Presents Drafting and Funding the Third Party SNT With Raymond J. Falcon, Jr., Esq. Sponsored by:

1. February 11, 2014 Presents Drafting and Funding the Third Party SNT With Raymond J. Falcon, Jr., Esq. Sponsored by:

2. Drafting and Funding the Third Party SNT • WHAT WE WILL COVER • Overview of issues leading to use of the SNT • Basic requirements of the SNT • Ways to Fund the SNT • Drafting issues and suggestions

3. Drafting and Funding the Third Party SNT What is a trust?

4. Drafting and Funding the Third Party SNT GRIT QPRT CRAT QDOT IDGT GRUT GSTT There are many kinds of trusts

5. Drafting and Funding the Third Party SNT Every trust comes with an instruction manual:

6. Drafting and Funding the Third Party SNT Every trust comes with an instruction manual:

7. Drafting and Funding the Third Party SNT Key contents in the instruction manual: Grantor -- person who creates the trust Trustee -- person charged with administering the trust Use of Assets -- what the trustee can do with the assets in the trust. Primary Beneficiary -- main person who benefits from the trust Contingent Beneficiary -- person who gets trust assets when primary beneficiary is gone Termination provisions -- how and when does the trust end

8. Drafting and Funding the Third Party SNT What makes the instruction manual for the SNT different? Intent of trust Use of trust assets Origin of trust assets

9. Drafting and Funding the Third Party SNT Statement of Intent -- why the trust was created Sample Language: It is my primary concern in drafting this Trust that it continue in existence as a fund to supplement public assistance for Mary, the beneficiary throughout her life. Continued access to basic living needs which are not provided for by public assistance programs is required in order to provide Mary with a continued level of humane dignity and for Mary to receive humane care. I recognize that in view of the vast costs involved in caring for a person with a disability, a direct distribution to Mary would be rapidly dissipated. In addition, if this Trust were to be invaded by creditors, subjected to any liens or encumbrances, or cause public benefits to be terminated, it is likely that the Trust corpus would be depleted prior to Mary’s death. In this event, there would be no coverage for emergencies or supplementation of basic needs. I further intend that Mary receive all government entitlements to which Mary would otherwise be entitled, but for the distributions hereunder.

10. Drafting and Funding the Third Party SNT Use of trust assets Assets shall only be used to supplement and not supplant government benefits!! Typical directive language: The purpose of the Trust is to permit the use of Trust Funds to supplement, and not to supplant, impair or diminish any benefits or assistance of any federal, state or local governmental agency, office or department, including, but not limited to Medicaid and Supplemental Security Income, and any other needs-based benefits, eligibility for which is dependent on income or assets, from any other public or private source, to which benefits Mary may be eligible or which Mary may be receiving (such benefits collectively referred to hereafter as “Public Assistance Benefits”).

11. Drafting and Funding the Third Party SNT Use of trust assets Consider giving some specific direction and limitation on use: Beneficiary cannot direct distribution Regular contact with beneficiary Evaluation Retain professionals: Care Manager; government benefits advisor; attorney; CPA

12. Drafting and Funding the Third Party SNT Use of trust assets DO NOT PUT A MEDICAID PAYBACK PROVISION IN A THIRD-PARTY SNT!!

13. Drafting and Funding the Third Party SNT Origin of trust assets Funds should come from third parties -- parents, grandparents, other relatives, friends. Funds should NOT come from the special needs beneficiary!

14. Drafting and Funding the Third Party SNT Source of Assets Testamentary bequest Lifetime gift Beneficiary-designated property Life insurance Deferred comp plans / IRAs TOD/POD accounts

15. Drafting and Funding the Third Party SNT Timing of funding During lifetime -- SNT should be standalone and irrevocable if gifts from other than grantors At death from parents -- SNT can be standalone (revocable or irrevocable) or testamentary At death, from third parties other than parents -- SNT should be standalone and irrevocable

16. Drafting and Funding the Third Party SNT Issues respecting IRAs: Timing of Payout -- inherited IRA Based on life expectancy of oldest beneficiary Charitable contingent beneficiary = faster payout Do not use conduit provisions in the SNT, but…. Conduit third party SNT pouring into accumulation d4A? Minimize income tax effect?

17. Drafting and Funding the Third Party SNT Issues respecting life insurance: Death benefit can pour into SNT SNT generally should not own life insurance ---can consider doubling as ILIT but no Crummey power to primary beneficiary Use separate ILIT to hold life insurance, with SNT as beneficiary of ILIT

18. Drafting and Funding the Third Party SNT Issues respecting real estate: SNT can own a residence Primary beneficiary can occupy the residence Consider ISM, but also PMV for SSI Provide funding for cost of maintenance

19. Drafting and Funding the Third Party SNT Multigenerational drafting issues: inform other family members of the SNT multigenerational input into contingent beneficiaries when drafting SNT

20. Drafting and Funding the Third Party SNT Considerations in Divorce Child support into SNT? Funding provisions in divorce decree Use of single SNT to receive assets from divorced parents

21. Drafting and Funding the Third Party SNT A Few Final Drafting Tips Beneficiary and beneficiary’s spouse cannot serve as trustee Trustee does not have to provide for Beneficiary's basic support and maintenance Beneficiary cannot compel a distribution from the SNT for support and maintenance

22. Drafting and Funding the Third Party SNT A Few Final Drafting Tips Do not prohibit the Trustee from providing for food and shelter so long as Trustee considers the effect on means-tested benefits Provide a list of permissible expenditures to give Trustee more guidance

23. Drafting and Funding the Third Party SNT A Few Final Drafting Tips Change of governing law and situs Amending the trust Merger, Consolidation and Division

24. Drafting and Funding the Third Party SNT Thank you for your attention!!

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