The Bench & Bar magazine is published to provide members of the KBA with information that will increase their knowledge of the law, improve the practice of law, and assist in improving the quality of legal services for the citizenry.
Issue link: https://kentuckybenchandbar.epubxp.com/i/132126
FEATURE: KENTUCKY'S ELDER LAW upon petition, the petitioner to add newlydiscovered assets to an existing or newly created trust. The statute concludes by enunciating the legislative purpose. Section 387.910 instructs the court that should there be any questions pertaining to the construction or interpretation of the law, the court is to be mindful that in enacting the new statute, the legislature intends to establish a framework by which a disabled individual who qualifies as a special needs person under the statute may either herself or himself - or through family members or others closely connected with the person's care - have access to the courts to obtain the benefits of 42 U.S.C. § 1396p for the disabled individual. CONFLICTS As stated at the outset, the new statute opens the doors to broadening the potential petitioners who may create a SNT for a disabled individual. Does this, then, create a potential conflict in cases where there are other individuals who are named as permissible grantors under 42 U.S.C. § 1396p? It appears not to create a conflict. The notice requirements for de novo proceedings under Ky. Rev. Stat. § 387.865, and also under section 387.890 require notice to be given to all "interested parties" within the meaning of section 387.860(5), which is tied to individuals with standing to petition the court for guardianship over the disabled individual. Anyone who seeks to, or has, established a SNT for the individual would be an "interested person" under section 387.510(12); named in section 387.530(1)(f), and would be entitled to notice under section 387.550(2). In all likelihood, the new statute will result in only new proceedings brought by grantors not specified in 42 U.S.C. § 1396p, and will not result in any adversarial interplay or conflict among potential petitioners. If so, the matter will be squarely before the court. Judicial resolution by bringing all interested persons before the court seems to be the outcome envisioned in the new statute. 16 AN OPPORTUNITY AND A POTENTIAL LIABILITY The new statute has been enacted under the guardianship sections of the Kentucky Revised Statutes, but is certainly not limited to guardianship cases. The statute begins by providing that in developing a plan to preserve and protect a ward's assets, a guardian or conservator may consider the benefits of establishing a SNT. While the B&B; • 05.13 statute is not written in mandatory language, given that the legislature has now enacted 11 new sections to Chapter 387, attorneys who are approached by a disabled or injured client, or his or her family members, should be familiar with the opportunities presented via the open-door policy of the new statute. At the same time, failure to do so may call into question the effectiveness of counsel. B&B; 1 2 3 4 5 6 7 8 9 The Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66, 107 Stat. 312, codified self-settled special needs trusts in 42 U.S.C. § 1396p. Essentially, this means that the individual is totally and permanently disabled to the extent that he or she is unable to engage in substantial gainful activity, which is based on a dollar amount determined by reference to the national wage average. In 2012, is the threshold was $1,010 per month. The threshold is higher for blind individuals. See 42 U.S.C. § 1396p(d)(4)(A); see infra note 5. The practitioner should note that the Kentucky statute does not create any alternative course to federal law insofar as the substantive requirements of a SNT are concerned. As such, there is no "Kentucky" SNT alternative to the federal SNT. The purpose of the Kentucky statute is simply to open the Court to petitioners to establish a SNT that comports with the federal requirements. The statute incorporates by reference the guardianship statute's "next-of-kin" notice rule. See Ky. Rev. Stat. § 387.530(1)(f). See id. § 387.860. Id. § 387.860(6). Id. § 387.875. In some states where the Trustee is a non-profit organization, under what is known as a "pooled trust" (in essence an arrangement whereby separate sub-accounts are held and managed by a nonprofit organization that handles such funds for disabled individuals on an ongoing basis), the trust may receive funds of an individual over age 65. A pooled trust is not subject to the reimbursement requirement as long as the funds remain in the pool for other disabled individuals upon the disabled individual's death. Since pooled trusts are 10 11 12 13 14 non-profit managed and established and in place, they are not a focus of the new statute. The lifetime termination language is not specifically required in 42 U.S.C. § 1396p, but rather is found in the Social Security Administration Program Operations Manual System. See POMS SI 1120.199, Transmittal No. 43 – 09/2010. See also Ky. CR 60.02(f). Where there is a guardianship, under the federal statute, the legal guardian has the authority to create a SNT. Normally, when one brings a petition before the Disability Division, it is to request the court's approval of the proposed trust because the guardianship estate will pour over into the trust. Thus, in a legal sense, under 42 U.S.C. § 1396p, if the disabled individual has been adjudicated, it is not the court that is creating the SNT, but rather the guardian. Nevertheless, under Ky. Rev. Stat. §§ 387.860(2), .865, the guardian should comply with the notice and filing requirements of the new statute and bring the matter in the Disability Division. Though the court is creating the trust by virtue of a court order, as a technical matter the "grantor" of the trust under the statute is expected to be the petitioner. Ky. Rev. Stat. § 387.860(2). Typically all assets will go into the trust. In some instances, however, the disabled individual may own a home with a spouse that need not be placed in the trust to gain Medicaid eligibility, or there may be certain exclusions from Medicaid counting rules – typically retirement accounts – that need not be placed in the trust. Further, when the disabled individual has ongoing income, that income should be irrevocably assigned to the trust. Brian Borellis practices elder law and estate planning in Louisville. It was his draftsmanship in conjunction with the review and sponsorship of the Kentucky Bar Association Trusts and Estates Legislative Committee that gave rise to the new Special Needs Trust statute. Nonprofit Organization Law Can Be Complex My Practice Is Limited to Advising Nonprofits and The Professionals Working With Them Assistance Provided With Organization Formation Organizational Policies & Procedures Assessment of Operations Continuous Improvement Systems (Quality) Board Governance Issues Complex Tax Matters For-Profit Subsidiaries and Joint Ventures Merger, Consolidation or Dissolution of Nonprofits Conley Salyer, Attorney, J.D., LL.M.; Examiner, Malcolm Baldrige National Quality Award (MBNQA). csalyer@nonprofitattorney.net, (859) 281-1171, 710 E. Main Street, Lexington, KY 40502. www.nonprofitattorney.net This is an advertisement.