Protect Personal Injury Settlements & Inherited Assets Susan Anderson, Esq. Carol R. M. Moss Carol R. M. Moss, Esq. Hellmuth & Johnson, PLLC 8050 W. 78 th Street Edina, MN SPECIAL NEEDS TRUSTS

2 2 Susan Anderson, Attorney 15+ Years Experience Law CPA firm Financial Trust Management President & CEO of ING National Trust Specialty: Estate tax consultant and preparation Estate planning: Wills, Power of Attorney, Health Care Directive Business Succession Special needs planning for disabled family members Charitable planning Probate Guardianship / Conservatorship Trust Department Legal Litigation – Will and Trust Disputes Wills for Heroes Volunteer – Firefighters & Police Officers PACER (Parental Advocacy Center Educational Rights ) – Children w/Disabilities Estate Planning, Probate, and Business Succession

3 3 Carol R. M. Moss, Attorney Represents individuals who have been injured or lost a loved one Advocates for clients to not only have their story be told but to protect their future Works with clients to figure out how to get their medical bills paid Creates partnership with clients to not only resolve legal case but to maximize protections for the future Understands the need to know the client’s story in order to work toward their goals Personal Injury and Medical Malpractice photo

4 Coordinated Legal Approach Good litigation attorneys consider the effects on their clients when receiving a settlement/verdict Types of Sources of Recovery: Liability Insurance of person who caused the harm; Workers Compensation benefits; and No-fault Automobile Insurance. Coordination of Benefits for Payment of Medical Expenses. Determine who pays medical expenses. Subrogation: The legal obligation to reimburse medical expenses paid on client’s behalf after receiving a recovery. Special Rules for Medicare/Medicaid

5 Minnesota Medical Assistance Two Main Criteria Asset Test Income Test

6 Two Types of Trusts 1.Special Needs Trust Beneficiary’s Funds 2.Supplemental Needs Trust 3 rd Party Funds Funds considered “unavailable” for Medical Assistance qualification

7 SPECIAL NEEDS TRUST  Self Funded trust  To benefit an individual who has a disability and  Is under age 65  Governing law: Federal 42 USC 1369p(d) and State Minn.Stat. 501B

8 SPECIAL NEEDS TRUST  Requirements  Creator/Grantor: Parent, grandparent, legal guardian, conservator or court

9 SPECIAL NEEDS TRUST  Requirements  Beneficiary Under Age 65 Qualify as Disabled: -Unable to engage in any substantial gainful activity due to medically determinable physical or mental impairment Expect result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months -Minor: medially determinable physical or mental impairment of comparable severity -Established by State Medical Reiew Team (SMRT) using criteria similar to Soc. Sec. Admin. Solely Benefits Individual

10 SPECIAL NEEDS TRUST Administration – Failure to make distribution properly may result in disqualification Distributions cannot replace, reduce or substitute public assistance Disqualifying Distributions: food, shelter and qualifying medical care

11 SPECIAL NEEDS TRUST Administration (cont.) Satisfactory Distributions: special medical care and equipment, dental care, personal supervision, companion services private room fees, counseling and other treatments, modification repair and reasonable purchase of home, handicapped vehicle

12 SPECIAL NEEDS TRUST Administration (cont.) Caution: Under NO CIRCUMSTANCES should you make a direct distribution to beneficiary Set up payments/invoicing to go directly to vendor

13 SPECIAL NEEDS TRUST Termination Terminates upon death of beneficiary Government is reimbursed for accrued Medical Assistance costs Any extra funds to beneficiary’s estate Payments for expenses for last illness, funeral, outstanding debts & expenses not payable from trust Administrative expenses are allowed Recommend pre-pay funeral expenses

14 SPECIAL NEEDS TRUST Trustee Cannot be the beneficiary Individual or corporate fiduciary Trustworthy, organized, time to handle matters, geographic location Co-trustee – individual and corporate trustee option

15 SPECIAL NEEDS TRUST Continuing court supervision required? No - parents/grandparents are grantors Yes – guardian or conservator Guardian or conservator Order approving litigation settlement, verdict amount, divorce decree Confirm trustee Annual Accounting Varies by jurisdiction

16 SUPPLEMENTAL NEEDS TRUST Funded by third party funds (someone other than the beneficiary, or beneficiary’s spouse* Inheritance Intervivos Testamentary Other family members, friends can contribute during their lives Benefits grantors by reducing their estate taxes *Note that gifts to such a trust not Annual Exclusion for Gift Tax purposes

17 ESTATE TAX Federal Estate Tax Table Year Estate Tax Exemption & Portable? Top Estate Tax Rate Step –Up Basis 1997$600,000 No55% Yes 1998$625,000 No55% Yes 1999$650,000 No55% Yes 2000$675,000 No55% Yes 2001$675,000 No55% Yes $1,000,000 No50% Yes $1,500,000 No48% Yes $2,000,000 No46% Yes 2009$3,500,000 No45% Yes 2010Unlimited0% No YearEstate Tax Exemption Top RateStep- Up Basis ,000,000 5,000,000 Yes 35%Yes 2013 ?55% ??

18 ESTATE TAX MN Estate Taxes For amounts over $1,000,000 the following applies Rate+$ $ $ 40, $ $ 0 40, , , % , , , % , , , % , , , , % , , , , % , , , , % , , ,040, , % ,600 1,040, ,540, ,040, % ,800 1,540, ,040, ,540, % ,800 2,040, ,540, ,040, % ,800 2,540, ,040, ,540, % ,800 3,040, ,540, ,040, % ,800 3,540, ,040, ,540, % ,800 4,040, ,040, ,040, % ,800 5,040, ,040, ,040, % ,800 6,040, ,040, ,040, % ,800 7,040, ,040, ,040, % ,800 8,040, ,040, ,040, % ,800 9,040, ,040, ,040, % ,800 10,040,000. — — — —....10,040, %.. 1,082,800 TOP RATE CAN = 16% $1 Million  EXEMPTION  NOT PORTABLE. Still need A/B trust.

19 SUPPLEMENTAL NEEDS TRUST Governing law: State Minn.Stat. 501B.89 Funds in trust are not considered “available” by the county for determining program eligibility. Beneficiary Under Age 65 Qualify as Disabled: Established by State Medical Reiew Team (SMRT) using criteria similar to Soc. Sec. Admin. Unable to engage in any substantial gainful activity due to medically determinable physical or mental impairment & expect result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months For Minors: medically determinable physical or mental impairment of comparable severity

20 SUPPLEMENTAL NEEDS TRUST Administration Same/similar to Special Needs Trust Distributions must benefit solely the beneficiary Cannot replace, reduce or substitute any public assistance Disqualifying Distributions: food, shelter and qualifying medical care No direct distribution to beneficiary

21 SUPPLEMENTAL NEEDS TRUST Termination Terminates upon death of beneficiary Remainder go to grantor’s choice of heirs Payments for expenses for last illness, funeral, outstanding debts & expenses not payable from trust Administrative expenses are allowed Recommend pre-pay funeral expenses

22 SUPPLEMENTAL NEEDS TRUST Trustee Cannot be the beneficiary – deemed “available” Individual or corporate fiduciary If trust created for tax purposes, do not name grantor as trustee Trustworthy, organized, time to handle matters, geographic location Co-trustee – individual and corporate trustee option

23 TRUST OR STRUCTURED SETTLEMENT When is a trust beneficial to a beneficiary versus a Structured Settlement?

24 CASE STUDIES TEAM APPROACH is key! Protect your loved one’s government benefits. Ask questions about whether a Special Needs or Supplemental Needs Trust will benefit them. Consult with a trust attorney. Call us for a second opinion, suggestions, etc.

25 Questions… Susan Anderson, Esq. Carol R. M. Moss, Esq. Hellmuth & Johnson, PLLC 8050 W. 78th Street Edina, MN