Unfortunately, many individuals, including many professionals, believe these two planning options are mutually exclusive and that one negates the need for the other. In fact, a carefully planned and cost-effective strategy to guard against the high costs of long-term care often includes both asset protection planning and long-term care insurance.

When used effectively, Medicaid planning can help individuals reduce prospective costs of long term care insurance, and long-term care insurance can provide certain services that New Jersey Medicaid doesn’t fund. What families need to know is which expenses are worthwhile and which can be cut.

Those looking for the simplest, least expensive asset protection plan must not forget that even partially implemented plans are often useless. Typically, individuals are concerned about protecting their residences from state liens and are willing to engage in legal planning for this purpose. Yet, on occasion, families are unwilling to take further steps that are necessary to protect stock accounts, IRA’s, CD’s, and other assets. Medicaid laws are extremely strict, and the financial requirements are definitive.

To qualify for benefits in New Jersey, an individual must not have countable assets in excess of $2,000, or, under certain programs, $4,000. A spouse’s assets are also subject to limitations. If an individual’s or couple’s liquid assets exceed the Medicaid resource limits, Medicaid will require that these be depleted before benefits begin. Therefore, as with long-term care insurance, certain costs of legal planning can be minimized while others cannot be compromised or the plan will be ineffective.

When engaging in asset protection planning, individuals must create a strategy that includes the possibility of remaining in one’s home and to the extent possible, receiving benefits to pay for in-home care. However, a large percentage of would-be Medicaid applicants are not eligible for in-home care subsidized by Medicaid in New Jersey because their monthly incomes are too high.

This year, the income limit to receive in-home care is $2,022 per month. Because many New Jersey residents are disqualified due to income level from Medicaid home care, individuals who anticipate reasonably high retirement incomes would be wise to purchase long-term care insurance with a home care rider, even if such an option results in somewhat higher premiums.

While trying to minimize costs, individuals cannot compromise certain aspects of the insurance and legal planning. For instance, insurance purchasers must not lose sight of the fact that the benefit amount they choose must cover the cost of care, taking prospective income and other expenses into account. Most of our clients are paying approximately $9,500 per month for a semi-private room in a nursing home and costs in excess of $6,000 in assisted living facilities. In trying to cut costs, purchasers must make sure they have ample coverage. Because the cost of nursing homes rises significantly and rapidly, inflation protection should be considered. Many policies offer this feature and allow the policy owner to pay the same premium over time while coverage increases.

While certain options should not be compromised, implementing a strategy that includes both long-term care insurance and asset protection planning can save individuals substantial assets in life savings and insurance premiums. While cutting the monthly insurance benefit amount is not recommended, individuals can save money on their long-term care insurance purchases by limiting the length of the benefit. Rather than choosing a policy that would pay out over the lifetime of the individual, individuals can still be adequately prepared to meet the costs of long-term care by selecting a policy that pays for nursing home care for a limited period of time.

Five years is an ample amount of time for the insurance benefit period because the Medicaid lookback period for a transfer of assets is set by federal law at 60 months. Those who consider long-term care insurance may wish to select an insurance benefit period of not more than five years. While the benefit period is occurring, the asset protection plan can be implemented and completed so that once the benefit payout ends, the Medicaid applicant can continue receiving the same level of care for which the insurance was paying and make a smooth transition to Medicaid benefits.

Even an insurance payout period as short as three years can make a large difference in clients’ abilities to protect their assets. Depending upon clients’ income and asset levels, many individuals can become eligible for Medicaid in less than five years from the time they first enter a facility. For those clients, a three year insurance payout term would still give a long-term care insurance policy owner ample time to protect savings through an asset protection plan and thereby still meet the primary goals of asset protection. A solid asset protection plan accounts for: reserving enough assets to meet care needs beyond the minimum for which Medicaid pays, protecting the spouse and helping maintain the family home and lifestyle, leaving an inheritance to children, and avoiding state liens.

Because federal law sets the Medicaid lookback period at five years, individuals must begin asset protection planning early to protect their savings. While many clients can become eligible for benefits prior to the expiration of five years from the time they begin asset protection planning, a majority of individuals would be well advised to begin legal planning when the possibility of nursing home care still seems extremely remote. On the other hand, individuals and couples that have purchased long-term care insurance have more flexibility as to when they might decide to begin asset protection planning since their savings will not recede as quickly as the accounts of individuals who are paying an average of $9,500 per month in nursing home care with no long-term care insurance.

Attorney Dana E. Bookbinder focuses much of her practice on elder law, and routinely recommends that clients investigate their long-term care insurance options. She practices with Begley Law Group, P.C., in Moorestown, Princeton, and Stone Harbor, New Jersey where clients seek her expertise in asset protection, disability planning, estate planning, and estate administration. However, when that option is foreclosed, she assists individuals in protecting their life savings through legal planning. When long-term care insurance and an asset protection plan are established in tandem at an early stage, these separate strategies will work together harmoniously to comprise a comprehensive, protective plan that maximizes savings for families.

Ms. Bookbinder has been certified as an Elder Law Attorney by the ABA accredited National Elder Law Foundation. She is a past Chair of the Elder and Disability Law Section of the New Jersey State Bar Association and past chair of the Burlington County Probate Committee. She has authored several articles on legal devices for asset, estate and tax planning in publications including the New Jersey Law Journal’s Financial Planning Supplement. She also lectures to civic and retirement groups and holds seminars sponsored by the New Jersey State Bar Association. She is also a member of NAELA and a life member of The National Registry of Who’s Who. Ms. Bookbinder is a member of the New Jersey State, Pennsylvania and District of Columbia Bar Associations. She received her bachelor’s degree with distinction from Cornell University and her juris doctor degree from The George Washington University Law School.

For more information:
Begley Law Group
http://www.begleylawyer.com
509 S. Lenola Road, Building 7
Moorestown, NJ 08057
Tel: 800.533.7227
Fax: 856.273.1062

With the cost of nursing homes now averaging approximately $9,500 a month for a semi-private room in New Jersey, this situation could be financially catastrophic. Because Medicare covers only an extremely limited amount of nursing home care, the cost of such care can devastate an estate, leave a spouse with inadequate assets to maintain the marital residence, or eliminate the chance of leaving an inheritance to one’s children.

Moreover, the stress of having a spouse in a facility and paying the bills for such care can ultimately impact the health of the spouse living at home. Those concerned about long-term care owe themselves the opportunity to investigate all options to protect their savings and current family financial situation.

All too often, couples who are seeking long-term care insurance find out they have begun their planning a little late when one of them learns that they can qualify for the insurance, but the other cannot. In the event that the spouse who is not covered by the insurance requires long-term care, both spouses’ estates will be dramatically impacted.

While being turned down by the insurance company is a disappointment and may encourage the spouses to consider how they can improve their health, the rejection in itself should not be allowed to lead the couple down a path of financial devastation. By being informed and proactive, couples can protect their savings even when one becomes sick. To maximize control over your financial future, keep the following in mind:

1. Begin early. When researching legal protection planning options and especially long-term care insurance, everyone must begin early. Generally, once an individual acquires a long-term illness, the person can no longer acquire long-term care insurance. This by no means suggests that the individual is unable to save substantial assets by engaging in legal planning, however. In fact, even after an individual enters a nursing home, the individual can still save substantial assets for his or her family through asset protection planning. Such legal planning is most effective when it is done early, usually before the prospective long-term care resident enters a facility. Every Medicaid application is also subject to a five-year lookback as established by federal law. Therefore, just as insurance premiums will be much lower the earlier one purchases the insurance, the savings through planning will be substantially greater. In addition, early planning gives families peace of mind and the security that generally comes from being proactive.

2. Select your advisor carefully. When purchasing insurance or considering legal planning, it is important to carefully select a provider. Increasingly, professionals are amassing more knowledge of Medicaid. However, the Medicaid asset transfer rules are complex, so partial knowledge of the subject is likely to place the client in a worse situation than if no planning had been done at all. Because many seniors discuss long-term care planning amongst themselves and with their trusted advisors, many myths abound. In New Jersey, for example, many professionals still try to sell annuities under the guise that these products will expedite Medicaid eligibility. While such claims may be true in limited cases, an annuity purchase by a senior citizen who is contemplating Medicaid eligibility is more likely to benefit the financial advisor than the purchaser. The most seasoned legal advisors to the elderly are likely to be members of the National Academy of Elder Law Attorneys (NAELA) or Certified Elder Law Attorneys (CELAs), accredited by the National Elder Law Foundation. Those seeking elder law advice should refer to www.naela.org.

Likewise, when choosing a long-term care insurance company, the selection must be done carefully. It is critical to choose a stable company that will be in existence for many more decades to come. Many insurance brokers agree that even a slight increase in premiums is worth the stability and security that a large company offers. Purchasers are best advised to select a broker who represents several companies so that they can review and compare different prices and features. Any long-term care insurance discussion should include a comparison of home care benefits to be paid out, including whether the policy has an inflation rider and a comparison of “elimination periods,” which show how long it will take before the policy begins to pay once the individual is incapacitated enough to trigger the benefit.

3. If one spouse is rejected from insurance coverage, consider both legal planning and insurance. In situations where one spouse is sick, the couple can plan for each of their care by purchasing long-term care insurance for the healthy spouse and engaging in asset protection planning for the ill spouse. This is commonly done, but couples are well advised to remember that Medicaid does look at the assets of the healthy spouse as well as the ill spouse when an application is filed. Therefore, while adequate insurance coverage will guarantee that the healthy spouse can retain assets and property in his or her name and still pay for long-term care if it is needed for him or her, a comprehensive asset protection plan is still necessary. Without legal planning, if the spouse without the insurance required institutionalization, the couple could be faced with an estimate of $9,500 of nursing home bills. On the other hand, through legal planning, the couple could convey the marital residence to the spouse who is covered by insurance and protect it if the other spouse ever requires Medicaid. They could also transfer certain other assets as consistent with state and federal law to the covered spouse, and in some cases to other family members, to minimize the financial impact of privately paying for care. Ideally, the spouse living at home can protect his or her standard of living, including being able to afford long-term care insurance premiums.

Attorney Dana E. Bookbinder counsels clients in asset protection, disability planning, estate planning, and estate administration. She has seen many clients that should be utilizing both a long-term insurance plan and asset protection plan to safeguard their life’s work and family. As a certified Elder Law Attorney at Begley Law Group, P.C. in Moorestown, Princeton, and Stone Harbor, New Jersey, she is skilled in helping individuals and families investigate their long-term care insurance options and plans for savings. The firm is highly respected for its successful track record and attention to their client’s needs to create a comprehensive, protective plan that maximizes a family’s savings and livelihood.

For more information:
Begley Law Group
http://www.begleylawyer.com
509 S. Lenola Road, Building 7
Moorestown, NJ 08057
Tel: 800.533.7227
Fax: 856.273.1062

At the end of August, the VA added ischemic heart disease, Parkinson’s disease and B-cell leukemia to the list of diseases connected to Agent Orange exposure during the Vietnam War. The VA announced that sufferers of those diseases may now be eligible for additional benefits because of their exposure.

More than 163,000 veterans or survivors of veterans have a pending claim related to these diseases. The VA hopes to have them all paid out by October of 2011. To meet this goal, some believe the VA has given special attention to the new cases and other veterans may see longer waiting times as a result.

“We have been hearing from the VA that the U.S. Court of Appeals for Veterans Claims has told it to process these claims prior to ruling on other claims,” said James G. Fausone, a lawyer who works for Legal Help For Veterans, PLLC. “As a result, we have been receiving word from local Regional Offices that the normal ‘slow’ process at VA has been slowed even further because the VA has been focusing on these claims and not working on the other claims.”

Prior to the announcement, 93,000 previously denied claims hung in limbo in the system. After the announcement, 70,000 more veterans stormed the system, claiming that they suffered from the new diseases covered under the announcement. The VA expects five to 10 percent of the previously denied claims to be rejected once again due to “imprecision” in diagnostic codes and because they simply cannot reach many veterans due to movings or death.

“This announcement is great for the veterans who put their lives on the line in Vietnam, were exposed to dangerous herbicides without knowledge that they were harmful, and suffered negative health effects as a consequence,” Fausone said. “It is unfortunate that many who have suffered because of Agent Orange had to wait so long for care. It is equally unfortunate that the system cannot handle all of these claims more quickly and efficiently, so veterans can move on with their lives.”

To learn more or to contact a Veterans disability lawyer or Veterans attorney call 1.800.693.4800 or visit http://www.legalhelpforveterans.com.

Social Security turned 75 on August 14. While some celebrated its successes, the dominant narrative was instead that Social Security is in trouble. Politicians and pundits took note of Social Security’s anniversary amid renewed warnings about the dire challenges the program is facing.

In the political realm, discussion of Social Security has degraded more to the level of insult slinging and demagoguery than actual policy discussion. Democrats are accusing Republicans of trying to dismantle the nation’s most popular social insurance program (which they are) and Republicans are accusing Democrats of scare mongering about Republicans’ plans (which they are).

However, as is increasingly and unfortunately the case, the additional attention currently being paid to Social Security is not contributing to a better understanding of the program.

Debates about the health of Social Security are not new. Since President Roosevelt signed the Social Security Act in 1935, the program has never met a 75-year test for solubility. [1] Yet, 75 years later, Social Security is still paying all promised benefits to retirees and individuals with disabilities.

President George W. Bush made Social Security “reform” a key goal early in his presidency. However, even with non-stop media coverage and in some cases flat out fear-mongering, the idea of privatizing some or all of the nation’s Social Security program simply did not appeal to the majority of Americans. The inability to pass any changes to Social Security after making “reform” key to his agenda was one of President Bush’s larger legislative failures.

The debate over what, if any, changes should be made to the Social Security system was quieted during the later years of the Bush presidency, but has resurfaced with vigor as President Barack Obama approaches the midway point of his first term. The resurgence of the debate can be attributed to several factors. Republicans, pandering to an increasingly extreme base in the coming 2010 mid-term elections, are using public confusion about the program to foment an atmosphere of fear and panic over looming budget deficits. Ideology also plays a roll. Conservatives do not like Social Security. It is a popular, effective government program that runs counter to the dogma that government can do no good. Finally, some politicians and economists are engaged in a good faith effort to make sure seniors who rely on Social Security and workers who have been promised Social Security will continue to receive benefits into the foreseeable future.

One key group investigating the future of Social Security is President Obama’s deficit commission. In February, the president created the National Commission on Fiscal Responsibility and Reform, and tasked the commission with developing solutions to help maintain the nation’s long-term fiscal solubility. Social Security leads the commission’s agenda, and members are mandated to produce a series of recommendations by Dec. 1, 2010. [2]

From its inception, the commission has received criticism from the left for its conservative makeup, being comprised of Republicans and moderate- to conservative-leaning Democrats. In a recent Washington Post article, Ezra Klein scored the six Republicans and six Democrats on the commission using DW-NOMINATE rankings. He found that the Senate Democrats on the committee are more conservative than the average Senate Democrat and that the Senate Republicans on the commission are also more conservative than most of their Senate Republican colleagues. The result, in his view, being a committee evenly split in terms of partisan affiliation but right leaning in terms of ideology. [3]

Klein’s analysis of the commission follows a wave of criticism directed at its co-chair, former Republican Senator Alan Simpson. Simpson, proving himself out of touch with working Americans, described Social Security as a “a milk cow with 310 million tits.” In addition to showing a striking lack of tact (the quote coming from a letter written to the head of the National Older Women’s League), Simpson’s rant proves he either does not care about or does not understand the actual workings of the Social Security insurance program. Social Security, funded separately from rest of the federal budget, quite simply pays benefits to those who have paid in. In order to qualify to draw Social Security, an individual must work and contribute to the program for 10 years. Social Security is not means tested; benefits are paid progressively as a percentage of former earnings and contributions.

The mean Social Security benefit is around $14,000 a year, providing 40 percent of retirement income for the average American. [4] According to the Center on Budget and Policy Priorities, Social Security lifts 20 million Americans out of poverty. [5] And, according to a recent national survey commissioned by the AARP, 85 percent of adults oppose cutting Social Security and half of non-retired adults support paying higher payroll taxes to ensure the systems stays solvent. Younger Americans, while skeptical about the program’s future, are particularly supportive of the program. 90 percent of respondents aged 18 to 29 said they believe Social Security is important. [6]

However, while Social Security is popular, many Americans, particularly young Americans, are skeptical about its future. Much of this can be attributed to the misunderstandings and mistruths that are continuously perpetrated by some in Congress and in the media. Here are the truths behind some of the more common Social Security myths.

1. Social Security adds to the deficit.

Social Security, by law, cannot add to the deficit. It is a separate program, paid into through FICA contributions, with benefits paid only from the revenue it raises. If the trust fund were to be exhausted and current contributions were not adequate to pay benefits, Social Security could not borrow from the general budget. Federal law prohibits Social Security from borrowing.

2. Social Security is broke, and there is no “Trust Fund.”

Conventional wisdom among Social Security skeptics is that the program is out of money now and that there is no Social Security Trust Fund. This is fueled largely by the fact that Social Security did begin to pay more in benefits than it received in taxes earlier than was projected due to the depth of the 2008 recession. Regardless of this fact, The Social Security Trust Fund currently runs a $2.5 trillion surplus. The Economic Policy Institute estimates the surplus will peak at $4.2 trillion in 2024 [7]

Trust Fund intact, with no changes to the program, Social Security is projected to be able to pay 100 percent of benefits until the year 2037. After 2037, Social Security will still be able to pay 75 percent of benefits. [8] A program projected to meet costs almost 4 decades into the future with no adjustments is not a system in crisis. Other government programs would be hard pressed to meet such a standard.

3. The Trust Fund has been raided and is just full of IOUs.

Those who decry the vacuous trust fund, eliciting imagery of a big room with lonely piles of IOUs, are in reality making claims against the creditworthiness of the United States government. True, the Social Security Trust Fund is not sitting around in a lock box as Al Gore eloquently stated. The funds are invested in Treasury Bonds, “full faith and credit” notes that the government issues to many of its creditors. Since the federal government has never missed a payment on its debt, and is not expected to anytime soon, to claim the Trust Fund is full of useless IOUs is disingenuous.

4. The retirement age must be raised because people are living longer

The retirement age argument is tricky because two things are the case: more baby-boomers are soon to retire, and people, on average, are living longer. The argument seems logical on its face, but the reality is very different.

The crux of the issue surrounding the retirement age is that the rise in life expectancy since 1935 is largely due to lower infant mortality rates and is unevenly spread among income levels. Since 1972, life expectancy has increased by 6.5 years for top earners, but by less than two years for workers in the bottom half of the earnings bracket. [9] Because of this disparity, the less affluent, those who most need social security, will see the greatest benefit cut. It is not as difficult to imagine staying in a well-paying office job for a couple more years as it is to continue working lower-paying labor-intensive jobs until age 70.

In addition, the retirement age is already set to increase gradually, due to a 1983 law, until it reaches 67 for people born after 1959.

5. Benefit cuts are needed

To the extent that there will be shortfalls in the Social Security budget in the future, they are minor in relation to other budget expenditures, and can be corrected without cutting benefits. In 1983, when Social Security actually did run out of funds, a “deal” was made with workers to put Social Security back in the black. Payroll taxes were raised, significantly, on middle and lower income workers. The tax increase was highly regressive, but, coupled with a raise in the retirement age, was responsible for building the large surplus Social Security enjoys today.

The increase in taxes on lower income individuals also allowed Reagan to cut taxes on those earning higher incomes. At the time, implicit in the deal was the idea that lower income workers would overpay their taxes for 30 years, at which point higher income individuals would pitch in to relieve some of the burden and cover any funding shortfalls. After a period of overpayment of payroll taxes, the tables would turn, and middle and lower income individuals would begin to underpay payroll taxes with the difference being covered by a raise in income taxes on higher earners. [10]

Thirty years later, the second part of that deal has been conveniently forgotten. Without cutting benefits, and in the spirit of Alan Greenspan’s 1983 recommendations, creating new sources of revenue could increase funds. The cap on Social Security taxed-income, currently $106,800, could be raised or eliminated. Other taxes, like a proposed financial transactions tax, could be implemented. The 75-year projected Social Security deficit is roughly equal to the cost of extending President Bush’s tax cuts on those earning over $250,000 a year for the same period. [11]

The logic, as Paul Krugman stated, is that benefits have to be cut to avoid cuts in benefits. That logic does not add up. [12]

6. Social Security faces the same issues as Medicare and Medicaid.

Social Security often gets lumped in with Medicare and Medicaid as a problem “entitlement” program. It is true, Medicaid and Medicare do face funding problems, but much of this is due to the ballooning costs of health care. Social Security does not face the same problems as Medicare and Medicaid as payouts are not affected by rising health care costs.

Even with these realities, many watching the Social Security debate expect the deficit commission to offer a package of several cuts, including an increase in the retirement age. It is anticipated these cuts will be coupled with some sort of an increase in payroll taxes for wealthier Americans.

Current and future retirees would be well served if politicians would stop confusing the distinction between cuts in Social Security and cuts in the national debt. Mounting deficits are a legitimate concern, but can in no way be attributed to Social Security. Americans, both those receiving Social Security benefits, and those planning to receive benefits in the future, acknowledge the significance of the Social Security. A program that is so important to so many Americans deserves an honest debate.

SOURCES

1. http://www.epi.org/publications/entry/webfeatures_viewpoints_ss_myth/

2. http://www.fiscalcommission.gov/

3. http://voices.washingtonpost.com/ezra-klein/2010/08/the_republicans_on_the_deficit.html

4. http://www.huffingtonpost.com/mark-miller/its-time-to-bolster-socia_b_696327.html

5. http://www.cbpp.org/cms/index.cfm?fa=view&id=3260

6. http://www.aarp.org/work/social-security/info-08-2010/social_security_75th.html

7. http://www.epi.org/analysis_and_opinion/entry/fact_check_has_social_security_begun_tapping_its_trust_funds/

8. http://www.ssa.gov/OACT/TR/2010/index.html

9. http://voices.washingtonpost.com/ezra-klein/2010/07/more_on_raising_the_retirement.html

10. http://motherjones.com/kevin-drum/2010/08/deal

11. http://www.cbpp.org/cms/?fa=view&id=3262&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+cbpp%2FfYJq+%28Center+on+Budget+and+Policy+Priorities%29#_ftnref1

12. http://www.nytimes.com/2010/08/16/opinion/16krugman.html?_r=1&hp

• Fully understanding the needs of the beneficiary
• Comprehending the language and intent of the trust document
• Handling an inventory of trust assets
• Collecting income and managing all trust assets
• Maintaining excellent records of all financial transactions
• Obtaining the proper IRS tax registration for the trust
• Filing both state and federal fiduciary income tax returns
• Establishing different accounts to manage the trust assets
• Arranging for the safekeeping and security of trust assets
• Hiring and monitoring service providers
• Maintaining good communication with the beneficiary and his or her service providers
• Assisting in any unforeseen or emergency situations

Although some of these issues can be complex, family members may be able to handle them. However, it may be a good idea to let family members focus on other issues and choose a professional trustee, who has extensive experience in handling those tasks.

Many parents believe that they can continue to care for their child with special needs by leaving money to a relative. This seems like a good idea because a relative knows the child personally and parents think they can trust them to care for their children. However, relatives are not legally bound to spend the money left to them on the child. In addition to this, the money can be taken from the appointed relative by a number of different parties, including creditors. Also, the money may be lost in a divorce settlement.

Many parents also make the mistake of leaving money to one of their children who does not have a disability, expecting this child to care for the one with special needs. However, this may be a bad idea because it also does not legally bind the child to use this money to care for the sibling with the disability. Also, doing so can pose undue stress on the sibling. If he or she already has to deal with the pain of losing parents, it may be too difficult for the sibling to deal with the added responsibility of caring for a child with special needs.

Rather than entrusting money directly to a relative or sibling, parents should consider forming a Special Needs Trust. Doing so will ensure that the child will be well taken care of and that the money devoted to this cause will not be taken by any other source and must be used for the purpose for which it was intended. Establishing a Special Needs Trust for a child with a disability is the best way to ensure the quality of his or her care in the future.

With a Revocable Trust, you retain the right to add or subtract assets to the trust at any time. This gives you a great degree of flexibility, as you can manage the trust according to your family’s changing life circumstances. If you choose this type of trust, it is important to know that the government considers the assets in the trust part of your estate. If you die, everything in your trust will be included in your estate for tax purposes and may be subject to lawsuits. That means that if someone attempts to sue you after your death, the assets in your trust are susceptible.

An Irrevocable Trust, on the other hand, is separate from your estate, and you cannot remove the assets you place in it. These benefits will remain in the trust solely for the benefit of the person with disabilities. Even if you need these assets due to a personal situation, you cannot draw on them. While this may be considered a drawback, irrevocable trusts do have their benefits. For one, any assets that you place in the trust cannot be touched by your creditors for outstanding debts or taxes. In addition, the trust cannot be touched by any creditors of the person with the disability.

• Fully understanding the needs of the beneficiary
• Comprehending the language and intent of the trust document
• Handling an inventory of trust assets
• Collecting income and managing all trust assets
• Maintaining excellent records of all financial transactions
• Obtaining the proper IRS tax registration for the trust
• Filing both state and federal fiduciary income tax returns
• Establishing different accounts to manage the trust assets
• Arranging for the safekeeping and security of trust assets
• Hiring and monitoring service providers
• Maintaining good communication with the beneficiary and his or her service providers
• Assisting in any unforeseen or emergency situations

Although some of these issues can be complex, family members may be able to handle them. However, it may be a good idea to let family members focus on other issues and choose a professional trustee, who has extensive experience in handling those tasks.

Many parents believe that they can continue to care for their child with special needs by leaving money to a relative. This seems like a good idea because a relative knows the child personally and parents think they can trust them to care for their children. However, relatives are not legally bound to spend the money left to them on the child. In addition to this, the money can be taken from the appointed relative by a number of different parties, including creditors. Also, the money may be lost in a divorce settlement.

Many parents also make the mistake of leaving money to one of their children who does not have a disability, expecting this child to care for the one with special needs. However, this may be a bad idea because it also does not legally bind the child to use this money to care for the sibling with the disability. Also, doing so can pose undue stress on the sibling. If he or she already has to deal with the pain of losing parents, it may be too difficult for the sibling to deal with the added responsibility of caring for a child with special needs.

Rather than entrusting money directly to a relative or sibling, parents should consider forming a Special Needs Trust. Doing so will ensure that the child will be well taken care of and that the money devoted to this cause will not be taken by any other source and must be used for the purpose for which it was intended. Establishing a Special Needs Trust for a child with a disability is the best way to ensure the quality of his or her care in the future.