It is called a knee jerk for a reason

Could it be because there is no thinking involved, it is reflexive, automatic, and involuntary? A colloquialism for an action taken without thought is not what we think of when we contemplate the practice of law. Often, when considering an area of the law that is outside of the scope of our individual practices, those areas can seem deceptively simple.

I’m settling a medical malpractice action for a child who now has disabilities, I must direct the settlement into a first party special needs trust, I’ll just copy the one John Doe did for another client of mine ten years ago.

Well, it might seem like a good plan, but if the child is neither receiving, nor anticipated to receive means tested benefits1 the first party payback trust may be premature. This type of a trust, commonly called a D4a trust, can be set up at any time prior to the beneficiary turning 65.2 The parents can establish the trust on their own and seek court approval to transfer the assets of the child to that trust in the future, if and when such benefits are needed.

This Trust is not revocable, if the child progresses and never needs means tested benefits; the assets are still inside the trust, which may not be what this individual would want as an adult. Moreover, the Trust John Doe did ten years ago, was drafted for that client and those facts.

My client is on SSDI, I must direct the settlement into a first party special needs trust. Social Security Disability Insurance is not a means tested program. SSDI can be available to someone without special needs but who has meet the Social Security definition of a disabled person. Receipt of the settlement will not impact SSDI. However, if the individual is also receiving SSI, Medicaid, Food Stamps, etc., those benefits may be lost or diminished, as such full disclosure of benefits should be required from the individual prior to settlement, especially if Workers Compensation, Medicare, or Medicaid have been provided, as there may be statutory repayments required.

My client’s child has been diagnosed with Autism/Asperger syndrome; they need a SCPA 17-A guardianship.3

A guardianship under SCPA 17-A may not be the least restrictive intervention, and may be contrary to the ultimate goals for this child. SCPA 17-A is a wonderful statute; it is however one-size fits all, and it does not allow the powers to be narrowly tailored to meet the needs of the individual. An Article 81 guardianship under the Mental Hygiene law may be more in keeping with the needs of the individual.4

My client wants to stay on community Medicaid; I can issue the settlement check to a family member so they can stay on Medicaid.

Medicaid Fraud is a crime. Do not take short cuts, do not circumvent the system. The funds should be issued to your client, who will need to do proper planning to maintain or re-establish Medicaid eligibility.

If I leave my client’s son a dollar in the will he can’t contest the will. Leaving a child a dollar under a Will does not remove his ability to contest the Will.5 It shows that the testator knew this person existed, but nothing else. Leaving the child a dollar, may actually fuel the emotional flames. There are better ways to reduce the chances of a Will being overturned.

My client has been appointed executor, the administration of the estate is going to take a while, but we know the value of the estate, he can pay himself an upfront partial commission.

No, he cannot, an executor may not advance his commissions absent prior approval of the Court. There is a statute and a procedure to be followed.6

My client’s spouse has a terminal illness; we should transfer the stock/house to the intended beneficiary now to avoid probate.

While you may be avoiding probate, you may be costing your client a step-up in basis, which is available for assets included in the decedent’s estate at death.7 There are other ways to avoid probate and receive a step up, including the use of certain trusts. A proper analysis of all tax issues must be made.

My client has a traumatic brain injury, I must direct the settlement into a first party special needs trust.

Again, this may not be the required or needed course of action, how impaired is your client? Has a guardianship been established/does the Guardian have the authority to settle the action, to direct the assets to the trust? Will this person be seeking means tested benefits? Will this client always need assistance managing his assets?

It is always better to give the purchaser the $500 real property disclosure fee. There are certain transactions that are specifically exempt from the real property disclosure rules, including sales from estates, trusts, and guardianship proceedings.8 The moral to the story, do not dabble, do not experiment, do what you do well and often, and avoid hearing those three little words “notify your carrier.”

Wendy H. Sheinberg, Esq., CELA is a partner in the Law Firm of Davidow, Davidow, Siegel & Stern LLP a law firm that concentrates in Elder Law, Planning for Same Gender Estate and Life Planning, Special Needs, Estate Planning, Guardianships, Estate Ad­ministration Trusts, and Wills. Ms. Sheinberg has been named one of fewer than 80 Fellows of the National Academy of Elder Law Attorneys, and she is AV rated by Martindale Hubbell. Wendy is a member of the Board of Directors of the National Academy of Elder Law Attorneys and Board Member Long Beach Lawyers’ Association. Wendy can be reached by calling 516-222-7720 or by email at wsheinberg@DavidowLaw.com

1. Means tested benefits, refer to those programs which have eligibility criteria which includes an asset values limitation, an income limitation, or an income budget with the excess income subject to specific types of spend downs or a combination thereof, e.g. Supplemental Security Income, or Medicaid.
2. 42 USCA 1396p(d)(4)(A) [AKA OBRA 93]
3. SCPA 17-A, Guardians of mentally retarded, and Developmentally Disabled Persons.
4. See Matter of Chaim A.K. 8/26/2009 NYLJ (Col 1)(Sur CT New York County) for a thoughtful and detailed analysis of the appropriate guardianship vehicle for an individual with emerging needs by Surrogate Kristen Booth Glen
5. SCPA 1410 Any Person whose interest… in the estate of the testator would be adversely affected by the admission of the will to probate may file objections to the probate of the will or any portion thereof….
6. SCPA 2311 provides the framework for an ex parte application for the advance payment of commissions.
7. IRC 1014(a)
8. New York Real Property Law 463, excludes from the requirements of section 462 many transactions, including those connected to a probate, administration or foreclosure proceeding, as well as transactions between co-owners, spouses, persons of lineal consanguinity etc.