How To Survive a Special Needs Trust

1. How To Survive a Special Needs Trust March 2009 Handout Available at www.achievingindependence.com/aba

2. This is a talk about nurturing a team to add a social service element to trust department or management team to serve your disabled beneficiaries and clients Special Needs Trusts

3. Many families are seeking answers on how to provide quality of life for their disabled loved ones You probably have clients with this needs that you may not even be aware of. More and more the financial industry is providing services that traditionally have been provided by the government. Special Needs Trusts

4. I intend to talk about A little history How many social service systems are facing an unprecedented failure How that failure affects almost all families in some way The opportunity that this failure presents Today’s Presentation

5. Short Stephen Dale Story I have build a practice focused on serving the needs of persons with disabilities and their families When I began there was no model so I made a bunch of stuff up But Before We Begin…

6. ABA Wealth Management and Trust Conference A Little History

7. The late 1960s and early 70s began a movement in the United States away from providing for disabled citizens in large institutions in favor of community based programs. A Promise Unkept

8. As states have closed their institutions, they moved only a fraction of the financial resources used by these large institutions into the community. For example, the average expenditures in 2002 for a resident in a public institution were $125,746, as compared with $37,816 per recipient of community services financed by the Medicaid Home and Community Based Services Program. We Moved the Disabled to the Community But Didn’t Move the Money

9. In 1963, President Kennedy called on Congress to replace institutions with comprehensive community programs to provide outpatient care, day treatment, rehabilitation, foster-home services and public education on mental health. In 1956 state hospitals housed 559,000 individuals with a mental health diagnosis. A Promise Unkept – Mental Health

10. In response to President Kennedy’s challenge to close large mental institutions and move services into the community, Congress commissioned a report by the Joint Commission on Mental Health, entitled Action for Mental Health. A Promise Unkept – Mental Health

11. This reportrecommended a national program and policies to treat people with mental illness in community-based clinics. From 1956-1980, the population of State Hospitals fell to 154,000. A Promise Unkept – Mental Health

12. The Joint Commission on Mental Health recommended a tenfold increase in spending on mental health over the next 10 years, as well as increases in training to ensure availability of the necessary workforce to serve this population. Funding would be redirected to communities—to hospitals or nonprofit community agencies—and not long-term institutional services. Eventually, it was hoped, state hospitals would be replaced by the community programs.   A Promise Unkept – Mental Health

13. JFK’s challenge to go to the moon succeeded – but the challenge for community mental health barely made orbit and has been in a continual decay Washington – We Have a Problem

14. Unfortunately, Congress did not fully follow the Joint Commission recommendations. Today most community mental health programs and services for persons with developmental disabilities are poorly funded and poorly staffed. A Promise Unkept – Mental Health

15. Many State Hospitals have been closed but the services have not been moved into the community. Instead of funding increasing for community services, spending is actually less per person than in 1963. State spending on mental health, adjusted for inflation and population growth, was 30 percent less in 1997 than in 1955. A Promise Unkept – Mental Health

16. Under California’s Lanterman Act persons with developmental disabilities have been moved into the community through the regional center system The Lanterman Act promises services to all developmentally disabled Californians in need One of the most essential programs they provide are residential services A Promise Unkept - Developmental Disabilities

17. Most of the residential providers have not had a substantive increase in their rates in 10 years Many of the providers have been dependent upon the equity in their houses to keep their programs afloat California is proposing a 3% reduction in services California is not investing in new programs Thousands of new RC consumers are about to hit the housing market A Promise Unkept - Developmental Disabilities

18. Let’s look at one segment of the Developmental Disability Community A Promise Unkept - Developmental Disabilities

19. Autism Prevalence by State 1 out of every 154 school aged children in California have a diagnosis of autism

20. Autism Epidemic in the US • In 1992 there were 15,580 cases of children with autism ages 6-22 • In 2006 there were 224,594 cases of children with autism ages 6-22

21. California legislators have known for decades that the California is not prepared to provide for persons with Autism as they mature. Even in the good times – funds were not allocated to residential programs. Now California is facing unprecedented budget deficits California Is Not Been Investing in California’s Residential Needs

22. Many families don’t trust that the government will be there to provide for their disable loved ones Many are looking at alternatives for provision of services and advocacy Many Families Are Opting Out of the System

23. Special Needs Trusts = Welfare Program The Disability Equations

24. Putting a Value on Public Benefits • Put a value on the benefits • Families are seeking quality of life • Spending thousands of dollars to preserve hundreds of dollars worth of benefits doesn’t make sense. • Advocacy is a high priority • Many families of means are looking for tax breaks

25. Disability = Poverty The Disability Equations

26. Common Misconceptions • All too many estate planning practitioners focus exclusively on preservation of public benefits in their Special Needs Trusts and miss the big picture. • There is no such thing as a Special Need. • Special Needs Trust planning is not poverty planning. Affluent families have disabled loved ones also.

27. There has always been a gap between the haves and have-nots The Gap is now a Chasm If I have a wealthy client – I can perform miracles For families with limited means – their options are often limited A Personal Observation

28. Working with Families with Disabled Loved Ones • Benefits are important – but not often the benefits are not the top priority • Create a flexible plan • A successful plan will focus on collaboration collaboration collaboration

29. The Big Question • Does my disabled loved one need Special Needs Planning? • Could manage funds without great assistance? • Build flexibility to deal with changed circumstances • Focus on advocacy and asset protection • Could keeping qualification for SSI or Medicaid be a tool to assist my disabled loved one?

30. Broaden the scope of your Special Needs Trust • All too many practitioners focus exclusively on preservation of public benefits in their Special Needs Trusts and miss the big picture. • Special Needs Trust can serve as an advocacy tool with instructions about how you wish you directives to be carried out. • The issue is – where are you going to find someone to carry out your wishes?

31. Focus on Life Planning • Many families focus only on death planning, but they really need to focus on life planning

32. Defining Issues for Corporate Trustees • Liability • Overloading the Trust Department Staff • Low Profitability

33. Probate Code 16012 (a) • (a) The trustee has a duty not to delegate to others the performance of acts that the trustee can reasonably be required personally to perform and may not transfer the office of trustee to another person nor delegate the entire administration of the trust to a cotrustee or other person

34. Probate Code 16012 (a) • (b) In a case where a trustee has properly delegated a matter to an agent, cotrustee, or other person, the trustee has a duty to exercise general supervision over the person performing the delegated matter. • (c) This section does not apply to investment and management functions under Section 16052.

35. Building a Team • After focusing on Special Needs Trusts for over 25 years – I have come to the conclusion that building a management team administer the Special Needs Trust is the single greatest factor about whether a trust will succeed of fail • I wish I could draft a document that would protect a disabled person – but it just isn’t possible. The Bob Jones Special Needs Trust

36. THE IDEAL TRUSTEE • Will use discretion in the best interest of the disabled beneficiary • Must understand public benefits and keep up with changes in the law • Can wisely invest and conform to all statutory fiduciary requirements • Understands taxes • Keeps perfect books • Provides advocacy and prevents abuse • Is immortal

37. Advocacy • Will use discretion in the best interest of the disabled beneficiary • Must understand public benefits • Provides advocacy and prevents abuse • Accountability • Keeps perfect book • Carries insurance, is bondable or has deep pockets • Is immortal • Financial • Can wisely invest and conform to all statutory fiduciary requirements • Understands taxes

38. Model 1 – the Trustee directed by a Trust Advisory Committee. • The Trustee manages funds, makes distributions, does taxes, keeps records • The Trustee directed by a Trust Advisory Committee which directs distributions, can amend the trust or replace the Trustee • Can include care manager Trustee Advisory Committee

39. Model 2 – the Trustee directed by a Care Manager. • The Trustee manages the funds • The Trustee can be directed by a Care Manager. • The Care Manager interacts with the beneficiary • The Trust Protector oversees the Trustee and Care Manager from a distance and can replace either for any reason Care Manager Trustee Trust Protector

40. Care Managers - Finding Peace of Mind • Professional care management has given peace of mind to many of my families. • I have seen my beneficiaries clinically improve by incorporating a care manager into their estate plan.

41. Surviving a Special Needs Trust • Special Needs Trusts can be very challenging for the banking professional • I have see many trust officers burn out from dealing with my beneficiaries

42. Surviving a Special Needs Trust • I have found that the utilization of professional care managers is the key to serving the beneficiary and protecting the trustee

43. Care Managers • Professional Geriatric Care Managers are health and human services specialists who typically help families care for older relatives. • Many Care Managers and agencies also have experience with the needs of persons with physical and psychiatric disabilities. • The Care Manager acts as a guide and advocate -- identifying problems and offering solutions, while encouraging as much independence as possible.

44. Example – Martha's Story • Martha is 85 years old and lives with her 55 year old daughter Helen. • Helen has a psychiatric disability and has been living with her mother for the last 30 years.

45. Example – Martha's Story • Helen is very dependent upon her mother and the her mother recently spent a week in the local hospital. • Both mother and daughter are concerned about what would happen upon Martha’s death or incapacity.

46. Engaging Care Managers Before a Special Needs Trust Matures • All too often Special Needs Trusts are seen as death planning – but what if the parent/advocate can no longer be there? • Have the care manager do an assessment before the trust matures • Often identify needs • Lets the beneficiary meet the care manager before a crisis • Allows the parent peace of mind to see the plan in action

47. Where to Find a Care Manager • Many Special Needs Alliance Members have Care Managers on staff • Two websites that are very useful for finding a care manager are National Association of Professional Geriatric Care Managers (NAPGCM) at http://www.caremanager.org/ and the National Guardianship Association (NGA) at http://www.guardianship.org/ .

48. Some last thoughts • Attorneys often set up unrealistic expectations with their clients (hard to believe) • The concept of splitting the fiduciary duties from the social work duties should be introduced to the family early on

49. Some last thoughts • Having a relationship with a care manager or care management group can be a good opportunity to provide valuable education to attorneys in your community on how your organization can provide these valuable services