Page 36 - Amarillo Senior Link Magazine Winter 2020- Online Magazine

HONORING SENIORS

A WORD ABOUT

SPECIAL NEEDS

TRUSTS by Lee Franks

First off, many estate planners into contracts, own cars, trucks, beneficiary’s death, the trustee
use the phrase “supplemental airplanes, and so forth. And the would distribute the remaining
needs trust” since such trusts types and purposes of trusts vary trust property according to the
are designed to supplement probably as much as the types trustor’s instructions in the trust
and not supplant or eliminate and purposes of partnerships. agreement.
sources of support for people with
disabilities, such as Supplemental In the case of supplemental needs In an interesting variation on
Security Income (SSI) and trusts, two particular scenarios this scenario, the trustor at the
Medicaid. Also, most folks have occur frequently. In the first, moment does not have much
only limited experience with a trustor, such as a parent or money or other property to give
trusts and may misunderstand other relative, wishes to set aside to the trust, but if the trustor is
how trusts operate in general. property that will help take care young and healthy, such a trustor
of a disabled beneficiary, but could obtain a hefty life insurance
In simple terms, a trustor (also the beneficiary receives or might policy for relatively little expense
known as a settlor or grantor) and one day receive a means-tested and name the trust as the
a trustee execute an agreement benefit, such as SSI or Medicaid, beneficiary.
for the trustee to own and take and such a gift would render the
care of property for the benefit beneficiary ineligible. Possibly, A second common scenario occurs
of one or more beneficiaries and the beneficiary does not have when a disabled beneficiary
to distribute that property or the the capacity to manage a direct unexpectedly receives property
income from it to the beneficiaries gift. Moreover, the trustor may as a gift or distribution from an
according to that agreement. In wish to protect the property estate or trust. If the beneficiary
a sense, a trust operates like a from potential creditors. The has not yet reached the age of
partnership between the trustor trustor could enter into an 65, the beneficiary, a parent, a
(the creator) and trustee (the irrevocable agreement with a grandparent, a guardian, or a
manager), and it is the business reliable trustee who could be judge may create a supplement
of the partnership to manage a bank, a spouse, or even the needs trust similar to the one
property and to make payments trustor himself or herself, to hold described in the first scenario, but
to one or more beneficiaries, and manage the property for the upon the beneficiary’s death, any
according to the partnership disabled beneficiary. As long as state agency, usually Medicaid,
agreement. It follows that, almost the beneficiary has no right to that provided benefits to the
anything a partnership can do, so demand any distribution at all beneficiary would have first claim
may a trust. For example, a trust or in any way control the trustee, to the remaining trust property
may buy and sell real property, a properly constructed trust for reimbursement.
open bank accounts or investment would not affect the beneficiary’s In either scenario, any
accounts, buy insurance, enter means-tested benefits. Upon the distributions for room and board

36 Amarillo Senior Link