What is a Special Needs Trust? – Annapolis and Towson Estate Planning

Supplemental Security Income and Medicaid are critical sources of support for those with disabilities, both in benefits and services.

To be eligible, a disabled person must satisfy restrictive income and resource limitations.

That’s why many families ask elder law and estate planning attorneys about the two types of special needs trusts.

Moberly Monitor’s recent article, “Things to know, things to do when considering a special needs trust,” explains that with planning and opening a special needs trust, family members can hold assets for the benefit of a family member without risking critical benefits and services.

If properly thought out, families can continue to support their loved one with a disability long after they’ve passed away.

After meeting the needs of their disabled family member, the resources are kept for further distribution within the family. Distributions from a special needs trust can be made to help with living and health care needs.

To establish a special needs trust, meet with an attorney with experience in this area of law. They work with clients to set up individualized special needs trusts frequently.

Pooled trust organizations can provide another option, especially in serving lower to more moderate-income families, where assets may be less and yet still affect eligibility for vital governmental benefits and services.

Talk to an elder law attorney to discuss what public benefits are being received, how a special needs trust works and other tax and financial considerations. With your attorney’s counsel, you can make the best decision on whether a special needs trust is needed or if another option is better based on your family’s circumstances.

Reference: Moberly Monitor (October 27, 2019) “Things to know, things to do when considering a special needs trust”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

The Downside of an Inheritance – Annapolis and Towson Estate Planning

As many as 1.7 million American households inherit assets every year. However, almost seventy-five percent of those heirs lose their inheritance within a few years. More than a third see no change or even a decline in their economic standing, says Canyon News in the article “Three Setbacks Associated With Receiving An Inheritance.”

Receiving an inheritance should be a positive event, but that’s often not the case. What goes wrong?

Family battles. A survey of lawyers, trust officers, and accountants conducted by TD Wealth found that at 44 percent, family conflicts are the biggest cause for inheritance setbacks. Conflicts often arise when individuals die without a properly executed estate plan. Without a will, asset distributions are left to the law of the state and the probate court.

However, there are also times when even the best of plans are created and problems occur. This can happen when there are issues with trustees. Trusts are commonly used estate planning tools, a legal device that includes directions on how and when assets are to be distributed to beneficiaries. Many people use them to shield assets from estate taxes, which is all well and good. However, if a trustee is named who is adverse to the interests of the family members, or not capable of properly managing the trust, lengthy and expensive estate battles can occur. Filing a claim against an adversarial trustee can lead to divisions among beneficiaries and take a bite out of the inheritance.

Poor tax planning. Depending upon the inheritance and the beneficiaries, there could be tax consequences including:

  • Estate Taxes. This is the tax applied to the value of a decedent’s assets, properties and financial accounts. The federal estate tax exemption as of this writing is very high—$11.4 million per individual—but there are also state estate taxes. Although the executor of the estate and not the beneficiary is typically responsible for the estate taxes, it may also impact the beneficiaries.
  • Inheritance Taxes. Some states have inheritance taxes, which are based upon the kinship between the decedent and the heir, their state of residence and the value of the inheritance. These are paid by the beneficiary and not the estate. Six states collect inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. Spouses do not pay inheritance taxes when their spouse’s die. Beneficiaries who are not related to decedents will usually pay higher inheritance taxes.
  • Capital Gains Tax. In certain circumstances, heirs pay capital gains taxes. Recipients may be subject to capital gains taxes, if they make a profit selling the assets that they inherited. For instance, if someone inherits $300,000 in stocks and the beneficiary sells them a few years later for $500,000, the beneficiary may have to pay capital gains taxes on the $200,000 profit.

Impacts on Government Benefits. If an heir is receiving government benefits like Social Security Disability Insurance (SSDI), Supplemental Social Security (SSS) or Medicaid, receiving an inheritance could make them ineligible for the government benefit. These programs are generally needs-based and recipients are bound to strict income and asset levels. An estate planning attorney will usually plan for this with the use of a Special Needs Trust, where the trust inherits the assets, which can then be used by the heir without losing their eligibility. A trustee is in charge of the assets and their distributions.

An estate planning attorney can work with the entire family by planning for the transfer of wealth and helping educate the family so that the efforts of a lifetime of work are not lost in a few years’ time.

Reference: Canyon News (October 15, 2019) “Three Setbacks Associated With Receiving An Inheritance”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Should I Know About a Special Needs Trust? – Annapolis and Towson Estate Planning

Your disabled family member may be eligible for a number of government programs. However, Pauls Valley (OK) Democrat’s recent article asks “Can your family benefit from a special needs trust?” The article reminds us that these programs don’t cover everything. You may need to close the gaps.

A few government programs have eligibility restrictions based on the level of financial assets that are available to the recipient. This means the financial help you’re wanting to provide may do more harm than good unless you establish a special needs trust.

As the donor, you supply the funds. A trustee holds and administers them according to your instructions. The beneficiary typically can’t use the trust for basic support or to receive benefits that can be provided by the government. The special needs trust can be used to provide specialized therapy, special equipment, recreational outings and other expenses.

When considering a special needs trust, you’ll need to look at several issues with your attorney.  However, there are two that are critical. The first is designating a trustee. You could name a family member or close friend as a trustee. While this works well for many, it has the potential to cause family conflicts. You could also name a trust company. This company can provide professional management, expertise and continuity of administration. A third option is to name an individual and a trust company as co-trustees.

The second critical issue with a special needs trust is funding the trust. You can fund the trust during your lifetime or have it activated when you die.

Note that you don’t have to be the sole donor. A special needs trust can be created so other family members can also contribute to it. The trust can be funded with securities (stocks and bonds), IRA proceeds, insurance death benefits and other assets.

You’ll need to understand the requirements of various federal, state and local benefit programs for people with disabilities, so that your loved one’s benefits are not at risk.

Speak with an experienced elder law or estate planning attorney about how you can to make life better for a disabled child or family member with a special needs trust.

Reference: Pauls Valley (OK) Democrat (August 1, 2019) “Can your family benefit from a special needs trust?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Do I Need to Know About ABLE Accounts? – Annapolis and Towson Estate Planning

Millions of Americans with disabilities and their families depend on public benefits to help provide income, health care, food and housing assistance. Eligibility for assistance through Supplemental Security Income, SNAP and Medicaid is based upon a resource test, so disabled individuals seeking benefits are typically limited to no more than $2,000 in savings or assets. This can present a difficult problem.

The Achieving a Better Life Experience Act (ABLE) was created as a way to create a tax-advantaged savings tool for individuals with disabilities and their families.

nj.com’s article, “ABLE accounts–A tax advantaged tool for special needs planning,” advises that when used correctly, this overlooked savings account may allow families to build a small nest egg, without affecting eligibility for public program benefits.

An ABLE 529 account is designed to be a savings or investment account to supplement public benefits. It can be a powerful strategy for individuals, who previously were unable to build supplemental funds outside of a trust for their needs. An ABLE account is funded with after-tax contributions that can grow tax-free, when used for a qualified disability expense. The account owner is also the beneficiary and contributions can be made from any person including the account beneficiary, friends, and family.

The ABLE account is available to individuals with significant disabilities, whose age of onset of disability was before they turned 26. A person could be over the age of 26 but must have had an age of onset before their 26th birthday.

Contributions are restricted to $15,000 per year. Because the ABLE account is connected to the 529 plan for education, the total contribution limit is based upon the individual state’s limit for 529 plans. Individuals can have up to $100,000 in an ABLE account, without impacting SSI eligibility. The first $100,000 also does not count toward the $2,000 resource restriction.

A frequently asked question is whether to use an ABLE account or a Special Needs Trust for planning purposes. ABLE are subject to certain limitations that make it impossible, or at least ill advised, to use them instead of a Special Needs Trust. Remember that ABLE accounts can only receive $15,000 in deposits each year, but, in most cases, Special Needs Trusts can receive much larger contributions in a year, once they are funded. This is an important difference for parents who want to leave more substantial assets to their child when they die but don’t want to jeopardize the child’s eligibility for critical services. In that situation, a Special Needs Trust may be more desirable.

When the beneficiary of the ABLE account passes away, any leftover funds in the account are typically reimbursed to the state to defray the costs of providing services during the beneficiary’s life. However, that’s different than a properly drafted Special Needs Trust.

In 2019, ABLE account owners who work but don’t have an employer-sponsored retirement account, can now save up to $12,140 in additional savings from their earnings.

Ask your estate planning attorney about possibly coordinating an ABLE account with a Special Needs Trust.

Reference: nj.com (April 20, 2019) “ABLE accounts – A tax advantaged tool for special needs planning”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

For Immediate Release

Contact: Jane Frankel Sims

410-828-7775

Contact: Frank Campbell

410-263-1667

Sims & Campbell Estates and Trusts

Frankel Sims Law and Holden & Campbell
Merge to Form Sims & Campbell

Firm will offer comprehensive Trusts & Estates services through offices in Towson and Annapolis

TOWSON, Md. (April 26,2019)  Frankel Sims Law and Holden & Campbell have jointly announced the merger of their firms to create a boutique Trusts & Estates law firm providing comprehensive services in the fields of Estate Planning, Estate Administration, Trust Administration and Charitable Giving. The combined firm will be named Sims & Campbell and have offices in Towson, Md. and Annapolis, Md.  Jane Frankel Sims and Frank Campbell will lead and hold equal ownership stakes in the firm.

Sims & Campbell will have 9 attorneys and 15 legal professionals that handle every facet of estate and wealth transfer planning, including wills, revocable living trusts, irrevocable trusts, estate and gift tax advice, and charitable giving strategies.  The firm will focus solely on Trusts & Estates but will serve a wide range of clients, from young families with modest resources to ultra-high net worth individuals.  This allows clients to remain with the firm as their level of wealth and the complexity of related estate and tax implications change over time. 

“By joining forces, we have expanded our footprint to conveniently serve clients in Maryland, D.C. and Virginia” said Jane Frankel Sims.  We are seeing some of the greatest wealth transfer in our country’s history, and we want to continue to be on the leading edge of helping our clients maintain and enhance their family’s wealth.  In addition, we aim to serve our clients for years to come, and the new firm structure will allow Sims & Campbell to thrive even after Frank and I have retired.”    

“Jane and I have always admired each other’s firms and recognized the need to provide even greater depth and breadth of focused expertise to help families amass and protect their wealth from generation to generation,” said Frank Campbell.  “Now we have even greater capabilities to make a real difference for our clients.” 

The Sims & Campbell Towson office is located at 500 York Road, on the corner of York Road and Pennsylvania Avenue in the heart of Towson.  The Annapolis office is currently located at 716 Melvin Avenue, and is moving to 181 Truman Parkway in August, 2019.  For more information, visit www.simscampbell.law.