What kind of Assets can I transfer to the trust?
Only sole assets of the grantor/beneficiary can be transferred to the trust. In other words, upon the death of the beneficiary, the asset cannot, by operation of law, transfer to a third-party and must stay in the trust.
Can I transfer assets like CDs, stocks, or life insurance policies to the trust?
The IDA, in concert with the investment advisor for The Private Bank, reviews assets on a case-by-case basis to determine if it is appropriate to transfer an asset in-kind to the trust, rather than liquidate it.
One asset that cannot be transferred in-kind is an IRA. If the special needs trust ("SNT") is being funded with the grantor/beneficiary’s IRA, then the asset must be distributed from the IRA into the SNT. This will result in potential income tax consequences; however, the 10% punitive tax for early withdrawal from an IRA will not apply due to the exception for disability.
There are also special rules regarding annuities. If the SNT is being funded with the income stream from an annuity, the annuity's owner and beneficiary should be retitled in the name of the SNT.
Is there any asset that should not be transferred into the trust?
Because some assets are exempt for Medicaid purposes, the grantor/beneficiary may choose not to fund the SNT with any of the following assets:
1) a $2,000.00 set-aside
2) Home (if live-in or intend to return to)
3) Life insurance with cash surrender value of less than $1,500.00
4) Irrevocable, unassignable prepaid funeral/plot up to $10,000.00
What should we do about an outstanding bill we have?
Pay any outstanding debts. The grantor, prior to funding the SNT, should ensure satisfaction of payment for all outstanding debts. Self-settled trusts cannot be used to avoid creditors. Note, however, that you should coordinate with your attorney before paying a nursing home bill, as the bill may change as the result of a Medicaid decision.
What is meant by “pooled” or “pooling of assets?
Assets, to the extent possible, are pooled or combined for investment and management purposes, which helps reduce fees and maximize investment return.
What is the bank's role in the IDPT?
The bank's primary responsibility as Co-trustee is to serve as custodian and investor of the assets. The bank maintains an accounting of all expenditures for the benefit of each beneficiary, the court (in guardianship cases), and the Illinois Department of Human Services.
What types of benefits do many of the IDPT participants receive?
-Supplemental Security Income (SSI)
-Illinois Dept. of Human Services benefits, including mental health and developmental disabilities services, rehabilitation services, subsidized housing programs, aging services, and custodial care services
What is the definition of "disability" needed to qualify for participation in the IDPT?
The Social Security Adminsitration's definition requires the individual to be diagnosed with a medical impairment resulting in his or her inability to engage in substantial gainful employment.
The SNT can pay for a variety of expenses, including:
- medical, dental or podiatry services not covered by government benefits
- companion care
- caregiver expenses not covered by government benefits
- educational and vocational training
- psychological therapy
Is there anything the trust cannot pay for?
The Trustee cannot make disbursements:
1) directly to the Beneficiary;
2) to an account bearing the Beneficiary’s name or Social Security number, including a patient trust fund at a nursing home; or,
3) to reimburse an individual who has given the Beneficiary cash or has deposited funds into an account bearing the Beneficiary’s name;
4) that is a gift or donation to others.
Additionally, disbursements for food or shelter may reduce the beneficiary’s SSI benefit dollar-for-dollar up to 1/3 of the total benefit amount, so those disbursements are generally disfavored.