Protect Personal Injury Settlements & Inherited Assets Susan Anderson, Esq. Carol R. M. Moss , Esq . Hellmuth &am

1. SPECIAL NEEDS TRUSTS Protect Personal Injury Settlements & Inherited Assets Susan Anderson, Esq. Carol R. M. Moss, Esq. Hellmuth & Johnson, PLLC 8050 W. 78th Street Edina, MN 55439 952-941-4005 www.hjlawfirm.com

2. Susan Anderson, Attorney • 15+ Years Experience • Law • CPA firm • Financial Trust Management • President & CEO of ING National Trust • Specialty: • Estate tax consultant and preparation • Estate planning: Wills, Power of Attorney, Health Care Directive • Business Succession • Special needs planning for disabled family members • Charitable planning • Probate • Guardianship / Conservatorship • Trust Department Legal • Litigation – Will and Trust Disputes • Wills for Heroes Volunteer – Firefighters & Police Officers • PACER (Parental Advocacy Center Educational Rights) – Children w/Disabilities Estate Planning, Probate, and Business Succession 2

3. 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 photo Personal Injury and Medical Malpractice 3

4. 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

5. Minnesota Medical Assistance Two Main Criteria • Asset Test • Income Test

6. Two Types of Trusts • Special Needs Trust Beneficiary’s Funds • Supplemental Needs Trust 3rd Party Funds Funds considered “unavailable” for Medical Assistance qualification

7. 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 7

8. SPECIAL NEEDS TRUST • Requirements • Creator/Grantor: Parent, grandparent, legal guardian, conservator or court 8

9. 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 9

10. 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 10

11. 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 11

12. 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 12

13. SPECIAL NEEDS TRUST Termination Terminates 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 13

14. SPECIAL NEEDS TRUST Trustee Cannot be the beneficiary Individual or corporate fiduciary Trustworthy, organized, time to handle matters, geographic location Co-trustee – individual and corporate trustee option 14

15. SPECIAL NEEDS TRUST Continuing court supervision required? No - parents/grandparents are grantors Yes – guardian or conservator Guardian or conservator Order approving litigation settlement, verdict amount, divorce decree Confirm trustee Annual Accounting Varies by jurisdiction 15

16. SUPPLEMENTAL NEEDS TRUST Funded by third party funds (someone other than the beneficiary, or beneficiary’s spouse* Inheritance Intervivos 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 16

17. ESTATE TAXFederal Estate Tax Table

18. ESTATE TAXMN Estate Taxes • For amounts over $1,000,000 the following applies • Rate +$ • $ 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.

19. 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 19

20. SUPPLEMENTAL NEEDS TRUST Administration Same/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 20

21. SUPPLEMENTAL NEEDS TRUST Termination Terminates 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 21

22. SUPPLEMENTAL NEEDS TRUST Trustee Cannot be the beneficiary – deemed “available” Individual or corporate fiduciary If 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 22

23. TRUST OR STRUCTURED SETTLEMENT When is a trust beneficial to a beneficiary versus a Structured Settlement? 23

24. 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.

25. Questions… Susan Anderson, Esq. Carol R. M. Moss, Esq. Hellmuth & Johnson, PLLC 8050 W. 78th Street Edina, MN 55439 952 941 4005 www.hjlawfirm.com