South Laurel Group - Blog #Special Needs Trust

The Right to Folly

Fri, 17 Feb 2023 10:39:16 -0800

Those of us who are entrusted with supporting older adults with dementia or other people with limited capacity often face the question of "to what extent does my client have the right to make questionable decisions for themselves?" Those with limited capacity often make choices that may seem foolish to others. However, it is important to recognize that everyone has the right to make choices, even if they seem irrational or unwise.

What is the right to folly? The right to folly is the right to make choices that others may consider harmful or illogical. This right is essential for individuals with dementia or limited capacity because it allows them to make decisions that reflect their personal values and preferences, even if they are not in line with what others may consider the best course of action.

Why is the right to folly important? Simply, because it promotes autonomy and dignity. It acknowledges that everyone has the right to make choices that reflect their own values and priorities, even if those choices are not in their best interests. It also recognizes that individuals with dementia or limited capacity should be treated with respect and dignity, regardless of their ability to make sound decisions.

Moreover, denying anybody the right to make choices, even if they seem foolish to others, can be detrimental to their mental health and well-being. It can cause them to feel disempowered and demoralized, which can worsen their cognitive and emotional state.

To protect the right to folly, it is essential to promote informed decision-making. This means providing individuals with the necessary information and support to make informed decisions that reflect their personal values and preferences. It also means respecting their choices, even if they seem unwise to others.

It is important to note that the right to folly does not mean that individuals with dementia or limited capacity should be left to make decisions without any guidance or support. Rather, it means that they should be supported in making decisions that reflect their personal values and preferences, even if those decisions are not in their best interests. Obviously, there are boundaries in terms of immediate danger to themselves and others and those of us with a duty to care have to weigh the right to folly against these dangers.

The right to folly is an essential right for individuals with dementia or limited capacity. It promotes autonomy, dignity, and well-being, and it is essential to respect this right in order to ensure that these individuals are treated with respect and dignity. By promoting informed decision-making and respecting their choices, we can help them to maintain their sense of autonomy and dignity, even in the face of significant cognitive or functional impairment.

Special Needs Trusts - What You Need to Know

Tue, 14 Sep 2021 11:03:06 -0700

Special Needs Trusts (SNTs) are more or less what they sound like. They are trusts designed for individuals who are unable to be gainfully employed in a full-time capacity (see definition below) and who don't want to forego the government aid to which they are legally entitled. Pretty straightforward. But just about every government agency with an acronym has jumped into the fray with their own set of rules and regulations: the Social Security Administration, the IRS, MediCal, MediCaid, the California Probate Code, SSI, Congress, etc. Because of the resulting thicket of regulations, rules and exceptions, setting up and administering an SNT is a task best left to the professionals.

First, some definitions:

“Disability” is the inability to engage in any “substantial gainful activity” (SGA) due to any medically determinable physical or mental impairment, or combination of impairments, that has lasted or can be expected to last for a continuous period of at least 12 months or result in death. 20 CFR §416.905
There are income and resource limits for qualifying for public benefits and they can be fairly complex and restrictive. In 2021, the SGA income limit is $1,310 per month, i.e., income below $1,310 is not considered SGA for purposes of determining whether an individual is disabled. For Supplemental Security Income (SSI), the resource limits (money in the bank, other non-house assets) are $2,000/person or $3,000/couple. For California, the structure below is a very simplified overview.
Funds disbursed from a Special Needs Trust cannot be spent in certain categories (food, cash, housing, etc.) without a resulting reduction in public benefits. That reduction in public benefits can be substantial and can wipe out the benefit of an SNT without careful oversight.

There are different types of Special Needs Trusts. The most common are First Party (where the beneficiary funds the trust themselves) or Third Party (where someone else funds the trust for the benefit of the beneficiary). Each of these types of trusts comes with its own set of rules, limits and reporting requirements.

There are a number of best practices for how to administer Special Needs Trusts that ensure the best outcome for the beneficiary while staying within the Federal and State rules. A Special Needs Trust can also be paired with an ABLE (Achieving a Better Life Experience) account in some cases to allow trustees and beneficiaries more flexibility and autonomy (if desired), along with some tax benefits.

If you have a family member who could benefit from a Special Needs Trust, work with an estate attorney and fiduciary who understand the tradeoffs involved and who can set up and administer the trust efficiently and legally for your loved one.