More Webinars from Elville and Associates
The education of clients and their families through counseling and superior legal-technical knowledge is the mission of Elville and Associates. We hold multiple educational events every month. Click to view our calendar of educational webinars and events or visit the Elville and Associates YouTube channel to view recordings of our past webinars.
#elvilleeducation #elvillewebinarseriesMore Webinars from Elville and Associates
The education of clients and their families through counseling and superior legal-technical knowledge is the mission of Elville and Associates. We hold multiple educational events every month. Click to view our calendar of educational webinars and events or visit the Elville and Associates YouTube channel to view recordings of our past webinars.
#elvilleeducation #elvillewebinarseriesDon’t Yet Want Your Heirs to Know About Your Assets? Use a Quiet Trust in Your Estate Plan
Trusts are great tools for leaving assets to your heirs while maintaining control over their access to those assets. In many cases, you would tell your beneficiaries that you have made a trust for them. However, this is not always desirable — and this is where a “quiet” trust may be helpful.
A quiet trust is a trust created much like other trusts, but with little to no notice given to its beneficiaries. A person, called a grantor, places assets in a trust managed by someone who is appointed as a trustee.
The trust document may provide that income will only be distributed to a beneficiary once specific conditions are met — for example, when the grantor passes away or the beneficiary reaches a certain age. It may further require that no information regarding the accounting of the trust, what the trust owns, or other details will be provided to a beneficiary until certain conditions or timeframes occur.
Advantages of a Quiet Trust
Many people turn to quiet trusts for their children or grandchildren. They want to avoid their heirs relying on these future resources and becoming complacent instead of developing themselves financially or professionally. The idea is that if the beneficiaries don’t know about the money, they will work harder to create their own wealth and develop good financial habits. Many trust grantors hope that this personal development will make it more likely that once their heirs receive income or assets in a trust, they will be better equipped to manage and preserve these resources.
In other situations, you may wish to keep a trust a secret as a matter of privacy. A quiet trust can control the number of people who know about the trust. This can prevent family disputes if one person will receive more than another. It can also prevent heirs from talking too much about what they may receive, misusing the information, or being taken advantage of. For example, some parents may be concerned about their children’s creditors or anyone trying to get close to them for the wrong reasons.
A quiet trust can shield your loved ones from these problems and help them overcome any disincentive to develop themselves to be the best they can be. In addition, just like an ordinary trust, a quiet trust can be used for estate tax planning and avoiding the lengthy and expensive probate process. Depending on how they are set up, quiet trusts can also delay when the assets are taxed as income.
When a Quiet Trust May Not Make Sense
However, there are situations where a quiet trust may not work for you or your family. For one, you may wish to involve your children in your financial planning or discussions about your assets.
Sometimes keeping information secret can also backfire. Your heirs may not be prepared for suddenly receiving large sums of money or investments if they are unaware of them. For example, if you leave them rental property and they have moved to another state by the time they receive it, they may not be able to manage the property easily.
The lack of disclosure may also create a certain amount of distrust or resentment.
Setting Up A Quiet Trust
How you set up a quiet trust will likely vary based on state law. The basic process involves drafting a trust agreement, transferring assets, and implementing the terms of the trust. You should ensure that the person you choose to manage your trust is someone on whom you can rely. The wrong person could mishandle assets, fail to keep proper accounting, or miss deadlines for filing tax returns.
This process is best overseen by an attorney and other professionals, such as a financial planner and CPA familiar with trusts.
For guidance on quiet trusts, consult the experienced estate planning attorneys at Elville and Associates, whose educational process and known throughout the mid-Atlantic as being unique in guiding individuals and families through the estate planning process. The education of clients and their families through counseling, client education, and superior legal-technical knowledge is the mission of Elville and Associates. Contact Elville and Associates today for your free initial consultation.
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If you have a child with disabilities, it is crucial to set money aside for the child’s future. At the same time, you need to consider your child’s access to public benefit programs such as Medicaid and Supplemental Security Income (SSI), as well as the state and federal tax implications. The two major vehicles to accomplish these goals, Maryland ABLE accounts and special needs trusts (SNTs), each have their advantages and limitations. Using them in tandem may be the optimal strategy for your child with special needs.
Achieving a Better Life Experience (ABLE): Pros and Cons
Patterned on Section 529 college savings accounts, ABLE accounts offer a tax-advantaged way for people with disabilities to put money aside in excess of the SSI program’s $2,000 resource cap without compromising their eligibility for government benefits like SSI and Medicaid.
Assets are allowed to grow, tax-free, inside the account, and withdrawals are not taxed so long as the money is spent on qualified disability expenses (QDEs) such as transportation, assistive technology, health and wellness, and employment support.
And, unlike a special needs trust, which leaves the account under the control of an assigned trustee, an ABLE account can be managed and controlled by the beneficiary once she or he comes of age. Being able to spend money without having to obtain a trustee’s permission translates into welcome financial independence for a person with a disability.
ABLE accounts are easy and inexpensive to set up. Almost all states now have ABLE programs, and if yours doesn’t, you can set up an account using the program in another state that accepts out-of-state account holders. For a directory of ABLE account programs, click here.
However, ABLE accounts have several serious drawbacks and limitations. The beneficiary with special needs is the owner of the assets but may lack the capacity to manage the money responsibly. The parents can petition to take on this role, but if they die before the beneficiary, the account would have to be managed through guardianship or conservatorship, which can be cumbersome. Alternatively, the Social Security Administration (SSA)-appointed Representative Payee can manage the account.
Perhaps the most significant drawback to an ABLE account is that the beneficiary must have become disabled before the age of 26 to qualify. Also, the beneficiary can only have one account and if its value exceeds $100,000, any benefit from the SSI program is suspended automatically. (Medicaid eligibility is not affected until the account’s value meets the state’s 529 account threshold — for example, California’s is $529,000). Annual contributions are limited to $16,000, as aligned with the federal gift tax exclusion. Lastly, most states that administer ABLE programs have a Medicaid payback provision upon the death of the beneficiary. This means the state can claim reimbursement, dollar for dollar, for any Medicaid funds that went to the beneficiary during his lifetime, if any money remains in the ABLE account.
Special Needs Trusts (SNTs): Pros and Cons
A special needs trust can be a way around these limitations. Unlike ABLE accounts, there is no limit to the size of the trust, and the funds can be used for almost anything a beneficiary needs to supplement his or her government benefits. Annual contributions are not limited as they are for ABLE accounts. Because the trust, and not the person with special needs, owns the assets, it is not counted against the beneficiary’s financial eligibility for SSI or Medicaid. Upon the beneficiary’s death, the assets in a third-party special needs trust can pass to the donor’s other relatives or anywhere else and are not subject to the state’s Medicaid payback provision (assets in a first-party special needs trust, which holds the beneficiary’s own assets, are subject to payback).
On the downside, as noted earlier, trust distributions are controlled by the trustee, not the beneficiary. Also, third-party special needs trusts do not enjoy the same tax benefits as ABLE accounts. Income over $4,300 is taxed at the highest rate (37 percent) for federal taxes, and state taxes may be due as well, although deductions apply that can lower this rate to the beneficiary’s tax rate. Assets within the trust do not grow tax-free over time but are subject to capital gains taxes, and these can be considerable. Because the property originally belonged to an owner other than the primary beneficiary with special needs, capital gains are assessed when the assets were originally purchased, perhaps at a very low cost if they were held over a long period of time.
You Can Have It All
The best solution is to use both. The ABLE account can be funded over time from the special needs trust, giving the person with a disability who has the capacity and ability to manage his or her own assets up to $100,000. This approach offers the best of both worlds: ensuring that the person with a disability is able to manage significantly more money in an ABLE account while at the same time preserving public benefits and having assistance in managing an entire inheritance in the special needs trust.
Stephen Elville, Managing Principal and Lead Attorney at Elville and Associates can work with you to devise the strategy that works best for your family. As an experienced special needs planner and someone passionate about helping individuals and families with loved ones with special needs, Mr. Elville guides families and individuals through the planning process through client education, counseling, and leading-edge legal-technical knowledge, creating solutions to their needs and peace of mind along the way. Contact Mr. Elville here or reach out to his Executive Assistant, Mary Guay Kramer, at 443-741-3635 or at mary@elvilleassociates.com to schedule a free initial consultation today.
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More Webinars from Elville and Associates
The education of clients and their families through counseling and superior legal-technical knowledge is the mission of Elville and Associates. We hold multiple educational events every month. Click to view our calendar of educational webinars and events or visit the Elville and Associates YouTube channel to view recordings of our past webinars.
#elvilleeducation #elvillewebinarseriesMore Webinars from Elville and Associates
The education of clients and their families through counseling and superior legal-technical knowledge is the mission of Elville and Associates. We hold multiple educational events every month. Click to view our calendar of educational webinars and events or visit the Elville and Associates YouTube channel to view recordings of our past webinars.
#elvilleeducation #elvillewebinarseriesThe Elville Webinar Series’ Wellness Series — Making the Most Out of Your Medical Appointments
More Webinars from Elville and Associates
The education of clients and their families through counseling and superior legal-technical knowledge is the mission of Elville and Associates. We hold multiple educational events every month. Click to view our calendar of educational webinars and events or visit the Elville and Associates YouTube channel to view recordings of our past webinars.
#elvilleeducation #elvillewebinarseries
Many individuals engaging in estate planning opt to create a third-party special needs trust to provide for their loved one living with a disability. However, did you know that these trusts may have to pay taxes on any income generated from the trust assets and retained by the trust for future use? If the trust is a qualified disability trust (QDT), it can minimize unnecessary tax consequences.
What Type of Trust Qualifies?
To qualify as a qualified disability trust, a trust must meet the following basic requirements:
- It must be irrevocable.
- The beneficiaries must be disabled and receive Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI). Additionally, the trust must have been established for their benefit before they turn 65.
- It cannot be a grantor trust and must be a separate tax-paying entity. So, for example, a first-party or self-settled special needs trust cannot qualify.
- Any remaining amount in the trust may be transferrable to nondisabled beneficiaries once the disabled beneficiaries are deceased.
Why Become a Qualified Disability Trust?
If a trust meets these requirements, it can reap significant tax benefits. Without the qualified disability trust designation, a trust normally may exempt up to $100 to $300 of income it generates from taxation, depending on whether it is required to distribute all of its income. However, a QDT may take an exemption equal to what an individual filing a personal income tax return may take. Per the Internal Revenue Code, this is $4,150 plus an annual adjustment for inflation.
In addition to the exemption, an individual benefits from more favorable tax brackets on income than a trust. A qualified disability trust also gets this benefit. As of 2022, the highest income trust bracket for a trust applies to amounts over $13,450, and the highest tax rate for trusts is 37 percent. In contrast, an individual taxpayer is not taxed at the highest rate of 37 percent until his or her income reaches $539,900 or more.
This preferred tax treatment can make a difference, especially when a trust wishes to retain income for future use. Alternatively, a trust may not want to distribute all income in order to protect beneficiaries from being disqualified from means-tested benefits such as Medicaid or SSI. Paying fewer taxes on retained income means more is left over for beneficiaries.
A qualified disability trust will have to file a tax form called Form 1041 to receive these benefits every year. A trust may need the assistance of a tax professional. However, this expense is well worth it when you consider the potential tax savings.
Estate Planning Tips
If you are setting up a special needs trust through your will, a best practice tip is to avoid vague terms and specifically name the beneficiary of the anticipated QDT. This will allow them to elect the qualified disability trust treatment on appropriate tax forms.
You should also carefully select your trustee. A trustee of a qualified disability trust will have serious fiduciary responsibilities that can last a lifetime. They should be financially savvy and willing to invest time and resources in correctly maintaining and administering a QDT. This includes keeping up with all annual tax filings. Elville and Associates’ and its Managing Principal, Stephen R. Elville, offers a quarterly webinar presentation titled “Trustee Selection – How to Choose the Right One for You,” which discusses this important topic in depth. You can view this presentation here.
By engaging in proper planning when setting up a special needs trust for your loved ones, you are setting them up for a better and brighter future. Working with an attorney to set up your trust correctly to qualify for qualified disability trust status may make an immeasurable difference in the lives of your beneficiaries.
For guidance in estate and special needs planning, consult with the qualified attorneys at Elville and Associates. Initial consultations are free and will give you the opportunity to have your questions answered, have your attorney listen to you and understand your situation, and offer you solutions and a path forward for your planning, giving you peace of mind along the way. Contact us online here or call us at 443-393-7696 to get started today.
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While Medicaid helps pay for nursing home care, being admitted to a nursing home as a Medicaid recipient is not always easy. There are several ways to navigate the process, depending on your situation, and it is important to speak to an experienced elder law attorney who understands the process and can help streamline the application for Medicaid and necessary spenddowns for Medicaid.
With the median cost of a nursing home room being more than $250 a day, most families need help paying for long-term care. Medicaid is the primary method of covering the costs for nursing home care in the United States, but in order to qualify for Medicaid, an applicant must have limited income and assets.
Generally, nursing homes will only accept patients who can pay for their care, while Medicaid will not pay for nursing home care unless an applicant is already living in a nursing home. This creates a predicament: How to get a loved one into a nursing home in order to receive Medicaid? The following are some of the methods you can use to find a nursing home that will accept your loved one:
- Private Pay. The easiest way to get into a nursing home is to be able to pay for care while the resident’s assets are spent down in order to qualify for Medicaid. Residents who can pay privately for a few months can file a Medicaid application once they are in the nursing home and start receiving benefits when the resident’s funds are below their state’s threshold for “countable assets.” Make sure the nursing home accepts Medicaid patients — and get the timing right so that the resident doesn’t run out of funds before the Medicaid application is approved.
If the resident lacks the funds to pay for his or her own care, the resident’s family could pay. However, this is risky. The family will not be reimbursed if the resident eventually qualifies for Medicaid. It may be possible for the family to lend the money to the nursing home under a written agreement stating that the funds will be returned when the resident qualifies for Medicaid.
- Medicare. Medicare provides nursing home coverage for up to 100 days of “skilled nursing care” per illness. The patient must enter the nursing home no more than 30 days after a hospital stay that had lasted for at least three days (not counting the day of discharge). The care provided in the nursing home also must be for the same condition that caused the hospitalization (or a condition medically related to it). In addition, the patient must receive a “skilled” level of care in the nursing facility that cannot be provided at home or on an outpatient basis. And finally, Medicare covers care only for people who are likely to recover from their conditions. If a loved one meets these conditions, it is possible for them to enter a nursing home and immediately apply for Medicaid while Medicare pays in the meantime.
- Medicaid Pending. There are some nursing homes that will accept a resident who has applied for Medicaid and is awaiting a response. Unfortunately, there are only a few nursing homes that accept Medicaid pending residents without some type of payment guarantee in the event the application is denied. The nursing homes that accept Medicaid pending residents tend to be those with lower ratings for nursing home quality.
When moving into a nursing home, be careful about signing a nursing home admission agreement. Nursing homes may try to get families to agree to pay their loved one’s bills if a Medicaid application is denied. Read any agreement thoroughly and have it reviewed by your attorney.
Navigating the Medicaid process is complicated. Contact the experienced elder law attorneys at Elville and Associates, who will help you understand the process, answer your questions, and help you apply for and qualify for Medicaid and determine the best path forward.
August Is ABLE to Save Month!
August is ABLE to Save Month and ABLE programs across the country are celebrating more than 119,000 ABLE account holders nationwide. Check out this video to hear from a Maryland ABLE account holder who is proud to be saving for her dreams during ABLE to Save Month.
ABLE programs nationwide have changed the way people with disabilities and their families participate in the community, build financial wellness and plan for the future by empowering them to save and invest for the added expenses that come with having a disability without losing access to federal means-tested benefits. Learn more about how a Maryland ABLE can benefit you – both during ABLE to Save Month and beyond.
The best interest of all family members is served when you secure the counsel of an experienced professional who practices special needs planning. Take comfort in knowing you have performed a thorough investigation and have taken steps to preserve both your family’s assets and expected government benefits to provide your loved one with the best possible future you are able.
Estate planning by parents who have children with special needs includes many considerations:
- How do you leave funds for the benefit of the child without causing the child to lose important public benefits?
- How do you make sure that the funds are well managed?
- How do you make sure your other children are not over-burdened with caring for the sibling with special needs?
- What is fair for distributing your estate between your child with special needs and your other children?
- How do you make sure there is enough money to sustain your special needs child over time?
Contact the special needs planning attorneys at Elville and Associates to learn how a Maryland ABLE account can be used as part of an overall special needs plan for your loved one to enhance their quality of life and plan for the future. Call 443-393-7696, contact Jeff Stauffer at jeff@elvilleassociates.com or visit https://lnkd.in/eskx8kxu to learn more!
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