Below you will find the course materials for the Special Needs Trust teleconference. Please be sure to download, complete, and send in your Evaluation Form so that we may continue to provide quality seminars.
Click on the links below to be directed to specific topics on this web page, or you may download the files at the bottom of the page for printable versions of each section.
Please note: among the links at the bottom of this page, there is an article written by Gale Flandreau that is not among the information below. You will need to click on the link called "Administering Fiduciary Accounts for Special Needs Clients" at the bottom of this page to access this article. This article is reprinted with permission of the Philadelphia Estate Planning Council which recently published the article in its Fall 2003 newsletter, Vol. XIII, No. 1.
Special Needs Trust:
What Personal Injury Attorneys Need to Know
Wednesday, January 28, 2023
12:00 p.m. -1:30 p.m.
No Substantive CLE Credits
- The Personal Injury Attorney and Special Needs Trust (Kevin R. Marciano, Esq.)
- Getting the Money, but Making Sure It Does Not Disqualify Your Client for Critical Public Benefits
- Special Needs Trust (Dennis C. McAndrews, Esq. and E. David Margolis, Esq.)
- What They Are
- When to Use Them
- Keeping Your Client Happy
- Trust Officers (Gale Flandreau, Esq.)
- The Role of the Corporate Fiduciary in Accepting and managing Special Needs Trust
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Please use the following scale to rate the faculty.
Please consider factors such as their knowledge of the subject matter, manner of presentation and general lecture content in selecting the appropriate score.
5 - Excellent
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3 - Met Expectations
2 - Needs Improvement
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__________ Kevin R. Marciano, Esq.
__________ Gale Flandreau, Esq.
__________ Dennis C. McAndrews, Esq.
__________ E. David Margolis, Esq.
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Kevin R. Marciano, Esq.
Anapol, Schwartz, Weiss, Cohan, Feldman and Smalley, P.C.
Kevin R. Marciano is a partner at the law firm of Anapol, Schwartz, Weiss, Cohan, Feldman & Smalley, P.C., located in Philadelphia with offices in Bucks, Berks and Delaware Counties and New Jersey. He concentrates his practice in personal injury, wrongful death, product liability, premises liability, medical malpractice and liquor liability. He received his B.A. from Dickinson College and graduated from Capital University Law School with honors. Mr. Marciano was a lawclerk to the Honorable Anthony R. Semeraro, Delaware County Court of Common Pleas. He is on the Board of Governors of the Pennsylvania Trial Lawyers Association and serves on its Executive Committee as an officer, Assistant Secretary. Additionally, he is involved with the following Pennsylvania Trial Lawyers Association committees: Chairman of the Membership Committee, Vice Chairman of the Budget & Finance Committee, Fund Development Committee and Long Range Planning Committee and is on the New Lawyer Section Leadership Council (Past-Chairman) and he is a member of the Legislative Policy Committee. He is a member of the Philadelphia Trial Lawyers Association, Delaware County Trial Lawyers Association and the Association of Trial Lawyers of America. Mr. Marciano was previously a member of the Board of Directors of the Delaware County Bar Association and a past member of the Executive Board of the Guy G. DeFuria Inn of Court. He is Past President of the Delaware County Lawyers Club and Past President of the Delaware County Bar Association, Young Lawyers Section. He is a frequent lecturer, writer and course planner for the Pennsylvania Trial Lawyers Association. He has enjoyed participating in planning and attending a holiday party for underprivileged children in Delaware County. He continues to present Anti-Smoking Mock Trials in elementary schools throughout Southeastern Pennsylvania in an effort to educate children on the dangers of smoking and using tobacco products.
Gale Rue Flandreau, Esq.
Group Vice President
Bryn Mawr Trust Company
Ms. Flandreau joined The Bryn Mawr Trust Company in 1999 where she currently manages the Special Needs Trust Unit. She has 20 years of experience in personal trust and estate administration with a special expertise in Guardianships and Special Needs Trusts. Ms. Flandreau holds a B.A. from Allegheny College and a J.D. from the Dickinson School of Law. She served as law clerk to the Hon. Robert W. Tredinnick of the Montgomery County Orphansâ€™ Court prior to beginning her career in trust administration. Ms. Flandreau attained her CTFA designation in 1998. She is admitted to the Pennsylvania Bar and is a member of the Delaware County Bar Association. She is a member of the Delaware and Philadelphia County Estate Planning Councils. She speaks and writes on the subject of fiduciary arrangements for Special Needs Clients. Her article: Administering Fiduciary Accounts for Special Needs Clients: Challenges, Quirks, Pitfalls and Rewards for the Fiduciary recently appeared in the Philadelphia Estate Planning Council newsletter, Vol. XIII, No. 1, Fall 2003.
E. David Margolis, Esq.
Reed Smith LLP
Mr. Margolis is a partner in the Trusts and Estates group of Reed Smith LLP, resident in its Pittsburgh office. His law practice is concentrated in wealth planning and associated litigation. He has a particular interest in the planning issues related to the resolution of substantial personal injury litigation and serves as a consultant to the business units of several national and regional banks serving the needs of the plaintiffâ€™s personal injury lawyer. He has frequently lectured and written in his field of practice for the Pennsylvania Bar Institute, University of Pittsburgh School of Law and other organizations. Mr. Margolisâ€™ professional affiliations include being a member of the Pennsylvania and Florida Bar Associations and a Life Fellow of the Pennsylvania Bar Foundation. He was formerly an elected member of the Allegheny County Bar Association Probate and Trust Council and the Pennsylvania Bar Association Real Property, Probate and Trust Law Section Council. Mr. Margolis previously served, by appointment as Chairman of Hearing Committee 4.07 of the Pennsylvania Supreme Court Disciplinary Board. Mr. Margolis graduated from Duke University magna cum laude, with a B.A. in economics, in 1975. His degree was awarded with distinction in economics and he received the Bache & Co. award given annually to an outstanding undergraduate in economics. He obtained his J.D. degree from the University of Pittsburgh School of Law in 1978, being designated Order of Barristers. He has successfully completed the NASD series 7, 63 and 65 exams, as well as the Level I exam of the Chartered Financial Analyst Program, but has not taken the Level II or III exam.
Dennis C. McAndrews, Esq.
McAndrews Law Offices, P.C.
Mr. McAndrews has worked for over twenty-five (25) years in the public and private sectors in several roles in the field of disability law. Mr. McAndrews regularly represents individuals with disabilities and their families in a variety of areas, including special education matters, special needs trusts, guardianship, estate planning, right-to-treatment cases, and injury cases. He regularly serves as a consultant to other public and private attorneys with regard to disability and special education issues. He has served as Executive Director and Staff Counsel to two select committees of the Pennsylvania State Senate which evaluated Pennsylvania's system of care for the mentally retarded and drafted proposed legislation designed to modernize Pennsylvania's legal basis for the provision of care to the mentally retarded. Mr. McAndrews served for fifteen (15) years as a Special Education Hearing Officer for the Pennsylvania Department of Education, and was regularly assigned to determine the appropriate educational classification, program, and placement of school age children with disabilities. In 1990, he was selected to serve as one of the first appellate hearing officers in Pennsylvania under new Department of Education regulations. During his sixteen (16) years as a prosecutor in the Philadelphia area, and currently in criminal defense matters, he has handled many cases involving defenses of mental disability. He was a special prosecutor in the murder trial of Commonwealth vs. John E. duPont. Mr. McAndrews is an instructor of Civil Rights and Civil Liberties and Criminal Justice at Villanova University. He is a frequent lecturer to national conferences, Bar Association Committees and advocacy groups in Pennsylvania concerning the rights of the disabled, and has authored numerous articles regarding the rights of disabled individuals. He served for a decade as Chairman of The Disability Law Committee of the Delaware County Bar Association. Mr. McAndrews obtained his law degree from the Villanova School of Law in 1978 and was awarded a Bachelor of Science Degree in Education together with a Bachelor of Arts Degree in Political Science from Villanova University in 1975.
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Special Needs Trust Outline
Special Needs Trusts are designed to permit financial resources to remain available to assist a disabled individual who receives, or may receive in the future, MH/MR and/or Medical Assistance and/or SSI benefits. The also protect such resources from immediate invasion by the Department of Public Welfare (or other providers of publicly-funded services) to reimburse the public treasury for the provision of MH/MR, MA or SSI benefits.
II. Types of Special Needs Trusts
The first type is a "Common Law Discretionary Trust" which involves a Trust funded by a third party. The controlling cases regarding Common Law Discretionary Trusts using the resources of third parties are Lang v. Commonwealth, Department of Public Welfare, 515 Pa. 428, 528 A.2d 1335 (1987); Commonwealth Bank and Trust v. Commonwealth, Department of Public Welfare, 528 Pa. 482, 598 A.2d 1279 (1991); Snyder v. Commonwealth, Department of Public Welfare, 528 Pa. 491, 598 A.2d 1283 (1991); Estate of Rosenberg v. Department of Public Welfare, 545 Pa 27, 679 A.2d 767 (1996); and Shaak v. Department of Public Welfare, 747 A.2d 883 (Pa. 2000).
The second type is an OBRA-93 Payback Trusts which is a “self-settled” Trust with the disabled beneficiary's own monies.
Finally, a Pooled Trust involves a non-profit fiduciary with a "mutual fund" type of program where the funds are invested in a common fund but with individual accounts.
III. May A Discretionary Trust Be Created Which Will Not Be Invaded By Public Authorities Under Present Law?
A. Common Law Discretionary Trust -- At present, the answer is "Yes", so long as the Trust clearly reflects an intent that the corpus of the Trust not be available as a “resource” with regard to public benefits.
i. Lang (discretionary trust held not invadable to pay DPW for mental retardation benefits)
ii. Snyder (trust not an "available resource" for purposes of determining son's eligibility for medical assistance benefits)
iii. Compare, Commonwealth Bank (trust disqualified beneficiary for MA due to testator's legal duty to care for beneficiary, failure of trust to refer to public benefits as an available resource, and fact that principal could be spent without concern for remaindermen), Rosenberg (trust disqualified beneficiary for MA where intent of settlor was not clear regarding desire for future eligibility for public benefits), and Shaak (inter vivos trust found to be an “available resource”, because the Settlor/Beneficiary “clearly intended that the Trust be used for her benefit during her lifetime” and principal could be used for “maintenance and welfare” of the Beneficiary).
B. OBRA-93 Payback Trust--42 U.S.C. Section 1396p(d)(4) explicitly permits creation/maintenance of certain inter vivos trusts for disabled MA recipients with their own funds.
C. The Pennsylvania Rules of Civil Procedure have recently been amended to explicitly permit the use of special needs trusts in resolving civil litigation. See Rules 2039 (minors), 2264 (incompetents), and 2206 (settlements in death cases where a minor or incompetent has an interest). See also, Local Rule 41.2 of the Rules of Civil Procedure for the Eastern District of Pennsylvania.
D. Pooled Trust - discussed below
IV. Factors To Consider In Establishing A Common Law Discretionary Trust
A. It must be clearly stated that (1) it is the intent of the settlor to supplement and not supplant public benefits and that such benefits be considered prior to distribution of any trust income or principal, (2) the trust is irrevocable, and (3) the trustee has total, absolute and unfettered discretion to pay, or refuse to pay, income or principal from the trust to the disabled beneficiary. Never instruct the trustee to make periodic (e.g. monthly) payments, as all payments should be discretionary and generally cannot be made for food, clothing or shelter under MA or SSI rules.
B. The courts also appear to consider other factors, perhaps as indicia of the settlor's intent;
1. The existence of other beneficiaries;
2. The existence of remaindermen with a statement of intent that the settlor wishes the trustee to attempt to preserve at least some assets for the remaindermen;
3. The trustee is instructed to consider the interests of all other beneficiaries, including contingent beneficiaries, before making distributions;
4. The lack of a duty of the settlor to support the disabled beneficiary.
V. OBRA-93 Payback Trusts
A. OBRA-93 amendments to the Medical Assistance rules require that at least where the beneficiary's own monies are used:
1. The Trust must be created irrevocably for the sole benefit of a disabled individual under age 65.
2. the trust must be created by the beneficiary's parent, grandparent, guardian or a court;
3. The Trustee must have total discretion to pay, or refuse to pay, resources of the Trust to the beneficiary;
4. the trust must state that monies in the trust at the beneficiary's death be made available to repay the state for Medical Assistance payments made on behalf of the beneficiary during his/her lifetime. Upon the death of beneficiary, the Trustee must contact:
Department of Public Welfare
Third Party Liability Casualty Unit
Special Needs Trust Depository
P.O. Box 8486
Harrisburg, PA 17105
B. Where SSI eligibility is also an issue, and the beneficiary's own monies are used to fund the trust, the SSI Guidelines consider the trust to be revocable (and thus an available asset) unless a second beneficiary (or possibly a contingent beneficiary) is named.
VI. Pooled Trusts
A. Must use non-profit agency as Trustee--no payback required, but resources remain in the pooled trust after the death of the beneficiary.
B. Query: Must the disabled beneficiary be under age 65?
VII. Thorny Issues in the Creation and Maintenance of Special Needs Trusts
A. Creation of Special Needs Trusts - Preliminary Issues
1. Must DWP approval for the Trust be obtained?
a) Is the money arising from litigation involving a minor or incapacitated person? In what county?
b) What will DWP require?
i. notice of expenditure of principal
ii. some limits on types of expenditures
2. Should you create a SNT if
- the beneficiary is marginally disabled?
- the beneficiary does not currently receive SSI or Medical Assistance, but may in the future?
- the trust corpus is relatively small -- can you spend down without losing eligibility (even if only for one month)?
- the trust corpus is so large that SSI and MA could be irrelevant (and can the SNT be drafted in such a way as to pay out monies for food, shelter, clothing and cash payments until the beneficiary goes on to MA/SSI)
3. Whose money is it, anyway? OBRA-93 Trust vs. Common Law Special Needs Trust - The Payback Issue
a) inheritance not yet paid out
b) injury settlement
c) past Social Security award
d) compensatory education fund
e) reversionary interest in property
f) can you combine - and is it ever wise to combine -- assets of the person with disabilities and assets of others?
g) life insurance companies are now marketing to families with persons with disabilities
4. What do you tell the Trustee about administering the Trust?
5. Must the Settlor have the legal authority to manage the assets of the disabled beneficiary? What are the differing demands of DPW, SSA, MR/MR?
6. What Social Security number do you use?
7. Who should be the contingent beneficiaries?
8. How do you get the court to act as settlor for the trust when no parent, grandparent or guardian is available?
B. Larger Trusts
1. Should you use a corporate or non-corporate trustee?
2. Which corporate trustee is best? Issues to consider are fees, customer service history, knowledge of SNTs and disability issues, and investment strategies.
3. Financial demands upon the trustee by the beneficiary and the family can be vexatious, and can include salaries for family members to care for the disabled beneficiary, housing for entire family, family vacations, vehicles not specially designed for the disabled beneficiary food, clothing, rent/mortgage, or cash for disabled beneficiary, furniture, electronic equipment, professional services.
C. Smaller Trusts
a) Can you find a corporate trustee?
ARC Community Trust (610) 265-4700 (King of Prussia)
ARC Family Trust (412) 995-5000 (Pittsburgh)
b) Will the Court appoint a non-corporate trustee in matters involving a minor or incapacitated person?
PA R.C.P., Rules 2039 and 2064. Counsel must also determine who should be the non-corporate trustee? Will the Court approve a family member, friend, financial planner, or attorney? Are conflicts of interest involved?
c) Can you keep a trustee happy if the beneficiary or his/her family is demanding? Issues can involve payment of fees to trustee, investment counseling, and supportive/intervention/casework services.
a) Should the trustee accede to requests which will quickly deplete the corpus?
b) Can principal be invaded? Will DPW object?
c) how should the corpus be invested?
D. Improper SNTs - can they be “fixed”?
E. Estate Recovery
1. Planning for Estate Recovery during trust administration.
2. Dealing with Estate Recovery at the termination of the Trust.
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The Role of the Corporate Fiduciary in Administering Special Needs Trusts
By Gale R. Flandreau, Vice President, Bryn Mawr Trust Company
A. Transition from litigation phase to fiduciary phase
1. Qualify the relationship
a. Size of fund (lump vs. structure)
b. Needs of client/family
c. Real Estate purchase/adaptation?
d. Other equipment/services needed?
e. Expectations re: law and fund
2. Connect litigator with fiduciary counsel early on
a. Selecting Orphansâ€™ Court jurisdiction
i. Residence of beneficiary
ii. Sensitivities of Court
(1) Procedural path (i.e. intermediate guardian appointment)
(2) Use of Mutual Funds
(3) Family budget, obligation of support documented by affidavit
b. Define fiduciary vehicle to be used
ii. Special Needs Trust (OBRA, 42 U.S.C. 1396p(d)(4)(a))
iii. Irrevocable Disability Trust
c. Review for administrative issues
i. Allocation of annuity
ii. Use of principal for taxes and/or fees
iii. Timing of petition for allowance (specific or general)
d. Review for DPW preferences
i. Lien on vehicle
ii. Ownership interest or lien on real estate
iii. Discretionary use of principal
3. Meet with client and clientâ€™s family as soon as possible
a. Establish rapport and begin to earn confidence
b. Reinforce explanation of law
c. Define needs (beyond “food, clothing or shelter”)
iii. Skilled nursing or attendant care
v. Medical care (PT, OT, surgeries, etc)
d. Help client to develop realistic expectations
i. Spending/access to trust
ii. Portfolio return
B. One contact within the “bank” to answer questions or communicate on clientâ€™s behalf
1. Petitions for Allowance
a. Gather information to support petition and relay to fiduciary counsel
b. Help client to prepare for hearing
c. Engage social worker or life care planner to report/testify as needed
2. Outside services
a. Public benefits
b. Social services
c. Medical goods and services (equipment and home care)
3. Operational issues
b. Bill paying
c. Explaining statements
d. Collecting annuity (may begin in future)
4. Tax issues
a. Grantor trust treatment?
b. Coordination with parents return (Kiddie Tax)
c. Can parent claim child as dependent?
d. Pay from I or P (ordinary income vs. capital gain)? (memo to tax preparer)
e. Estate tax
1. What are the legal ramifications of a SNT?
a. Trust is for “special needs” to supplement basic needs met by public benefits and/or parental obligation of support
b. What comprises “food, clothing and shelter”?
c. Can family members indirectly benefit? (live in house, go on vacation, enjoy vehicle)
d. When must Court be involved in discretionary decisions?
e. Reporting to Court or DPW as required
f. Pay back provision and how it works
g. Steps to be taken at termination of trust (legal and operational)
2. When and how can funds be distributed?
a. No “cash”
b. Pay for services directly
c. Van not titled in trust (but lien?)
d. Real estate - utilities obligation of parent
e. Gift card from retail store
f. Secured credit card
B. Investment Management
1. Investment strategy of corporate fiduciary
b. Products (individual securities, mutual or common trust funds)
2. Customized investment plan for client
a. Refer to life care plan
b. Use projections when considering significant withdrawals of principal (to determine if fund will last clientâ€™s lifetime)
c. Plan for withdrawals (donâ€™t get caught unprepared in a down market)
C. Basic Financial Management
1. Teaching family to manage money (balancing checkbook; paying bills)
2. Establishing a budget; what trust pays and what client/family pays
3. Training the client to communicate (before they buy)
4. Collecting receipts
5. Holding the line; how to say “no”
A. Public Benefits
1. Understanding what benefits are available and whether client qualifies
a. Attend seminars and training courses
b. Use SSA website (www.ssa.gov)
c. Build resource file
2. Have services ceased or been denied?
3. Helping client to understand and communicate
4. Speak for client as necessary
5. Use contacts at DPW/SSA to clarify issues
1. Finding right living environment for client (home vs institution)
2. Supporting family preferences and standards
3. Protect asset
a. Trustee makes the contract to purchase or modify
b. Insist that all contractors have sufficient liability insurance
c. Challenge real estate tax assessments
4. Act as “landlord”
C. Health Care
1. Coordinate with public benefits
2. Supply special equipment or services
3. Can trust insure family caregiver?
D. Education issues
1. Moving client to new school environment with move of residence?
2. I.E.P. and what school must/will provide.
A. Life Care
1. Utilize report compiled for litigation - a place to start
2. Build upon report, adapt to changes in need
3. Call in consultant to update as necessary
B. Estate Planning
1. If client has/had testamentary capacity, is there a will?
2. Intestate scheme where there is no testamentary capacity or prior will
3. Will Court permit creation of estate plan?
4. Payback, taxes, distribution upon termination of trust
V. Sympathetic Ear and Horse of Many Colors
A. Understand/anticipate pattern of emotions
1. Expect anger
2. Recognize fear and frustration
B. Listen with empathy; acknowledge what you hear
1. Mirror back to client the articulated needs
2. Give positive feedback
C. Show client you are willing to explore creative solutions
1. Remind client of law and policies
2. Determine if need is legitimate (supportive documentation)
3. Investigate alternate, untraditional approaches
4. Be willing to expand your knowledge and take on new roles
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Administering Fiduciary Accounts for Special Needs Clients
Role of the Corporate Fiduciary: Outline
Special Needs Trust Agenda
Special Needs Trust Outline