[WSBAPT] Special Needs Trust as Testamentary Trust in a Will

[Ronda Larson Kramer]

No problem, Susan. LA Plus is a nonprofit that runs a pooled trust. Disabled people can use it to hold resources for them and act as trustee for them over those resources. Because the resources of all the disabled people who have resources with LA Plus are managed in a pool, it becomes very efficient for LA Plus to administer the SNTs of all of them. Most people know LA Plus in its capacity of managing SNTs for people whose own resources went into his or her trust. This is a "first-party trust." In those cases, the trust template that LA Plus uses has a statutorily required Medicaid payback provision but statute allows the creator of the trust to choose between paying back Medicaid or letting LA Plus retain whatever is left over after the beneficiary dies. In the latter case, the remainder goes back into the pool to help other disabled people. However, if the Medicaid payback option is chosen, and if Medicaid has been paid back and there are still funds remaining in a person's SNT, the remaining funds would go to his or her contingent beneficiaries if some were named. So even in the case of first-party trusts using a pooled trust, one can have contingent beneficiaries like family members listed in the document. They merely won't be receiving anything if it's all taken by the Medicaid payback.

In your case, you are working with the funds of not the disabled person but of someone else. Anyone else can create a SNT for a disabled person, and when they do, it's considered a "third-party trust." LA Plus manages third party trusts as well. When you use LA Plus, you simply use their own template for that. You don't draft the trust yourself. In those cases, there is no Medicaid payback required. Rather, the person who created the trust can choose to have remainder beneficiaries (e.g., a relative) to receive whatever remainder there might be when the beneficiary dies. Or he or she can choose to have the remainder funds go back into the pool.

In my wills, in appropriate cases, I will create a testamentary SNT but also insert a provision that says the PR can instead transfer the residue to the trustee of a pooled trust: "my Personal Representative is authorized to not distribute the residue of my estate to such Trustee but to instead distribute it to the trustee of a "third-party" pooled asset trust authorized by 42 U.S.C. § 1396p(d)(4)(C), to be held and administered for the benefit of my spouse." This is extra flexibility for the PR, since LA Plus and other pooled trusts are so low cost.

However, I haven't yet found a pooled trust other than LA Plus that understands the fact that there need not be a Medicaid payback in a testamentary (i.e., third party) context. So I would recommend LA Plus over other pooled trust entities if you decide to go the route of a pooled trust in your case. They've been doing it a long time and are really good.

Ronda Larson Kramer
J.D., LL.M. Taxation, Owner

LARSON LAW, PLLC
Elder Law, Estate Planning
P.O. Box 7337
Olympia WA 98507
Ph: 360-259-3076
ronda at larsonlawpllc.com<mailto:ronda at larsonlawpllc.com>
www.larsonlawpllc.com<http://www.larsonlawpllc.com/>

NOTICES: This message, including attachments, is confidential and may contain information protected by the attorney-client privilege or work product doctrine. If you are not the addressee, any disclosure, copying, distribution, or use of the contents of this message are prohibited. If you have received this email in error, please destroy it and notify me immediately. Any tax advice contained in this message is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the internal revenue code or (2) promoting, marketing, or recommending to others any tax-related matter(s) addressed here.



From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of sdonahue at sdonahuelaw.com
Sent: Monday, March 22, 2021 11:31 AM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Special Needs Trust as Testamentary Trust in a Will

I'm sorry, Ronda.  I'm not following you.  You are saying that LA+ (which I'm assuming is the name of a professional trustee firm) has a trust template that would not requirement Medicaid repayment or giving the remainder to the pooled trust.  Ok.  But I don't understand the next sentence.  So only third party SNTs can have beneficiaries other than Medicaid repayment or the pool trust?  With a third party SNT, the beneficiary can be anyone, or any charity.  Is this what you saying?  Sorry I'm so dense.

Susan

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Ronda Larson Kramer
Sent: Monday, March 22, 2021 11:06 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Special Needs Trust as Testamentary Trust in a Will

On the other hand, if it's a testamentary third party SNT, LA+ has a trust template that would not require Medicaid repayment or giving the remainder to the pooled trust. This is the case only for third party SNTs, however, which is exactly what you're planning to draft.

Ronda Larson Kramer
J.D., LL.M. Taxation, Owner

LARSON LAW, PLLC
Elder Law, Estate Planning
P.O. Box 7337
Olympia WA 98507
Ph: 360-259-3076
ronda at larsonlawpllc.com<mailto:ronda at larsonlawpllc.com>
www.larsonlawpllc.com<http://www.larsonlawpllc.com/>

NOTICES: This message, including attachments, is confidential and may contain information protected by the attorney-client privilege or work product doctrine. If you are not the addressee, any disclosure, copying, distribution, or use of the contents of this message are prohibited. If you have received this email in error, please destroy it and notify me immediately. Any tax advice contained in this message is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the internal revenue code or (2) promoting, marketing, or recommending to others any tax-related matter(s) addressed here.



From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Mark Vohr
Sent: Monday, March 22, 2021 10:43 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Special Needs Trust as Testamentary Trust in a Will

LA plus is also a professional trustee very experienced with SNT's.  One thing to remember with respect to pooled trusts is that upon the death of the beneficiary, the balance remaining in the account (if any) may be retained by the charity establishing the pooled trust, to be used for other beneficiaries of the pooled trust. A few states have required that some or all of the trust funds remaining at the death of the beneficiary be repaid to the state Medicaid agency, but most states allow the beneficiary to elect that the charitable organization retain the balance at the beneficiary's death.  So, for a testamentary SNT, if putting into a pooled trust one might be limited as to the remainder beneficiaries.

I am not an expert on pooled trusts, by any stretch, but this is my understanding.

Regards,

Mark

Mark C. Vohr, Esq.
Ohana Fiduciary Corp.
Ohana Financial Services
A Washington Trust Company
Mark C. Vohr, J.D., CPG, Principal
PO Box 33710  Seattle, WA  98133
T:  (206) 782-1189 F:  (206) 782-1434
mcv at ohanafc.com<mailto:mcv at ohanafc.com>      www.ohanafc.com<http://www.ohanafc.com>

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Roger Hawkes
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Subject: Re: [WSBAPT] Special Needs Trust as Testamentary Trust in a Will

LA Plus has a pooled special needs trust that works pretty well also.

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Mark Vohr
Sent: Monday, March 22, 2021 9:45 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Special Needs Trust as Testamentary Trust in a Will

Susan -

            Short answer, yes absolutely.  A third party funded special needs trust can be a testamentary trust.  Professional Trustees such as Ohana, PIC Trust, WE trust, and GSS and others manage these kinds of trusts all the time and have a great deal of experience doing so.

Regards,

Mark

Mark C. Vohr, Esq.
Ohana Fiduciary Corp.
Ohana Financial Services
A Washington Trust Company
Mark C. Vohr, J.D., CPG, Principal
PO Box 33710  Seattle, WA  98133
T:  (206) 782-1189 F:  (206) 782-1434
mcv at ohanafc.com<mailto:mcv at ohanafc.com>      www.ohanafc.com<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.ohanafc.com&d=DwMFAg&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=K1mLMC1eFjwfeeMM-AC6zQ&m=H7oZ6m1Q_3xZOKW5P5dX7PjfxKOc9Yu0Uzy29hsj9_k&s=rhiZ6pct0Eox0A3UShpJ-5jeAQt8il4iw57o1U-OA_s&e=>

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of sdonahue at sdonahuelaw.com<mailto:sdonahue at sdonahuelaw.com>
Sent: Monday, March 22, 2021 9:33 AM
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Subject: [WSBAPT] Special Needs Trust as Testamentary Trust in a Will

Hello List Mates,

I've done Special Needs Trusts and I've done testamentary trusts, but I'm thinking my client needs a Special Needs Trust as a testamentary trust in her will.  She has two sons.  One has been severely disabled all his life.  The other son will take care of him upon her death.  She is not her disabled son's guardian.  He has no guardian per se.  She has been appointed by the state to handle his disability payments and that has worked well for her.  Her disabled son is in his 20s.

She wants me to draft a will, but, obviously, she can't leave anything to her disabled son.  So, I'm thinking that I could draft a Special Needs Trust in the will as a testamentary trust and make her other son the trustee.  Would this work?  Can a Special Needs Trust be a testamentary trust in a will?

Any thoughts or suggestions would be very welcomed.

Thank you,

Susan

Susan Donahue
Law Office of Susan Donahue
125 West 2nd Avenue, Suite "B"
P.O. Box 81
Twisp, WA 98856
(509) 996-5944 (phone)
(509) 362-9692 (fax)
sdonahue at sdonahuelaw.com<mailto:sdonahue at sdonahuelaw.com>

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