother was that when she passed that provision, even if the grandson denounced it, would cause him to loose his SSI. Mother amended her trust to provide for that share, not to exceed a fixed sum which was in excess of $100,000, to go the the Oregon Special Needs Trust account that the attorney established in his name.

To have a private SNT is very expensive and you must be very cautious about how the resources are made available to the benificary. Although there is an administrative fee it is cheaper, and administratively easier, to use an existing program. My nephew would call me unhappy with the administrator's decisions but I told him that he should ask his Mother to deal with that. He had a serious mental illness so I was relieved to have someone else to deal with him.

 

[youbet]

OK, interesting. So it sounds like a way to help validate that the money is for 'needs' not 'wants'.

-ERD50

Just the opposite actually, ERD50. For example, my disabled (Cerebral Palsy) grandson will have an ABLE account. The purpose of ABLE accounts is to allow qualified folks to have some money they can use for discretionary expenses without reducing their aid packages. For example, say Johnny works a few hours a week stocking shelves at the grocery store and receives a token wage. He can deposit that wage in an ABLE account and spend it for "fun" stuff as he wishes without it lowering his public aid. Otherwise, it would make no sense to work since anything earned would be offset by a reduction in his aid. If he applies it to his rent, then his aid is reduced since he doesn't need as much aid to cover the rent.

It sounds a bit counter-intuitive at first. But the intention of the program is to encourage disabled folks to earn what they can. By sheltering, up to a low limit, what is earned and directing it to personal use, there is a reason to climb into the wheel chair, get over to the grocery store at 3:00 AM and work a few hours, often in a special program.

Put another way, without this type of program, and also special needs trusts, the disabled would need to maintain a status of "completely broke" to qualify for aid and could never have any resource of "their own."

 

[ERD50]

Just the opposite actually, ERD50. ... The purpose of ABLE accounts is to allow qualified folks to have some money they can use for discretionary expenses without reducing their aid packages. ...

OK, thanks to you and the previous posters for educating me on this. Sounds like it works out pretty well for the intended purpose.

-ERD50