On the other hand, there are things that you can do to avoid conflict in your family after you are gone. The first step, and perhaps the most important one, is to make sure that you know your family – both the good and the bad. You can love all your children and grandchildren very much and still recognize that one or more of them have serious financial or addiction problems that might not make them good choices as a fiduciary. You can love your family and recognize that some of your children do not get along and will not work together well. You may have a child who means well but really doesn’t understand the realities of financial planning or managing wealth and who needs a trust to protect his or her interests. You can have a child who is great with money but oblivious to the emotional interactions within the family. Once you have identified potential problems within the family, discuss with your attorney how to draft your documents to manage or avoid the potential conflicts you can already see.
For instance, if you have children who do not get along and you have determined that trust planning for them meets your goals, you might avoid making the children trustees of each other’s trusts. That way they do not have to be in conflict with one another over distributions from the trust and can focus, instead, on their relationship as siblings. This may be particularly true in instances where a trust is created for only one child as a result of an addiction issue. Depending on the circumstances, a professional trustee may even make sense. A no contest clause could also make sense in appropriate circumstances, especially where you are making an uneven distribution of your estate, or you have one or two descendants who like to cause trouble.
The second step is to know your assets and the relative importance and value that each member of the family places on such assets. For instance, if you have a family farm, it may be very important to maintain the farm as such while others may see it as a development opportunity. If your goal is to maintain the property as a family farm, you will want to take steps to ensure that this asset is controlled by family members who think as you do. If you have other assets that you can use to equalize bequests to your family, it may make sense to give the farm to one child who wants to maintain the farm, while giving the liquid assets to another who has no interest in farming. If you have multiple family members who value the farm or really any business, it may make sense to create a family LLC for the farm that you can run as a family while you are alive. Nothing, and I mean nothing, will pass on your values and traditions like incorporating your family into your business while you are alive. By doing so, you pass on your passions, your business strategies, your values in ways that make them truly alive for the next generations.
A similar issue arises with respect to tangible personal property. It is not uncommon for family members to fight over the distribution of tangible personal property. While most families ultimately work this issue out themselves, if only because the cost of legal help rarely makes sense, it can cause tensions within the family that may take a long time to clear up. By knowing the importance that your family members place on particular items of tangible personal property, you can alleviate these tensions in many cases while you are alive. You can give the tangibles away to particular people during your lifetime. This can be done one-on-one or at a family party where the children take turns choosing items. If you are concerned that the children may fight over things, you can even sell them and take a personal vacation.
The third step is to communicate with your family. It is rarely a good idea to keep your estate plan a secret from your family members. If you have decided that only one of your children should be a fiduciary or only one needs a trust or you have made some other uneven distribution of your estate, let all of the children know. Explain, while you can, why you have made your choices as you have. Usually, the family understands your decisions and, even if they do not like the decisions, they are willing to accept your decisions on the matter. After all, it is your money and you can do with it what you like. Secrecy in the family, especially where one family member has been favored by an ailing parent and the other family members feel isolated from that parent, is a leading cause of conflict that ultimately ends up resolved in court. Not just because one child feels left out, but because the trust within the family has been broken. Once you are gone, the opportunity is lost.
The fourth step is to encourage your named fiduciary to seek qualified legal counsel in connection with the administration of your estate. Some problems can be easily resolved with careful guidance of the fiduciary through the administration of the estate. It can also reduce conflict within the family to have a dispassionate third party communicate with the beneficiaries, explain the process etc., so that the focus of any disappointment or anger may not rest on the child named to act your fiduciary.
Addressing potential conflicts within the family before death with your attorney cannot guarantee that conflicts will not arise. However, an experienced estate planner like the attorneys at the Hook Law Center, can offer individualized advice and assistance to reduce the conflict while you are alive and to minimize the conflict after your death.
Ask Kit Kat – Kitten Nursery
Hook Law Center: Kit Kat, what can you tell us about the special kitten nursery in NYC?
Kit Kat: Well, they are doing a wonderful job and performing a unique service to the feline population of New York City. Leave it to New York—a city of 8 million people also has an outsized population of kittens. Breeding season is April to November, and kittens proliferate. This particular nursery is located on the Upper East Side at East 91st Street and was opened in 2014, because the ASPCA needed some way to deal with the high number of kittens. It can handle up to 300 kittens at a time. Once they reach 8 weeks of age and are spayed, they are transitioned to one of the regular ASPCA locations.
It takes a horde of volunteers to handle these little darlings. They need individual attention to become accustomed to handling by humans. Some have come to the nursery as young as a day old. The volunteers act as surrogate mothers. They feed them individually with tiny bottles of formula. They mimic the mother cat’s grooming with the use of a toothbrush. The grooming act, in turn, stimulates the kitten to feed and take the bottle. The volunteers also rub the kittens’ tummies with warm water to get them to use the litter box. Bubbles are blown at them to foster their hunting skills.
In the nursery’s two-year existence, it has handled 3,500 kittens! Kitten euthanasias have declined by 20 percent, because the kittens are able to get the care they need at a critical time in their development. Kittens from the same litter stay together and are given names starting with the same letter of the alphabet. “Orion, Ozzy and Osbourne in one cage; Hallie, Hamlet and Hiro in the next.” It’s a great service to the feline population. Often the mother does as much as she can for her kittens, but if she has to move suddenly because she feels threatened, frequently a kitten or two get lost in the shuffle. Thank goodness this safety net is here to help! (Andy Newman, “Two Rooms, 300 Kittens,” The New York Times, New York Region, November 23, 2016)
Distribution of This Newsletter
Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.The post Intra-Family Conflict After Death – It’s Expensive first appeared on SEONewsWire.net.]]>
[This article was originally printed in the Straight Word, a publication of the Burlington County Bar Association.]
FACT GUIDE FOR NATIONAL TRUST TRAINING: THE IMPACT ON SPECIAL NEEDS TRUSTS
by Thomas D. Begley, Jr., CELA
The Social Security Administration (SSA) has divided the country into ten Regions. Historically, each Region has had one individual primarily in charge of reviewing special need trusts. Trusts in New Jersey are reviewed by the New York Region. Trusts in Pennsylvania are reviewed by the Philadelphia Region. About a year ago, SSA decided to train additional individuals to review these trusts. A team of seven SSA trust experts developed a training manual known as the “Fact Guide for National Trust Training” (the Guide). While the Guide was dated December 16, 2013, it was not released until April 23, 2014. The Guide probably raises more questions than it answers. These are particularly important as to how first-party special needs trusts will be reviewed by the new trust reviewers. Caution: train wreck ahead.
Legislative History
On October 1, 1993, President Clinton signed OBRA ’93, a portion of which dealt with the establishment of special needs trusts for individuals with disabilities.[1] The statute stated that assets contained in clearly-defined trusts were not to be counted as assets of the individual for Medicaid eligibility purposes and transfers to those trusts were exempt from the Medicaid transfer of asset penalties. The language in the statute is as follows: “A trust containing the assets of an individual under age 65 who is disabled (as defined in §1382c(a)(3) of this Title) and which is established for the benefit such individual by a parent, grandparent, legal guardian of the individual, or a court, if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter.”[2] The statute also contained language authorizing pooled trusts operated by non-profit organizations so long as a separate account is maintained for each beneficiary, but for purposes of investment and management of funds the trust pools these accounts, and the accounts are established solely for the benefit of the individual by a parent, grandparent, legal guardian of such individual, by the individuals, or by a court. The section further provides that to the extent amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust pays to the state from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary.”[3]
In 1994, CMS (then known as HCFA) issued HCFA Transmittal 64. Essentially, this document repeated the language in the statute with respect to special needs trusts.[4] In 1999, Congress again acted by adopting the Foster Care Independence Act[5] and essentially applied the provisions of 42 U.S.C. §1396p(d)(4)(A) & (C) to SSI.[6] Subsequently, SSA issued guidance in the Program Operating Manual System (POMS). The most recent revision is effective May 14, 2013.[7]
Purpose and Outline of the Guide
The purpose of the Guide is to train the new SSA trust reviewers. The Guide is divided into eleven sections:
- Key players involved in a trust
- Trust policy
- Basic trust identifiers
- Revocable vs. irrevocable
- Common types of trusts
- Exceptions to counting self-funded trusts as resources
- Helpful reference tools to determine if the trust is a countable or excluded resource
- Additional trust considerations
- Disbursements
- Role of the public/attorneys
- Reminder items and documentation
Conflicts Between The Current Law And The Guide
Structured Settlements
The first conflict appears to be in Section F 1 b of the Guide that states that additions/augmentations to a trust at/after age 65 would violate the rule that requires assets to be transferred prior to the individual attaining age 65. While the Guide sets forth the exceptions, including interest, dividends, and other earnings of the trust, it does not mention payments under a structured settlement. The POMS specifically authorizes such payments after age 65, so long as the structure was in place prior to age 65.[8]
Early Termination
Section F 1 d conflicts with the POMS in that the Guide provides that the special needs trust exception does not apply if the trust allows for termination of the trust prior to the individual’s death and payment of the principal/corpus to an individual or entity (other than the state). While this is not a serious conflict, the POMS provide that a special needs trust may contain an early termination provision, so long as after repayment to the State for all medical assistance previously paid no entity other than the trust beneficiary[9] may benefit from early termination. This is less a conflict than language that is likely to cause confusion, unless clarified.
Court-Established Trusts/Petitions
The biggest problem in the Guide section entitled “Who can establish the trust?”[10] The Guide states creation of the trust may be required by a court order. This is consistent with the POMS. It would appear from this language that the court order can incorporate the trust by reference, so long as the word “required” is used in the order. Good practice would dictate that the same word be used in the trust document. The potential pitfall is who may petition the court to create a trust for the beneficiary? The Guide states that if an “appointed representative” petitions the court to create a trust for the beneficiary, the trust would be invalid. Normally, either the Personal Injury attorney or the Trust attorney petitions the court for approval of the trust. Does this render the trust invalid? If so, who else could petition the court for approval? Would a guardian ad litem meet the tests? How about the trustee? The attorney for the defendant? Or is there any other person? If a homeless person was offered $100 to petition the court, would that make the homeless person an “appointed representative” and render the trust invalid? The author has requested clarification from SSA and is awaiting a response.
Medicaid Payback/Administration Fees and Costs
The final area of conflict is Medicaid reimbursement. The Guide states that “the only items that may be paid prior to the Medicaid repayment on the death of the beneficiary of the trust are taxes due from the trust at the time of death and court filing fees associated with the trust. This clearly violates the POMS,[11] which states that upon the death of the trust beneficiary the trust may pay prior to Medicaid reimbursement taxes due from the trust to the State’s or federal government because of the death of the beneficiary AND reasonable fees for administration of the trust estate such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with the termination and wrapping up of the trust.
With respect to pooled trusts, the same conflicts appear to arise.
Conclusion
While the purpose of the Guide is to train more field workers to be available to review trusts with certain expertise, it would appear that there will be a tremendous amount of confusion if those newly-trained field workers are not also aware of the language contained in the statutes, HCFA Transmittal 64, and the POMS.
[1] 42 U.S.C. §1396p(d)(4)(A) & (C).
[2] 42 U.S.C. §1396p(d)(4)(A).
[3] 42 U.S.C. §1396p(d)(4)(C).
[4] HCFA Transmittal 64 §3259.7 A & B.
[5] 42 U.S.C. §1382b.
[6] 42 U.S.C. §1382b(c)(1)(C)(iv) & 42 U.S.C. §1382b(e)(5).
[7] POMS SI 01120.203.
[8] POMS SI 01120.203.B.1.c.
[9] POMS SI 01120.199.F.
[10] Section F 1 e 3.
[11] POMS SI 01120.203.B.1.h. and 203B.3.a.
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