Planning for Life

Can Trust Pay for Voodoo Cure?

Posted by Harry S. Margolis on January 24, 2021

By Harry S. Margolis

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Both the issues and the clients faced by trustees of special needs trusts can be significantly different from those faced by trustees of more traditional trusts created for asset management, tax, and asset protection purposes.

I am co-trustee of a trust holding funds derived from a medical malpractice award for a severely handicapped girl with cerebral palsy. She was born in the United States, but her parents came from the Dominican Republic.

Some years ago, the girl’s mother called me and asked whether the trust would pay for medications from Venezuela that had helped another girl with cerebral palsy. I was rather skeptical, but didn’t want simply to say “no.” So, I asked a number of questions about the name of the medication, its derivation, its dosage, and the amount of times the girl would have to take it. The mother said she would try to get answers to my questions.

A few minutes later, the mother called back to apologize for not being entirely straight with me. It turned out that she did not need the money for medicine, but for a voodoo cure. She was convinced that the reason her daughter had been born with her ailment was that while she was pregnant someone had put a curse on her, the mother. The voodoo doctor, for a fee, would remove the curse.

Being trained in a western tradition, I have no knowledge of these affairs. So I agreed to meet the mom halfway, to split the cost of the voodoo treatment. She paid for half out of her pocket; the trust paid for the other half. Unfortunately, the treatment didn’t work.

As this story indicates, trustees can be asked to pay for items or services that may run counter to their own values or best judgement. Should a trust pay for video games, plastic surgery, pornography, or an abortion? Guidance from the grantor of the trust can be helpful. But in the case of a special needs trust funded as the result of litigation, there really is no grantor. So, in that case, the trustee must make a judgement based on what she believes to be in the best interest of the beneficiary. That can include a consideration of the benefit the trustee believes the beneficiary will receive from the item or service. It should also consider the financial standing of the trust. Can the trust afford this payment, or would it deplete the resources available for services the beneficiary may need?

In the case of the voodoo treatment for my beneficiary, while I was almost 100% certain it would not work (always allowing for the possibility that my western view of how the world works could be wrong or limited), I felt there was value in strengthening my relationship with her mom. I do think that worked. My relationship with the family has grown as I've watched the mom continue to devote her life to caring for her largely bedridden and uncommunicative daughter. (It also helped when, years later, my co-trustee and I met the mom's sister and it turned out he and she knew people in common. Boston can be a small town in many ways.)

As a side note, if the voodoo treatment had worked, or if we truly believed that a voodoo curse was the cause of the initial injury, this would raise a serious doubt about the medical malpractice case which was the source of the trust funds. If the cause was voodoo, how can we find the doctor truly at fault?

 

Related Articles:

What You Need to Know about Special Needs Trusts and Taxes

SNT vs. ABLE Account: Which Makes More Sense for You

Congress Passes Special Needs Fairness Act

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Topics: Special Needs Trust, trustee

Can You Put a Retirement Plan in a Special Needs Trust?

Posted by Harry S. Margolis on December 19, 2020

By Harry S. Margolis
 
retirement-plan-special-needs-trust-estate-planning-attorney-Wellesley-MA-02481

It's not unusual for parents of children with special needs, or individuals who have become disabled as adults, to have retirement plans as a significant portion of their assets. In such cases, the question arises as to whether they can put a retirement plan into a special needs trust. The answer, as with many legal questions, is "it depends." Also, the answer has changed significantly since passage of the SECURE Act at the end of 2019.

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Topics: special needs planning, Retirement Planning, Special Needs Trust

Why You Might Want a SECURE SNT

Posted by Harry S. Margolis on August 15, 2020

By Harry S. Margolis

SNT-Special-Needs-Planning-attorney-Wellesley-MA-02481

As we've discussed before (here), the SECURE Act, passed at the end of 2019, changed a number of rules regarding inherited IRAs, making it more difficult to "stretch" them for most beneficiaries. However, an exception to the new rules could upend the advice we've often given clients doing special needs planning.

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Topics: special needs planning, Retirement Planning, Special Needs Trust

What You Need to Know about Special Needs Trusts and Taxes

Posted by Harry S. Margolis on January 22, 2020

By Harry S. Margolis

special-needs-trust-Wellesley-tax

Trusts created for individuals with special needs generally fall into two broad categories: those created with the beneficiary's own funds, often from the proceeds of a personal injury settlement, and those funded by third parties, often by parents and grandparents. The tax treatment of the two trusts is somewhat different.

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Topics: special needs planning, income taxes, Special Needs Trust

3 Implications of the SECURE Act

Posted by Harry S. Margolis on January 14, 2020

By Harry S. Margolis

SECURE-Act-retirement-planning-attorney-Wellesley-MA

We reported on the SECURE Act when it was enacted at the end of 2019. (You can read about the rules it changed here.) Since then, we and other attorneys have been parsing it and learning a lot more about how its changes work and how they may affect clients. Here's some of our new learning:

1.  Estates in Progress May Want to Disclaim

Except for eligible beneficiaries (spouses, minor children, and disabled or chronically ill individuals), those inheriting IRAs from decedents dying this year and in the future will have to withdraw and pay taxes on the inherited accounts within 10 years from the year of the original owners death. Those who inherited IRAs from people dying before this year can continue to "stretch" out the distributions through their own lifetimes.

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Topics: Retirement Planning, Special Needs Trust, Retirement Benefits, SECURE Act

SNT vs. ABLE Account: Which Makes More Sense for You

Posted by Harry S. Margolis on October 15, 2019

By Harry S. Margolis

ABLE-accounts-special-needs-trusts-Wellesley-MA

We have prepared a handout to assist beneficiaries of Supplemental Security Income and other public benefits programs to determine whether they're better off using ABLE accounts or special needs trusts, or both.

Both ABLE accounts and SNTs permit the beneficiary to maintain eligibility for public benefits programs will being the beneficiary of funds held in reserve, but both also have their advantages and drawbacks. Here are a few of them:

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Topics: special needs planning, supplemental needs trusts, Special Needs Trust, ABLE Accounts, Attainable Savings Plan, Supplemental Security Income

When to Use an ABLE Account

Posted by Harry S. Margolis on January 29, 2019

By Harry S. Margolis

ABLE-account-special-needs-planning-attorney-Wellesley-MA

ABLE accounts were created by the Achieving a Better Life Experience Act of 2014 as an alternative to special needs trusts and to share the benefits of 529 plans for people who are unlikely to pursue higher education. They only go part way towards those goals but nevertheless can be very useful in providing flexibility around very strict public benefit rules, especially those of the Supplemental Security Income (SSI) program.

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Topics: special needs planning, Special Needs Trust, ABLE Accounts, Attainable Savings Plan

Divorce-Created SNT Deemed Self-Settled for Creditor Purposes

Posted by Harry S. Margolis on January 22, 2019

By Harry S. Margolis

SNT-creditor-special-needs-trust-estate-planning-attorney-Wellesley-MA

In determining eligibility for MassHealth and Supplemental Security Income (SSI), the state and federal agencies treat self-settled trusts—those created by the applicant for benefit—and third-party trusts—those created by someone else—entirely differently. The assets held in a self-settled trust are considered available to the applicant for benefits to the extent the trustee has discretion to distribute them to the applicant or to use them for her benefit. The assets of a third-party trust are only considered available to the extent the trustee actually distributes them to or uses them for the applicant for benefits.

These rules track the rules for creditors. With some exceptions, creditors can gain access to assets in trusts created by the debtor and cannot gain access to trusts created by someone else for the benefit of the debtor. The issue in the case of Calhoun, et al. v. Rawlins (93 Mass. App. Ct. 458, June 27, 2018) is whether a trust created by one divorcing spouse for the benefit of the other spouse is protected from the creditors of the beneficiary spouse. This has significance for special needs planning because it's not unusual for a special needs trust to be created in the context of divorce.

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Topics: special needs planning, divorce, Special Needs Trust, creditor protection

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