Protect Personal Injury Settlements & Inherited Assets

Susan Anderson, Esq.

Carol R. M. Moss, Esq. Hellmuth & Johnson, PLLC8050 W. 78th StreetEdina, MN 55439

952-941-4005www.hjlawfirm.com

SPECIAL NEEDS TRUSTS

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Susan Anderson, Attorney15+ Years Experience

• Law • CPA firm • Financial Trust Management • President & CEO of ING National Trust

Specialty: Estate tax consultant and preparationEstate planning: Wills, Power of Attorney, Health Care Directive Business SuccessionSpecial needs planning for disabled family membersCharitable planning ProbateGuardianship / ConservatorshipTrust Department Legal Litigation – Will and Trust Disputes

Wills for Heroes Volunteer – Firefighters & Police OfficersPACER (Parental Advocacy Center Educational Rights) – Children w/Disabilities

Estate Planning, Probate, and Business Succession

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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

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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

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Minnesota Medical Assistance

Two Main Criteria

Asset Test

Income Test

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Two Types of Trusts

1. Special Needs Trust

Beneficiary’s Funds

2. Supplemental Needs Trust3rd Party Funds

Funds considered

“unavailable” for Medical

Assistance qualification

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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

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SPECIAL NEEDS TRUST

Requirements

Creator/Grantor: Parent, grandparent, legal guardian, conservator or court

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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

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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

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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

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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

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SPECIAL NEEDS TRUST

TerminationTerminates 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

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SPECIAL NEEDS TRUST

TrusteeCannot be the beneficiary

Individual or corporate fiduciaryTrustworthy, organized, time to handle matters, geographic location

Co-trustee – individual and corporate trustee option

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SPECIAL NEEDS TRUST

Continuing court supervision required?

No - parents/grandparents are grantors

Yes – guardian or conservatorGuardian or conservator

Order approving litigation settlement, verdict amount, divorce decree

Confirm trustee

Annual Accounting

Varies by jurisdiction

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SUPPLEMENTAL NEEDS TRUST

Funded by third party funds (someone other than the beneficiary, or beneficiary’s spouse*

InheritanceIntervivos

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

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ESTATE TAXFederal Estate Tax Table

YearEstate Tax

Exemption & Portable?

Top Estate Tax Rate

Step –Up Basis

1997 $600,000 No 55% Yes

1998 $625,000 No 55% Yes

1999 $650,000 No 55% Yes

2000 $675,000 No 55% Yes

2001 $675,000 No 55% Yes

2002 - 2003

$1,000,000 No 50% Yes

2004 - 2005

$1,500,000 No 48% Yes

2006 - 2008

$2,000,000 No 46% Yes

2009 $3,500,000 No 45% Yes

2010 Unlimited 0% No

Year Estate Tax Exemption

Top Rate Step-Up Basis

2011-2012 5,000,000 Yes

35% Yes

2013 ? 55% ? ?

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ESTATE TAXMN Estate Taxes

For amounts over $1,000,000 the following appliesRate +$

$ 0 . . . . $ 40,000 . . . . . . . . . $ 0 . . . . . . . . . . . . . . . . . .$ 0 40,000 . . . . . .90,000 . . . . . . .40,000 . . . . . .0.8% . . . . . . . . . 0 90,000 . . . . .140,000 . . . . . . . 90,000 . . . . . .1.6% . . . . . . . 400 140,000 . . . . .240,000 . . . . . . 140,000 . . . . . .2.4% . . . . . .1,200 240,000 . . . . .440,000 . . . . . . 240,000 . . . . . .3.2% . . . . . .3,600 440,000 . . . . .640,000 . . . . . . 440,000 . . . . . .4.0% . . . . .10,000 640,000 . . . . .840,000 . . . . . . 640,000 . . . . . .4.8% . . . . .18,000 840,000 . . . 1,040,000 . . . . . . 840,000 . . . . . .5.6% . . . . .27,600 1,040,000 . . . 1,540,000 . . . . .1,040,000 . . . . . .6.4% . . . . .38,800 1,540,000 . . . 2,040,000 . . . . .1,540,000 . . . . . .7.2% . . . . .70,800 2,040,000 . . . 2,540,000 . . . . .2,040,000 . . . . . .8.0% . . . .106,800 2,540,000 . . . 3,040,000 . . . . .2,540,000 . . . . . .8.8% . . . .146,800 3,040,000 . . . 3,540,000 . . . . .3,040,000 . . . . . .9.6% . . . .190,800 3,540,000 . . . 4,040,000 . . . . .3,540,000 . . . . .10.4% . . . .238,800 4,040,000 . . . 5,040,000 . . . . .4,040,000 . . . . .11.2% . . . .290,800 5,040,000 . . . 6,040,000 . . . . .5,040,000 . . . . .12.0% . . . .402,800 6,040,000 . . . 7,040,000 . . . . .6,040,000 . . . . .12.8% . . . .522,800 7,040,000 . . . 8,040,000 . . . . .7,040,000 . . . . .13.6% . . . .650,800 8,040,000 . . . 9,040,000 . . . . .8,040,000 . . . . .14.4% . . . .786,800 9,040,000 . . 10,040,000 . . . . .9,040,000 . . . . .15.2% . . . .930,800 10,040,000 . — — — — . . . .10,040,000 . . . . .16.0% . . 1,082,800

TOP RATE CAN = 16%

$1 Million

EXEMPTION

NOT PORTABLE.

Still need A/B trust.

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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

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SUPPLEMENTAL NEEDS TRUST

AdministrationSame/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

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SUPPLEMENTAL NEEDS TRUST

TerminationTerminates 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

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SUPPLEMENTAL NEEDS TRUST

TrusteeCannot be the beneficiary – deemed “available”

Individual or corporate fiduciaryIf 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

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TRUST OR STRUCTURED SETTLEMENT

When is a trust beneficial to a beneficiary versus a Structured Settlement?

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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.

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Questions…

Susan Anderson, Esq. Carol R. M. Moss, Esq.

Hellmuth & Johnson, PLLC8050 W. 78th StreetEdina, MN 55439

952 941 4005www.hjlawfirm.com