Minnesota Special Needs Trusts

by Flanders Law Firm LLC on September 26, 2016

Minnesota Special Needs TrustEstate Planning, Pooled Trusts, and the Intersection of Federal and State Law

Estate planning can take come in a variety of ways. For parents with children with disabilities, the special needs trust (SNT) is a unique estate planning device specifically tailored for beneficiaries with disabilities. The goal of this article is to examine SNTs, its intersection with federal law, and the various complications that may arise when conflict with state law arises. This is a complex area of the law, and for those considering this estate planning device, consultation with an expert Minnesota estate planning attorney is recommended.

Minnesota Special Needs Trust

One type of special needs trust is a special needs pooled trust. A special needs pooled trust is run by a nonprofit organization to administer the trust on behalf of people with disabilities. (Stepehn Elias, Special Needs Trusts, 107 (Nolo 3d. ed. 2009)). The special needs pooled trust flows from the federal Medicaid statute that excludes certain assets from Medicaid eligibility determinations. (Laurie Hanson, Reintroduction to Pooled Trusts, Stetson Univ. Conf. on Special Needs Trusts, Oct. 14-16, 2015).

For purposes of Medicaid exemption, the trust must meet four requirements. The trust must be for the benefit of 1) a disabled person 2) managed by a nonprofit agency 3) that maintains trusts solely for the benefit of disabled person established by that parents, grandparents, or legal guardian, and 4) to the extent amounts are not retained by the trust upon the death of the beneficiary, the trust pays the state the remaining amounts. 42 U.S.C 1396p(d)(4)(C)(i)-(iv). Special needs pooled trusts offer the advantage of the trust with the management experience of a nonprofit.

Medical Assistance and Minnesota Probate Law

As stated above, 42 U.S.C. 1396p(d)(4)(iv) provides states with an avenue to recover expenses paid on behalf of a beneficiary of medical assistance. These scenarios intersect with state law as well. There are examples of this in Minnesota. In In re Estate of Gullberg, the Minnesota Department of Human Services and Dakota County sought reimbursement for medical assistance paid on behalf of the estates husband. In 1983, the decedents husband conveyed their homestead valued at $59,000 to the decedent. The husband thereafter applied for medical assistance and received it from the state. In re Estate of Gullberg, 652 N.W. 2d 709, 711 (Minn. Ct. App. 2002).

Following the death of both the husband and wife, the state filed a claim with the estate for recovery of expenses paid. Id. For purposes of Medicaid, property meant real property to which the decedent had legal title (which the recipient did not have). However, the Minnesota estate recovery law defined property to include any property jointly owned (which applied to the recipient). Id. at 712. The Court of Appeals held the Minnesota estate recovery law [went] beyond what is allowed at federal law. Id. at 714. However, for the Court, the construction allowed for only partial preemption of state law. The Court of Appeals therefore concluded that Minnesotas estate recovery statute allows recovery against a surviving spouses estate only to the extent of the value of the recipients interest . . . at the time of the recipients death. Id.

Although not a special needs pooled trust case, In re Gullberg provides an overview of how estate planning, Medicaid assistance, and state law interact. In sum, utilizing special needs pooled trust while receiving Medicaid can create unforeseen complexities. A helpful Minnesota estate planning attorney can help those considering this estate planning vehicle effectively administer their estate.

Free Initial Consultations

Contact the Flanders Law Firmtoday. The firm offersfree estate planning consultationsto all potential clients. Call(612) 424-0398.

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Estate Planning for Minnesota Farmers

by Flanders Law Firm LLC on September 22, 2016

estate-planning-for-minnesota-farmersFarmers face unique estate planning issues separate from more traditional white-collar careers. The nature and value of assets in a farm presents different estate planning issues for hard working farmers. Because an orderly disposition of farm assets may take years, it is important for farmers to plan early for their retirement.

Estate Planning For Minnesota Farmers

The University of Minnesota Extension classifies farm assets in three different categories. Current assets include crops, both stored and planted. (Gary A. Hachfeld et. al, Preparing to Transfer the Farm Business, Transferring the Farm Series #1 (2016). These mirror traditional balance sheet assets in that the farmer can expect to use these assets within a year. Livestock and machinery typically comprise intermediate assets. Id. Furthermore, buildings and land are longer terms assets common to a farm. Id. It is important that a farmer account for all assets and their expected useful lives when considering creating a farm estate.

Charitable Remainder Trusts

There are effective estate planning vehicles farmers may use to devise their assets in an orderly fashion. One common method is to use Charitable Remainder Trusts (CRT). CRTs are a hybrid estate-planning vehicle that devise interests in farm estates to designated beneficiaries first and then to charities. (Lori A. Peterson, Charitable Remainder Trust In-Depth for Farmers Part I & II, 42nd Ann. Prob. & Trust L. Sect. Conf. (2016). Contributions to a CRT offer farmers an income stream similar to an annuity and potential avoidance of a self-employment tax. Gary A. Hachfeld et. al, Transferring Machinery and Livestock, Transferring the Farm Series #1, (2016). Setting up a CRT to realize the full value of CRTs is a complex and involved process. It is important farmers considering this to consult a knowledgeable Minnesota estate planning attorney to navigate this process.

Taxes and Minnesota Farmers

Farm assets can offer another estate planning benefit farm estates. The Minnesota Qualified Small Business Property & Qualified Farm Property exclusion excludes certain farm assets from Minnesota Estate tax. According to the Minnesota Department of Revenue, qualified farm property must meet the following criteria: 1) the propertys value was included in the federal adjusted taxable estate 2) the property is agricultural in nature 3) the property was classified as agricultural land for property tax purposes and classified as 2a during the taxable year of death 4) the decedent continuously owned the property for three years preceding his or her death and, 5) a family member maintains the property for three years following the decedents death. It is important that the estate maintain homestead classification up to the point of the decedents death.

Farms are an integral part of American society and a wonderful way for parents to leave a legacy for their children or beneficiaries. However, maximizing the full value of the estate requires many hours of planning and consideration. A dedicated and intelligent Minnesota estate planning attorney can help farmers accomplish these estate-planning goals.

Free Initial Consultations

Contact the Flanders Law Firm today. I offer free consultations to all potential clients. Call (612) 424-0398.

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