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00:04 Speaker 1: Welcome to Aging Insight, with your host John Ross and Lisa Shoalmire. This program is brought to you by Heritage Home Health, Ameriprise Financial, Better Hearing Care, Windsor Cottage, Red River Federal Credit Union, Wadley Senior Clinic, Home Care Assistance, Hospice of Texarkana, Our Place Respite Care Center.

00:42 Lisa Shoalmire: Welcome to Aging Insight. I'm Lisa Shoalmire and I'm here today with my co-host John Ross, and we are here to give you information to help you as you age in our community, to know about the resources and the legal and financial issues that you may encounter as you age. Or if you're a family caring for an aging or disabled individual, we wanna provide information to you so that you can think about the kind of plans and the things you need to get in place to make sure you can care for that loved one in the way you want to. John, today we had decided we were gonna talk about an issue that affects older people and younger people, particularly if those younger people have some special needs. And a lot of times people think about this being a disabled or handicapped individual but that's not necessarily the case, is it? 

01:42 John Ross: Right. One of the things that's out there... We have a large percentage of the population that is disabled but just because some people aren't disabled, doesn't mean that they can't become disabled. So often people have a tendency to plan for today and they look and they say "Well, you know, it's me and my wife and we're healthy and we're getting ready to retire. We've got all these big plans and when we die, we want everything to go to our three beautiful, healthy adult children that have no problems and everything's great." And that's because everything is great right now. But when you're talking about planning for the future, if everything goes great, you don't need to plan. That's not the purpose. The whole purpose of planning is so that if things go wrong, you've got the things in place to protect those loved ones. And so one of the things we're gonna be talking about today is probably one of the most powerful, one of the most important types of estate planning tools that's out there, it's something called a Special Needs Trust, also called a Supplemental Needs Trust. And that's what we're gonna be talking about today, what it is, how you use it and why it's so important that every single estate plan out there oughta have it in there.

03:03 Lisa Shoalmire: That's right John. The idea of a supplemental or special needs trust being contained in every single will or estate plan is... Something that we encountered some years ago as the profession was talking about things like the simple will... As "Why, if I leave everything to my husband, if he survives me and then if he hasn't, if he's already deceased, everything equally to my children." And basically, years ago the profession was already saying that that was essentially malpractice.

03:41 John Ross: Yeah, it's just not enough, because again, while you may want everything to go to that spouse, you may want everything to go to those kids. Well, let me ask you. What happens if at the time of your death, and you're leaving assets to these kids, what happens if one of those kids has become disabled and they're in a nursing home? So often we think about the older generation being the one that has problems, but that's not always the case. We've had situations where our clients have had a child who was in a car wreck and has a head injury, or they developed some sort of disease, or Parkinson's, or early-onset Alzheimer's. Or maybe, just in some cases, we've had where the older generation just lives a long, long time. One of the funny things about it is, if you get into 80, 90, 100, over 100. If you are 100 years old, my guess is your children are not young, they're easily in their 80s as well. We wanna plan and make sure because my guess is that you don't wanna leave your assets to the nursing home, you wanna leave them for the benefit of that child, and that's where the special needs trust planning comes in. So Lisa tell us what is it that a special needs trust does.

05:07 Lisa Shoalmire: Well, essentially, we're talking about someone as a beneficiary if that person is disabled, and we can be talking about a spouse with Alzheimer's who is either needs a long-term care now or will likely need that type of care in the future. Or we could be talking about a child, even if that child is living in the community, but because of their disability they receive a certain government benefits that helps support them in their disability to remain as independent as possible in the community, which is of course what every parent wants, particularly for that disabled child. We're talking about an estate planning tool that will preserve the benefits that that disabled individual might be receiving. And often those benefits are so critical, because not only are those benefits perhaps paying for nursing home care, if they're in an institutional setting. Or some housing assistance, additional assets to pay for the cost of living. More importantly, a lot of times, these benefits are also providing the health care that that disabled individual is able to obtain. Whether it's Medicaid, medical insurance, or whether it's Medicare. So those benefits are critical to that persons wellbeing, and we want to preserve them. And John, talk to our viewers about, what the risk is? If we just leave assets outright to these disabled individuals? 

06:48 John Ross: Right. So if you've got... Let's say, you've got a family member, maybe it's an adult disabled child that has Down syndrome, or Parkinson's, or cerebral palsy, or something like that. Or maybe, it's some other family member, maybe it's even your husband, or your wife who has these diseases. That person, either now or at some point in time in the future could be eligible for government benefits that are based on their financial need. In other words, they have to have very low income, and they have to have very low assets. And so if you were to... Let's say, I had a child with Down syndrome, and that child relied on Medicaid, and SSI for their basic care. And I were to leave this child some money directly, those benefits would immediately be lost, because they would have too much in assets in order to qualify. But that's not what I intended to do. What I intended, I wanted to leave assets for the benefit of that person. But I want him to be able to keep those government programs: The Medicaid, the SSI, without having to use up, what I've left them. I want my stuff to provide quality of life, and that's not something that the government pays for.

08:09 Lisa Shoalmire: Right, and this is not a situation where we're talking about, we're encouraging people to jump on government benefits. These are situations, where we truly have a disabled individual, due to their age, or due to an inherent disability. Where these folks are either not able to have a productive job and lifestyle, or they're aged past the point, where they can do those things. So we're gonna take a little break right now, but when we come back we're gonna get into the details of how you can leave asset and plan, and provide for that disabled person. But yet, still make sure you preserve their basic access to these benefits they may be receiving.

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10:41 Lisa Shoalmire: Welcome back to Aging Insight. I'm Lisa Shoalmire, here today with John Ross. And today, we're talking about providing for those people in our families, that are least able to provide, and protect themselves, and that is the disabled. Whether that disability be from age, or whether that disability be from a disease, or inherit birth defect, or those type of issues. But it's just imperative, that our families make a plan for these type individuals. And one of the ways we can do that is to set aside assets for those individuals, for their use, that will improve their quality of life after we are gone. And John, that is something called a Supplemental Needs Trust, also called a Special Needs Trust. And there are two types of those type of trust, is that correct? 

11:43 John Ross: That's right. That's right. So, the first thing is, is we're talking about a trust. And all a trust is, is a stack of paper. But once this trust is created, it's a legal entity. And it's got rules, and it's governed by the words that are in that trust. And the way a Supplemental Needs Trust works is that the assets are held for the benefit of that disabled person but they're held in such a way that they don't affect their eligibility for Medicaid, or SSI, or other government programs. Now as Lisa said, there's actually two types; one of them is what's called a third-party special needs trust. Now what does all of that mean? Well, all that means is this is a special needs trust that's set up by one person for somebody else. So imagine that my spouse had Alzheimer's disease and as long as I'm alive, I'm gonna care for her, and I'm gonna take care of her, but with Alzheimer's disease the life expectancy of the spouse of the person with the disease, is shorter than the person with the disease.

12:50 John Ross: It's so hard being that caregiver that a lot of times the caregiver dies first. And without that caregiver that means that that wife that I was trying to take care of might now need to go into a nursing home. Well when I die, let's say I had just left everything to the wife, well now all of those assets are gonna get eaten up by the cost of the nursing home care before she would become eligible for Medicaid. But you know what Medicaid pays for? Its room and board, but it's not quality of life, it's not new clothes, it's not going to the movies. So if my wife was disabled and she was gonna need some of those cares I would set up a third-party special needs trust so that when I die, those assets could be held for her but it would not count against her when she needed to qualify for something like Medicaid. So that's a third-party. It's set up by one person for somebody else.

13:50 Lisa Shoalmire: And one of the examples I see a lot that we deal with is grandparents who were perhaps... I had a lady come in and she wanted to leave $10,000 a piece to each of her five grandchildren. And I asked her if any of these grandchildren had any disabilities, and the grandmother said, "Well, yes as a matter of fact I have one grandchild who has moderate to severe Autism." And at that point I suggested that for that particular grandchild's benefit that she setup this third-party special needs trust, where she was gonna put the money that she wanted to leave to that grandchild she'd leave that set aside in a trust for that grandchild, so that that money could be used to provide the special things that this child as he grew and developed, grew to like and brought him comfort and joy.

14:48 Lisa Shoalmire: And you know John, if I hadn't asked that question then the funds that that grandmother... If she had gone to someone else who hadn't set up that special needs trust then that grandchild would have been disqualified from any of his benefits, he may have been receiving at the time of her death. And her money would have gone to pay for those basic services that that young man was receiving instead of being set aside to make sure that he got the special walkers and the special computers that he needed in order to best communicate with his family. And that's what this grandmother wanted to do. So that third-party special needs trust is a way for others to leave assets for the benefit of that special person.

15:41 John Ross: Right. Now the one thing about it, is there's also a situation where imagine that instead of me wanting to set it up for somebody else, what if I had become disabled, and I had some of my own funds that I wanted to protect so that I could qualify for things like Medicaid and still have my own personal funds available to me to provide my own quality of life? So now I wanna use my assets to provide for my quality of life and still have access to things like Medicaid and SSI. A lot of times we see this in situations where maybe the person has been in a very bad car wreck where they've received a head injury and now they're gonna be getting some personal injury settlement or maybe it's a disabled person who, their grandparent hadn't gone and seen Lisa.

16:42 John Ross: And that grandparent passed away and so here this disabled person has inherited some money and the receipt of that inheritance has caused them to lose their benefits. So how do they protect those assets and still keep them? Well, if you're under the age of 65, notice under the age of 65, then you can set up what is called a first-party special needs trust. So third-party, setting it up for somebody else. First-party, setting it up for yourself. And this can be a way to preserve the assets that you have so that you can get the benefits you need and still have some quality of life. But again notice I said, it has to be something that's set up prior to the age of 65. And that's not something that we came up with, it's built into the law. So first-party special needs trust are actually governed by federal law, these are provided for in the law as a way for people to protect themselves. But that law says you've got to do it prior to the age of 65.

17:47 John Ross: So we're gonna take another break here in just a second, but when we opened this show we talked about how the special needs trusts are so important they ought to be in everybody's planning, well what we're gonna talk about when we come back is what we mean by that. So we'll see you in just a second.

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19:13 John Ross: Welcome back to Aging Insight everybody. I'm your host John Ross here with my co-host Lisa Shoalmire. Today's topic we're discussing Special Needs Trusts also known as Supplemental Needs Trusts. And what these are, are a way that you can have assets held for the benefit of a disabled person but in such a way so that that disabled person can still be eligible for things like Medicaid, SSI or other need-based government benefits; and those benefits can be vital to their basic care. When I was in the Marines, the drill instructors used to say, "John, we don't know what you're complaining about. You got three hots and a cot." Well, that's kind of what these government programs provide, basic care. They don't provide quality of life. It's up to you to provide that quality of life for that loved one whether that's your spouse, whether that's your child or a grandchild or anybody. Now, you might be thinking, "You know what? I don't have any disabled members in my family. Everybody is perfectly healthy. My wife's healthy, my husband's healthy, our kids are healthy, our grandkids are healthy. Everybody's healthy." Well, that's great now.

20:28 Lisa Shoalmire: It's really a blessing but unfortunately, odds are that whether it's an aging process with you and your spouse, where someone has a sudden health crisis, such as a stroke, or perhaps say diagnosed with a progressive disease like Parkinson's or Alzheimer's, dementia. Oftentimes that healthiness can be such a fleeting asset and we need to plan for the potential that either you, your spouse or one of your family members or loved ones who you intend to share your assets with at some point, we need to plan for the potential of a disability somewhere in the process.

21:16 John Ross: That's right. And so here's where we get the concept of the contingent special needs trust. Well, that sounds all fancy and everything, it's not. So, imagine that we looked at a will and let's say it's my will and my will says "I leave everything to my spouse. And if she's not alive at my death, I leave everything to the kids." And you know what? I bet if you have a will, your will looks pretty similar. I leave everything to the spouse and when we're both gone, we leave everything to the kids. That's what I like to call an 'I love you will'. It's great, there's nothing wrong with that but let me add a little something here. What if it said, "I leave everything to my spouse, but if at the time of my death my spouse is a disabled person then instead of going directly to him or her, I want it to be held in a special needs trust for their benefit. And then when they die, that trust terminates and goes to our kids in equal shares, but if one of those kids has become disabled their share could be held for their benefit in such a way that they get to keep their benefits." And so, you know what I've done here? If I die everything goes to my wife but if we are in a car wreck or something and I'm dead and she's got a head injury then instead of leaving it directly, it gets directed over, it gets shifted over. And the same thing when we go to the kids we've protected those people with this contingency plan.

22:52 Lisa Shoalmire: Right. And so a contingency plan. John when you say it, it sounds so logical, so reasonable, so appropriate and it really is. Because if you think about it in the simple will situation where you don't have the contingent special needs planning, you're really kind of rolling the dice and assuming that everything is gonna stay in your happily ever after fairytale that you're living right now, and that's just not usually the case unfortunately. So, it's a simple thing to do, but one of the complaints I've had when I've presented this contingent special needs planning to someone in the community has been, "Well, that overly complicates my situation. I don't like all that, it makes the will too long. There's a lot of legal mumbo jumbo in there and I don't like complicated things. I just want to keep it simple." And then I usually can tell them a story about a family who had that simple tool of planning and it was such a crisis. We're already dealing with the emotional crisis of losing a family member, but then when you find out that it's gonna turn into a financial crisis for a disabled individual, and the process to re-establish those benefits that they're receiving, can be months and months long. A few extra words and a little more complication in your will is so worth avoiding those other disasters.

24:36 John Ross: Well and I'll clear that up. I'll clear up that same issue. You have people all the time talk about wanting a simple will. It's not the document that you want to be simple, it's the process. It's the transition between one life and the next. It's passing those assets in the easiest, most convenient and most protected way. You don't care whether the document is simple or complex. You only care about whether or not it does the job. And so, don't get fixated on, "Well, I want you to stick all that on one page." How many pages it is, is irrelevant. What's important is that it says what it needs to say. And one of those things it needs to say is that if somebody that you're leaving assets to is disabled, that their share will be held for their benefit. A contingent special needs trust, this is not an option, this is mandatory in your will. And if you don't have it, you need to be asking questions and saying, "Why isn't it in there?" Because it really is that important.

25:49 Lisa Shoalmire: That's right. And the special needs trust, those monies that you set aside for that disabled family member can be so vital to their quality of life. Our technology has progressed so quickly and the money you have set aside for that person can purchase things like iPads, so they can FaceTime and visit with other family members through that technology. They can have higher, use wheelchairs that are easier to operate. There's just special pressure mattresses that make their lives more comfortable if they're bedridden. There's just all kinds of things that your resources can do for a disabled person if you plan appropriately.

26:31 John Ross: That's right. So, if you don't have a will in place or a trust in place, when you go and speak to a professional, ask them about contingent special needs planning. If you do have those things in place, look back at them and make sure that stuff is there. It's that important. But, once again, you're here at the end of another episode of Aging Insight. We certainly appreciate you joining us. Please follow us on Facebook at facebook.com/AgingInsight or follow me on Twitter @TXKElderlaw. And of course, you could always catch us on the radio.

27:07 Lisa Shoalmire: Every Saturday afternoon at noon on 107.1, live call-in program. So if you have a personal question that today's episode has sparked, well then you just pick up the phone and give us a call or leave us a note on our Facebook page.

27:20 John Ross: That's right. Thanks everybody for watching. Listen in on the radio and we'll see you next time.

27:27 Speaker 1: Thank you for joining us for this week's Aging Insight program with John Ross and Lisa Shoalmire. This program is made possible by Heritage Home Health, Ameriprise Financial, Better Hearing Care, Windsor Cottage, Red River Federal Credit Union, Wadley Senior Clinic, Home Care Assistance, Hospice of Texarkana, Our Place Respite Care Center.