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Where to put proceeds of trust for sister on SSI and Disability?

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Justaguest

Junior Member
What is the name of your state (only U.S. law)? New York

My parents house was put in a irrevocable trust about 15 years ago. The main reason this was done was to protect my sister, who is on SSI and disability and lives in a group home. Even though she will probably never need any of this money, she is entitled to it. My parents have both passed, I am in the process of getting the house ready to list. I have 2 brothers that seem to think the proceeds will/should be split 3 ways, not 4, but that's another story. I am the trustee so I'm in charge of selling the house and determining how to hold the money for my sister. It can't be in her name, but it also shouldn't be in mine either. How do I proceed, what kind of account do I open that will protect her money AND keep it out of both of our names? Do I need to see a Trust lawyer?
 


Ohiogal

Queen Bee
What is the name of your state (only U.S. law)? New York

My parents house was put in a irrevocable trust about 15 years ago. The main reason this was done was to protect my sister, who is on SSI and disability and lives in a group home. Even though she will probably never need any of this money, she is entitled to it. My parents have both passed, I am in the process of getting the house ready to list. I have 2 brothers that seem to think the proceeds will/should be split 3 ways, not 4, but that's another story. I am the trustee so I'm in charge of selling the house and determining how to hold the money for my sister. It can't be in her name, but it also shouldn't be in mine either. How do I proceed, what kind of account do I open that will protect her money AND keep it out of both of our names? Do I need to see a Trust lawyer?
Why can't the trust be in your sister's name? Because it could then be seized to pay for her care?
 

tranquility

Senior Member
While I am uncertain as to how you can distribute outside of the specific terms of your current trust, if some money goes to sister, a special needs trust might be set up. There is no need to use this money now if the sister qualifies for government assistance. Of course, if a special needs trust is set up, any amounts left after the death of sister will be clawed back by the state. An attorney is necessary to keep the most in benefits while giving sister the most in benefits from the money.

One problem is that if the sister already has a right to get the money, even without a distribution, it might already be an asset that should be counted against her.

You need a good attorney who has knowledge of both trusts and eldercare. (Eldercare tends to have an overlapping knowledge set with government benefits for younger people as well.)
 

Justaguest

Junior Member
To answer the first question, the money would count against her. I believe there's a limit of $2.000 she can have because she's on disability. She will never be able to live on her own and will always be in some type of group home and on SSI. I figured it would be some type of Trust lawyer I need to see. Of course we would want to keep the money in the family after her passing, and obviously I need legal help with this matter. Thanks fr the input, I do have a very good trust lawyer in mind.
 

tranquility

Senior Member
To answer the first question, the money would count against her. I believe there's a limit of $2.000 she can have because she's on disability. She will never be able to live on her own and will always be in some type of group home and on SSI. I figured it would be some type of Trust lawyer I need to see. Of course we would want to keep the money in the family after her passing, and obviously I need legal help with this matter. Thanks fr the input, I do have a very good trust lawyer in mind.
While I understand the desire to protect the money for the family, either it is the sister's money or not. If not, no problem. If it is sister's, because of her special needs, a trust can be set up to effectively take it out of her ownership for government purposes during her life (With special requirements and counting rules for distributions.). But, things like medicaid reimbursement will be taken from the trust on her passing.
 

Ohiogal

Queen Bee
To answer the first question, the money would count against her. I believe there's a limit of $2.000 she can have because she's on disability. She will never be able to live on her own and will always be in some type of group home and on SSI. I figured it would be some type of Trust lawyer I need to see. Of course we would want to keep the money in the family after her passing, and obviously I need legal help with this matter. Thanks fr the input, I do have a very good trust lawyer in mind.
Quite frankly, the money is hers and should be used for her care. Instead of SSI. And it should be disbursed as ordered by your parents' will.
 

tranquility

Senior Member
Quite frankly, the money is hers and should be used for her care. Instead of SSI. And it should be disbursed as ordered by your parents' will.
If not set up properly, using it for her care will reduce the government money used for her care. Like taxes, I fail to see why a person should not take advantage of the law to gain advantage. It is not like it is a secret, both the government and the theory of special needs trusts address this particular situation. If you feel there is some moral imperative to not maximize the value of the gift to the sister, as we tell so many others, perhaps you should lobby your representatives to change the law.
 

Justaguest

Junior Member
If not set up properly, using it for her care will reduce the government money used for her care. Like taxes, I fail to see why a person should not take advantage of the law to gain advantage. It is not like it is a secret, both the government and the theory of special needs trusts address this particular situation. If you feel there is some moral imperative to not maximize the value of the gift to the sister, as we tell so many others, perhaps you should lobby your representatives to change the law.
I agree. Though the amount of money she will receive isn't important, it would only pay for her care for approximately 18-24 months. I can't even
imagine the hassle of her going off of SSI and Disability for that time frame, then having to re-qualify. Possibly not being able to live in the
very stable and safe environment where she is now. That money is meant to provide any extras that she might not be able to have now. And it might have to pay for a funeral, I'm not sure. In any case, I feel no moral obligation whatsoever to use it for her care, rather than SSI and Disability. My parents' wishes were for it to be used for her enjoyment, not her care.
 

FlyingRon

Senior Member
You don't have to "go off and requalify," she's still disabled, she just will have reduced (or no) benefits from SSI or other need based programs while she has funds from elsewhere.
 

curb1

Senior Member
Interesting comment, "My parents' wishes were for it to be used for her enjoyment, not her care."

Something about that comment that doesn't seem right.
 

tranquility

Senior Member
Be sure to let me know when the clothes on her back, or the house she lives in, or the photographs she has, or the food in her pantry exceeds what you think she deserves. The legislature has made a determination, but it seems you are smarter. How much? At what point is she a leach and not someone who is disabled?

Perhaps it would be better to just not fund any portion of her life. I mean, really, what will her contribution be?

Are you going to go by the rules decided upon by the legislature, or are you going to be smarter than everyone?

Let me know. What is your price point?
 

Justaguest

Junior Member
Be sure to let me know when the clothes on her back, or the house she lives in, or the photographs she has, or the food in her pantry exceeds what you think she deserves. The legislature has made a determination, but it seems you are smarter. How much? At what point is she a leach and not someone who is disabled?

Perhaps it would be better to just not fund any portion of her life. I mean, really, what will her contribution be?

Are you going to go by the rules decided upon by the legislature, or are you going to be smarter than everyone?

Let me know. What is your price point?
Perhaps I haven't made myself clear. I want my sister to have, spend. and/or use all the money she will get from the sale of the house. When I said I don't think it should be used for her care, I meant that it shouldn't be used to pay for the expenses that SSI and Disability currently take care of. I was looking for a way to protect it so it will be hers, and will not affect her ability to still get those services.
 

curb1

Senior Member
You have made yourself very clear. Those services are based on ability to pay. Your sister has a greater ability to pay with the proceeds of the trust. What you are wanting is for someone else to pay rather than your family. If you think about it, you will (should) realize that there is something wrong with that line of thinking.
 

Zigner

Senior Member, Non-Attorney
Perhaps I haven't made myself clear. I want my sister to have, spend. and/or use all the money she will get from the sale of the house. When I said I don't think it should be used for her care, I meant that it shouldn't be used to pay for the expenses that SSI and Disability currently take care of. I was looking for a way to protect it so it will be hers, and will not affect her ability to still get those services.
In other words, you want the government (ie: us) to pay for what she needs, leaving her money to pay for what she wants.
 

tranquility

Senior Member
Where do you people want to draw the line? If a disabled person gets a birthday card with a $20 in there, should they report it to lower the amount the government puts in? How about living in a room in their parent's house? Should the amount be reduced then? Can they have a car? A game system? Clothes newer than a decade old?

The government you are all trying to protect so much has made a set of rules to consider what a countable asset is or is not. Just like in many programs, need and ability are partial determinants, but the real issue is how we care for those less fortunate. Personally, I think we'd save more by denying people who smoke or who overeat from getting medicaid. Means test social security and deny the mortgage interest deduction as it only benefits the relatively rich. Don't get me started on how much extra money is put into education to assure equal chance to succeed when it is clear society will benefit more from a monetary standpoint from removing it from those who need extra help and put it towards those who will excel. By the way, when do we start kicking people out of their homes before they can start medicaid? It is ridiculous the government gives them money when they have assets already.

But, that is cost/benefit from a monetary standpoint. As a society, we have determined we have a greater duty than to just look at the financial balance sheet. Government policy has tried to deal with this balance through the concept of countable assets and the fact special needs trusts have to be filed (and approved) by Social Security and Medicaid administrators to be successful.

Still, why a trust? Unlike what some have said, a person has to reapply when they lose benefits due to exceeding countable assets. (It requires more than a call to a guy to tell him you are below $2,000.) One example of the problems this could cause is mentioned at http://www.hooklawcenter.com/publications/special-needs-planning/using-self-settled-special-needs-trusts-to-protect-public-benefits/
Upon settling his lawsuit, John received $500,000 in net proceeds. He immediately lost his SSI and Medicaid because he had more than $2,000 in countable assets. John began paying for services out of his own pocket at the rate of $7,700 per month, using up his entire $500,000 in 64 months. John then reapplied for SSI and Medicaid. He received SSI immediately, but since there were a limited number of slots for his type of Medicaid waiver, he was put on a waiting list and told that it would likely be two or three years before he received a slot. In the meantime, John�s medical services stopped.
Good times, that. Remember too, such trusts protects the person from himself. Is that fair? Say the disabled person becomes agitated and knocks a caregiver backwards, causing damages, is it fair to not have that caregiver compensated by the person causing the damages? If you think so, forget about most irrevocable trusts and the theory of corporations and other limited liability entities. They are hardly fair--well, unless society thinks there are other benefits to the situation.

The bottom line is that special needs trusts (aka supplemental needs trust) have been around a very long time through case law and over twenty years by federal statute. It is completely legal to create one and I feel it is more than just moral, it is an expression of love to handle the situation to the disabled person's benefit. I have heard no politician or special interest group complain about the issue and it is not going to go away in our lifetimes and does not seem to bring havoc to the public fisc. If a client came in with a situation like the OP has presented and he did not create such a trust, I would think him an idiot.
 

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