I’m Disabled, Not Incompetent … Why Can’t I Establish My Own Trust?

Special needs trusts are an important tool in an elder care attorney’s toolbox. Established correctly, SNTs allow a person to qualify for public benefits such as Medicaid or SSI while maintaining assets in a trust to supplement the funds provided by such programs. First-party SNTs are established with funds that belong to the beneficiary. By placing the assets into a first-party SNT, the beneficiary can reduce his or her resource level to below the $2,000 required by Medicaid and SSI to qualify for benefits. Unlike SNTs established with third-party funds, a first-party SNT will include a government payback provision. Often, competent adults who have a physical injury or disease will want to establish first-party SNTs, with the appropriate government lien, for themselves.

Bigstock-Disabled-Athlete-With-The-Whee-85935989Since the Omnibus Budget Reconciliation Act of 1993, it has been a legal requirement that first-party special needs trusts be established by a parent, grandparent, guardian or court. This requirement has caused some issue for competent disabled adults who wish to establish their own trusts, and it is in direct conflict with the pooled trust. Pooled trusts, which are special needs trusts run by a non-profit third party for a pool of beneficiaries who place their own funds in the trust, were permitted by Congress in 1993 as well. Because of these issues, the Special Needs Trust Fairness Act was resubmitted to Congress in 2015 asking for a law allowing competent disabled adults to establish first-party SNTs for themselves.

Currently, the act has passed the Senate and is now under consideration by the House Committee on Energy and Commerce. As an issue of policy, it is highly likely the bill will pass a vote in the full House as well. Passing this bill will free up court time and resources and cut down on unnecessary costs for disabled adults. It will also offer us, as elder care attorneys, another option to provide clients who are receiving benefits and who inherit or are awarded a lump sum of money over $2,000. Imagine the convenience to our disabled clients of establishing their own trusts, picking their own trustees and having funds readily available for the remainder of their lifetimes to supplement their SSI benefits without the necessity of court intervention.

You can follow the progress of the bill on or contact your own representative to establish your support as an elder care professional by referencing H.R.670 – Special Needs Trust Fairness Act of 2015.  We will keep you updated at LWP as the bill continues to move forward becoming law and providing an exciting new opportunity for our clients!

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Kimberly M. Brannon, Esq., Legal-Technical and Software Trainer


How To Know When An SNT Needs A Tax ID Number

The question among many practitioners is, does a supplemental needs trust need a separate tax I.D. number and have to file a separate income tax return?  The answer is, it depends.  So let's examine when an SNT needs a separate tax I.D. and when it doesn’t.

Bigstock-School-Kids-on-a-Chalkboard-14563127A supplemental needs trust will be a first party or third party trust.  A first party supplemental needs trust is funded with assets of the disabled individual who is also the beneficiary of the trust.  Under law a first party supplemental needs trust can only be created by the parent or grandparent of the individual, or a court.  Once the first party supplemental needs trust is created, it will not require a separate tax I.D. number, but instead will use the tax I.D. number of the disabled beneficiary.  All income earned by the first party supplemental needs trust will be reported on the income tax return of the disabled beneficiary, but will not affect or be counted toward their continuing eligibility, as long as distributions are made on the beneficiary’s behalf and not made directly to the beneficiary.

A third party supplemental needs trust is created and funded by someone other than the disabled beneficiary, but for the benefit of a disabled beneficiary.  Whether a tax I.D. number is required for the third party SNT will depend upon how the trust is structured.  In most third party SNT’s, the creator of the trust (grantor) wishes to maintain control of the trust for the benefit of the disabled beneficiary.  In this case, no separate tax I.D. number would be required as it would be considered a "grantor" trust and all income would be taxed to the grantor.  If the grantor is not the trustee, but retains other identified rights, then the same rules would apply.  Alternatively, if the grantor creates a trust and retains no rights to change it, benefit from it or control its distribution, then it may be a non‑grantor trust and need a separate tax identification number. 

Similarly, after the grantor who created the trust and retained rights to make it a grantor trust dies, the third party supplemental needs trust now becomes a "non‑grantor trust" and requires a separate tax identification number.  Annual income tax returns would have to be filed for non-grantor SNT’s but the actual tax will be deemed payable by either the beneficiary, or the trust, depending upon the actual distributions made.  For example, if a supplemental needs trust earned $10,000.00 in a year, and they used $7,000.00 of it for the beneficiary, it would "pass through" the $7,000.00 in taxable income to the beneficiary on a Form K1.  The remaining $3,000.00 retained in the trust, would be taxed at the trust tax rate and payable by the trustee directly with the tax return filed by the trust with the IRS.  Finally, in relation to IRAs, the IRS has ruled in Private Letter Ruling 200820026, that an IRA payable to a supplemental needs trust at the death of the IRA owner, will not be required to be liquidated and, but instead, the age of the disabled beneficiary will be used for "stretch purposes" and it will be considered a grantor trust of the beneficiary for purposes of the IRA distribution.

So does a supplemental needs trust need a tax I.D. number?  No and yes it all depends how you create the trust during lifetime and how you plan for it!

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  • Learning the difference between General Asset Protection, DAPT Protection, Medicaid Protection and iPug® Protection
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David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center


Congratulations to Peggy Timmel, LWP Member Of The Month

What is the greatest success you’ve had since joining LWP? 

Organization + Confidence = Increasing Success.  That’s the formula we now have in place.  Sure, we still are working through some of the processes, making them our own and getting the kinks worked out when and as needed.  Not all clients initially expect the process to be as involved, but there is no doubt that our efforts are appreciated. 

PhotoWhat is your favorite LWP tool?

LWP Meeting Focuser (the green sheet) – it may sound strange to some members, but that sheet is reviewed at the end of client meetings so that tasks are delegated and the next meeting with the client put on the calendar.  I’ve been using it for cases that are pre-LWP or non-LWP, like guardianships.  It keeps our team more focused and allows us to move our clients through the entire process more smoothly.

How has being part of LWP impacted your team and your practice? 

We get to travel three times a year and always come back with something to improve our practice.  It has been incredibly helpful to have the support system that LWP provides.  The members provide a great community of support and the LWP systems and processes give us a great foundation to continually improve our practice.


Defensive Use Of Powers Of Attorney

The General Durable Power of Attorney (“GDPOA”) has often been described as the most effective burglary tool since the crowbar.  The defensive use of the elder principal’s GDPOA can minimize the potential for Elder Financial Abuse.  Proper counseling of an elder by the estate planning attorney, and customized drafting of the GDPOA to address the elder’s specific worries about the powers granted to the agent, can help minimize the potential for EFA. 

Bigstock-Power-Of-Attorney-30978749Of particular concern to many elders is the abuse of gifting authority under the GDPOA, or other granted powers that could defeat her estate plan if used improperly by an unscrupulous agent.  Other problematic powers that are routinely granted under many boilerplate GDPOAs include the authority to make tax-motivated transfers, to exercise disclaimers or powers of appointment, to sell assets subject to a specific bequest in the elder’s Will, to change beneficiary designations for the elder’s non-probate assets (for example, life insurance, retirement plans, accounts with transfer-on-death or pay-on-death designations), to create joint interests with the right of survivorship, and to create, amend, revoke, or terminate an inter vivos trust that would avoid the probate process. 

The law in many states requires a person to opt-in to each and every power granted under a GDPOA, especially the powers noted above.  Although the expense of customized drafting, explanations of opt-in powers and review of worst case scenarios for the illicit use of granted powers can be significant, these approaches can provide enhanced protection against EFA for the elder and the intended beneficiaries of her estate plan.

Additional protection against EFA can be afforded by setting forth in the GDPOA specific duties of the agent (signed and acknowledged by the agent), including the duties of loyalty, good faith, and due care; a duty to keep the principal’s property separate from that of the agent; the duty to denote clearly any of the principal’s property titled in the name of the agent in that capacity; and the duty to keep a contemporaneous record of each transaction undertaken by the agent on behalf of the elder, a running account of all receipts and disbursements as agent, and a full annual (or more frequent) accounting to the principal, her conservator, if any, other persons designated in the GDPOA to receive this information, and to the elder’s executor or other personal representative within 90 days of her death.

The GDPOA should also address self-dealing and conflicts of interest that inure to the benefit of the agent, including any specific examples the elder wishes to identify (for example, investments in the agent’s personal business or improvements to the agent’s residence or other properties).  The GDPOA should also outline whether and how the agent is to be compensated for services while acting as agent (for example, hourly at a specified rate, or a fee based on the value of the assets under management).  Fairly compensating an agent can encourage him to be more honest, attentive and diligent in the exercise of his duties, and help forestall EFA.

If you are interested in learning more about what it means to be a Lawyer With Purpose.  Come join us in Phoenix for 2.5 days of technical legal information at the 2014 Asset Protection, Medicaid & VA Practice With Purpose Program October 20-22nd.  Click the link to register today!

Kristen M. Lewis, Esq., Member of the Special Needs Alliance and Fellow of the American College of Trust and Estate Counsel.


Multi-Disciplinary Team Of Professional Advisors

Assembling a multi-disciplinary team of allied professionals to advise an elder on a consistent periodic basis can contribute significantly to the prevention of elder financial abuse.  Key members of such a team could include the following.

Bigstock-success-and-winning-concept---53462125National Elder Law Foundation

Geriatric care manager

National Association of Professional Geriatric Care Managers (NAPGCM)

Life care planner

American Association of Nurse Life Care Planners (AANLCP)

Investment advisor

Investment Advisor Search

SEC’S Investment Adviser Public Disclosure website

Government benefits specialist

Home accessibility specialist

Accessibility Professionals Association (APA)


American Institute of Certified Public Accountants (AICPA)

Household manager

International Concierge and Lifestyle Management Association (ICLMA)

Bookkeeper or bill payer service

National Association of Certified Public Bookkeepers (NACPB)

American Association of Daily Money Managers

Elder mediator

Academy of Professional Family Mediators (APFM)

While the compensation of all of these allied professionals can be costly, the end result of their team efforts could save the elder multiples of that cost if significant financial abuse and exploitation is forestalled.

Kristen M. Lewis, Esq., Member of the Special Needs Alliance and Fellow of the American College of Trust and Estate Counsel.


Probate Court Remedies For Elder Financial Abuse

The Probate Court (or other state court with jurisdiction over alleged incapacitated adults) generally has the power to order numerous actions and remedies for elder financial abuse, each of which typically has its own procedural and evidentiary requirements.

Bigstock-Will-7981786The appointment of a limited or full conservator for the elder, with court-supervised responsibility for managing the elder’s assets, is typically ordered as a “defensive” protective measure.  During the pendency of a conservatorship proceeding, which can be a time-consuming proposition, consideration should be given to obtaining one or more of the following temporary remedies.

(1)  Temporary restraining order to prevent irreparable harm to the elder and her assets.

(2)  Preliminary injunction to preserve the elder’s assets while the conservatorship action is pending, coupled with court-ordered disbursements for the elder’s benefit during the pendency of the action.

(3)  Recordation of a lis pendens (Latin for “litigation pending”) in the deed records of any county in which the elder owns real property, putting third parties on notice of possible claims against, or title issues with respect to, the elder’s real estate assets.

Practitioners have reported a disturbing recent trend of filing “offensive” or “attack” conservatorship proceedings.  See Vivian L. Thoreen and Dana G. Fitzsimons, Jr., Elder Financial Abuse: Protecting the Aging Client from the Den of Thieves, 46th Annual Heckerling Institute on Estate Planning, Jan. 2012.  Cited examples include “[a] child, alienated from an elderly affluent parent and likely to be disinherited, seeks control of the parent’s assets to frustrate the parent’s estate plan by draining its assets.  Another example is the child, angry about being excluded from the parent’s lifetime giving, seeking to block generosity to other family members or charities, or to compel “gifts” to himself against the will of the parent.  In even more distasteful circumstances, the child may seek to restrict the parent’s lavish lifestyle or to limit expensive care so as to preserve a future inheritance.”  Id

Another disturbing offensive tactic that has emerged in recent years is that of “granny snatching” (i.e. removing an elder from her home state to another jurisdiction for the sole purpose of filing a guardianship or conservatorship proceeding there based on the elder’s physical presence in that jurisdiction).  This tactic has been curtailed in recent years as the vast majority of states have enacted the Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act (“UAGPPJA”) in some form, promulgated in 2007.  

Notably absent from the list of 38 states and the District of Columbia that have enacted, or recently introduced legislation to enact (Massachusetts, Mississippi and New York), the UAGPPJA are several southern states, including Georgia, Florida, Louisiana, North Carolina and Texas.  (The other non-adopters are California, Kansas, Michigan, New Hampshire, and Wisconsin.)

If your at all interested in learing more about Lawyers With Purpose please join us in Chicago in June!  You can contact Molly Hall at 877-299-0326 x 201 or  Register today – seats are filling fast!

Kristen M. Lewis, Esq., Member of the Special Needs Alliance and Fellow of the American College of Trust and Estate Counsel.


Civil Remedies For Elder Financial Abuse

Private civil actions for elder financial abuse under state law could include a complaint for restitution, compensatory damages, and punitive damages under one or more of the following.  The burden of proof for civil claims is usually "preponderance of the evidence."

  1. Specific statutory causes of action for elder financial abuse or exploitation.
  2. Fraud or constructive fraud on the elder.
  3. Breach of fiduciary duty, or aiding and abetting a breach of fiduciary duty, to the elder.
  4. Negligence.
  5. Rescission of transactions that damaged the elder.
  6. Conversion of assets stolen from the elder.
  7. Actions for an equitable accounting of the actions of a fiduciary charged with managing the property of the elder, whether as a Trustee or an agent (e.g. under a Power of Attorney).  Section 116 of the Uniform Power of Attorney Act (“UPOAA”) allows for certain persons to petition a court only “to construe” a Power of Attorney or “to review the agent’s conduct” thereunder, and to grant appropriate relief, but only if the Principal lacks the capacity to revoke the Agent’s authority or the Power of Attorney.  The persons who may petition for this judicial relief include the following.

a.     The Principal or the Agent

b.    A guardian, conservator, or other fiduciary acting for the Principal

c.    A person authorized to make health care decisions for the Principal

d.    The Principal’s spouse, parent, or descendant

e.    An individual who would qualify as a presumptive heir of the Principal

f.    A person named as a beneficiary to receive any property, benefit, or contractual right upon the Principal’s death, or as a beneficiary of a trust created by or for the Principal, that has a financial interest in the Principal’s estate

g.    A governmental agency having regulatory authority to protect the welfare of the Principal

h.    The Principal’s caregiver or another person that demonstrates sufficient interest in the Principal’s welfare

i.    A person asked to accept the Power of Attorney.

Bigstock-Several-Law-Books-With-Paragra-3525997Disinheritance statutes.  Several states (including Arizona, California, Illinois, Maryland, Oregon, and Washington) have enacted so-called “disinheritance statutes,” modeled after the more commonly encountered “slayer statutes.”  These laws preclude a convicted perpetrator of elder financial abuse from receiving benefits as a consequence of the death of the elder victim.  The abuser is deemed to predecease the victim for purposes of some or all of the following.

  1.  Inheritance under a Will or Living Trust.
  2. Inheritance under intestate statutes.
  3. Receipt of life insurance proceeds as a designated beneficiary.
  4. Elective share, statutory share, or homestead rights.
  5. Fiduciary appointments under documents executed by the elder victim.
  6. Benefitting as a permissible appointee of a power of appointment.

Registries of persons convicted of elder abuse.  Increasingly, Adult Protective Services agencies are creating and maintaining a registry of convicted elder abuse offenders that can be used to ascertain whether a prospective in-home caregiver (or other person with access to the elder) might have a history of, or propensity for, elder abuse.

Kristen M. Lewis, Esq., Member of the Special Needs Alliance and Fellow of the American College of Trust and Estate Counsel.




Remedies for Elder Abuse: Criminal Prosecution

Additional challenges for prosecuting elder financial abuse are presented by the growing number of interstate and international mass marketing fraud cases.  Such cases include “grandparent scams,” foreign lottery scams and internet scams.  Coordination among local law enforcement authorities in multiple jurisdictions (domestic and international) is labor-intensive and problematic. 

Bigstock-Brown-Gavel-46632817Lines of communication between local agencies and the numerous federal agencies that have authority to investigate and prosecute interstate and international scams is either informal or non-existent.  Federal agencies involved in combating interstate and international financial crimes include the following.


  • Consumer Protection Financial Bureau.

  • Federal Trade Commission.

  • Securities and Exchange Commission.

  • Postal Inspection Service.

  • Federal Bureau of Investigation.

  • Department of Justice.

  • Department of the Treasury.

Federal elder justice programs are administered and funded through a complex intergovernmental structure.  The Older Americans Act of 1965 (42 U.S.C. § 3001 et seq.) established the Administration on Aging (“AoA”) within the Department of Health and Human Services (“HHS”) as the chief federal advocate for older Americans, and assigned responsibility for elder abuse prevention to the AoA.  In April 2012, HHS established the Administration for Community Living, which brought together the AoA, the Office of Disability and the Administration on Developmental Disabilities “to better align the federal programs that address the community living service and support needs of both the aging and disability populations.”  See GAO, Elder Justice: More Federal Coordination and Public Awareness Needed (GAO-13-498)(Washington, D.C., July 10, 2013), at 4 (available at 

The Department of Justice supports HHS elder justice programs and activities by pursuing civil and criminal prosecutions of elder abuse and neglect, as well as health care fraud matters.  Id.  at 7.  The Consumer Financial Protection Bureau (an independent Bureau within the Federal Reserve System) is charged with combating elder financial abuse through its recently established Office of Financial Protection for Older Americans (authorized by 12 U.S.C. § 5493(g)(3)) (“OFPOA”). Id. at 8.  The functions of the OFPOA must include activities designed to facilitate the financial literacy of persons age 62 and older to protect them from unfair, deceptive, and abusive practices.  See 12 U.S.C. § 5493(g)(1).

Kristen M. Lewis, Esq., Member of the Special Needs Alliance and Fellow of the American College of Trust and Estate Counsel.



Financial Abuse of Elders & Other At Risk Adults – Part 9

Remedies For Elder Financial Abuse: State Criminal Prosecution

Although the Adult Protective Services (“APS”) statutes and programs in all 50 states and the District of Columbia recognize elder financial abuse as a reportable action, not all states specifically recognize elder financial abuse or exploitation as a distinct crime.  In those states, however, basic criminal laws against theft, fraud, deception, larceny, forgery, and embezzlement can be invoked to prosecute elder financial abuse and seek restitution for the elder.  The burden of proof for a conviction under such statutes is typically “beyond a reasonable doubt.”

Bigstock-Abusedpiggy-6651443Frequently, however, prosecutors refuse to pursue elder financial abuse actions for a variety of reasons, including (i) insufficient support of APS investigations by law enforcement personnel; (ii) limited budget resources; (iii) the effect of the incapacity or death of the victim on the ability to marshal sufficient probative evidence; and (iv) the refusal of the victim to cooperate with the development of the case.

Specially trained multi-disciplinary teams of criminal justice and social service professionals are increasingly being trained and deployed to enhance state efforts to prosecute elder financial abuse.  Collaboration between and among the following disciplines promises to increase the effectiveness of state efforts to convict and punish the perpetrators of elder financial abuse: (i) APS,State Units on Aging, and Long-term Care Ombudsman Offices (“LTCO”); (ii) state and local law enforcement agencies; (iii) policy makers; (iv) financial and banking industries; (v) legal; (vi) social services agencies and social workers; (vii) medical and mental health care providers; (viii) public health officials; (ix) medical examiners and coroners; (x) state insurance, banking, and securities regulators; (xi) district Attorneys and state Attorneys General; and (xii) consumer protection agencies.

An example of a successful multi-disciplinary team established by the Georgia Department of Human Services Division of Aging Services, Forensic Special Investigations Unit, is the “At-Risk Adult Crime Tactics” (“ACT”) Specialist Program.  Over 800 ACT specialists are working in Georgia, with promising results at the local, state and federal levels to combat and prosecute the abuse, neglect and exploitation (“ANE”) of at-risk adults.  An ANE work group comprised of representatives of local agencies (e.g. county and city police departments, county District Attorney’s Offices), state agencies (e.g. the Georgia Bureau of Investigation, APS, LTCO, Medicaid, Inspector General, Georgia Association of Chiefs of Police, Georgia Criminal Justice Coordinating Council), and federal agencies (e.g. the FBI; the Offices of Inspector General of the Social Security Administration, HHS, FDA, VA; and the United States Attorney’s Office) meets bi-annually to identify and address obstacles to preventing and prosecuting crimes against at-risk adults.  Recommended solutions include the following.

(a) Increased public education and awareness of ANE of at-risk adults.

(b) Mandatory training of criminal justice personnel at all levels (e.g. law enforcement, prosecutors, judges) on ANE of at-risk adults.

(c) Expedited investigation and prosecution of crimes against at-risk adults.

(d) Development and codification of evidence preservation procedures designed to enhance prosecution of ANE crimes against at-risk adults.

(e) Development of multi-disciplinary cooperation and collaboration between law enforcement and non-law enforcement government agencies to ensure equal protection for at-risk adult victims.

(f) Facilitation of information sharing between and among government agencies to support investigations and enforcement.

(g) Statutory changes to enable law enforcement to obtain financial records related to abuse and exploitation in a no-cost or low-cost manner.

(h) Development of funding resources to implement the foregoing recommendations.

The activities of the Georgia Department of Human Services Division of Aging Services to combat the societal plague of ANE of at-risk adults is documented in a recent public television production Elder Abuse: Hiding in Plain Sight (available at

Part 10 of this series will explore the challenges of prosecuting interstate and international elder financial abuse schemes.

Kristen M. Lewis, Esq., Member of the Special Needs Alliance and Fellow of the American College of Trust and Estate Counsel.



Financial Abuse of Elders & Other At Risk Adults – Part Eight

Parts 6 and 7 of this series addressed the roles of Adult Protective Services and the Long-Term Care Ombudsman Programs in investigating and redressing alleged elder financial abuse.  There are several other resources available to handle the myriad legal issues raised by this crime.

Bigstock-Abusedpiggy-6651443The Older Americans Act provides funding for state legal services programs designed to address the needs of elders.  In the context of elder financial abuse, such programs can provide no-cost access to the justice system by offering advocacy, advice and legal representation to persons 60 years of age or older, including access to an attorney.  Due to limited budgetary resources, these legal services programs accept only a small percentage of the cases referred to them.  The staff of these programs also routinely present community education programs addressing topics of interest to elders, including consumer fraud and financial exploitation.  This type of community education often helps prevent elder financial abuse from occurring.

Some states also maintain a Senior Legal Hotline, which provides brief telephone assistance and advice on civil legal matters to, and on behalf of, persons 60 years of age and older.  Attorneys are available to answer legal questions during regular business hours.  Additional resources are sometimes available by collaborating with APS programs if the case involves elder abuse and neglect, adult guardianship or conservatorship matters, or elder financial exploitation. 

Increasingly, private law firms are offering pro bono legal services to the victims of elder financial abuse.  Holland and Knight, which represented Mickey Rooney in a well-publicized civil lawsuit for financial abuse against his step-son, Christopher Aber, has created “The Mickey Rooney Elder Abuse Pro Bono Project.”  Private attorneys agree to pursue elder abuse cases that otherwise would not be pursued.  The initiative is reportedly being replicated in law firms across the country.

Kristen M. Lewis, Esq., Member of the Special Needs Alliance and Fellow of the American College of Trust and Estate Counsel.