A Trust Protector Can Look Out for a Beneficiary's Interests

One of the most important decisions a special needs trust's donor (the person who supplies the funds for the trust) makes is the choice of a trustee for the trust. A trustee typically manages the day-to-day operations of the trust, often making distributions to the trust's beneficiary, investing the trust's assets, and paying the trust's bills. But how can the donor make sure that the trustee will properly manage the trust when the donor is no longer around to keep an eye on the trustee, especially if the trust's beneficiary is not capable of supervising his own trustee? In many cases, a trust protector can ensure that a beneficiary is protected from trustee mismanagement.

Once she assumes office, a trustee almost always serves in a "fiduciary capacity," meaning that she is in a position of trust and confidence and has a legal duty to properly manage the trust's assets while keeping in mind the best interests of the trust's beneficiary. A fiduciary is held to a high standard of conduct, and she owes the trust's beneficiary a strict duty of loyalty. However, in many cases involving special needs trusts, the beneficiary of the trust is unable to properly enforce this fiduciary duty because of his special needs. This is where a trust protector comes in.

A trust protector is a person chosen by the donor who is responsible for monitoring the trustee's actions. The trust protector's duty is to serve as an additional pair of eyes for the trust's beneficiary, making sure that the trustee is properly performing her job. The trust protector typically has access to the trust's accounts, and can compel a trustee to produce a summary of what she has done for the beneficiary. If a trust protector believes that the trustee is not properly performing her duties, he can usually fire the trustee. Depending on how the trust is drafted, the donor can even give the trust protector the power to name a new trustee if the donor has not done so himself in the trust document. (Most of the time, however, the trust protector must name an independent trustee as the new trustee, avoiding the scenario where the trust protector fires a trustee only to name himself as the new trustee.)

Trust protectors may be useful in a variety of situations. Take the case of Jennifer and her son, Adam. Jennifer is elderly and would like to make sure that her son, who has special needs, is cared for at home for as long a possible after she is gone. So Jennifer decides to establish a special needs trust that will hold her home for Adam's benefit, and she funds this trust with enough money to make sure that the property is well kept and that the bills are paid. However, Jennifer's closest relative, her niece Margaret, does not want to serve as trustee of Adam's trust because she does not want the added responsibility of managing a home. Jennifer decides to name John, a friend of hers who knows Adam and who runs a property management company, as the trustee instead. Although Jennifer trusts John, she decides to name Margaret as a trust protector to review his yearly accounts and make sure that he charges the proper amount for his services and is keeping the property in good shape.

Every special needs trust is different, and in many cases, especially when a donor is serving as trustee, a trust may not initially need a trust protector. The best way to decide if your special needs trust should include one is to speak with your qualified special needs planner.

Contact us

Elise Lampert, Esq.

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com

 

Government Agency Calls for End to Program Allowing Subminimum Wages for People with Disabilities

 

A federal agency has called on the government to end a program that explicitly permits employers to pay hundreds of thousands of people with disabilities less than $1 an hour, calling the practice “rife with abuse and difficult to administer.”

The federal minimum wage has stood at $7.25 since 2009, although many states have enacted their own higher minimum wages. Certain employers, however, may request certificates from the Department of Labor authorizing them to pay employees with disabilities less than the minimum wage, called a “subminimum" wage. The certificate is known as a 14(c) waiver, referring to the provision of the Fair Labor Standards Act of 1938 that authorizes such waivers.

The program’s original purpose was to provide job opportunities for people considered unemployable because of their disabilities. However, the program is now widely viewed as exploitative. (Reports documenting extensive subminimum wage abuse can be read here and here.)

In a massive new report released September 17, 2020, and titled “Subminimum Wages: Impacts on the Civil Rights of People with Disabilities,” the federal U.S. Commission on Civil Rights blasts both the Department of Labor and the Department of Justice for failing to adequately monitor the 14(c) program.

The Commission’s top recommendation is that the federal government phase out the 14(c) certificates altogether — following the lead of a few states that have done so — in favor of “alternative service models prioritizing competitive integrated employment.”

The Commission also finds that people employed by 14(c) certificate holders, who number more than 420,000 nationwide, are “not categorically different” from other people with disabilities. It notes that the Americans with Disabilities Act requires states to integrate their workforces, and thus 14(c) certificates may now violate the Act.   

“The Commission’s research shows that Section 14(c) is antiquated as it was enacted prior to our nation’s civil rights laws, and its operation in practice remains discriminatory by permitting payment of subminimum wages based on disability without sufficient controls to ensure that the program operates as designed . . . ” the report states. “Although Congress enacted the program with good intentions, the Department of Labor’s enforcement data as well as several key civil rights cases and testimony from experts show that with regard to wage disparities, the program is rife with abuse and difficult to administer without harming employees with disabilities.”

Disability rights advocates hailed the report.  “We are thrilled to see the U.S. Commission on Civil Rights calling for an end to the 14(c) waiver program,” Rebecca Cokley, director of the Center for American Progress’ Disability Justice Initiative, told The Hill. “This program has existed for over 80 years to transition disabled people to competitive fair wage jobs, with less than a 5% success rate.”  

The U.S. Commission on Civil Rights is an independent, bipartisan federal agency created by Congress in 1957 and tasked with issuing recommendations on federal civil rights policy.

Contact us

Elise Lampert, Esq.

Law Office of Elise Lampert 

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com

 

Husbands Usually Don’t Consider Their Wives’ Future When Deciding When to Take Social Security Benefits

The amount of Social Security benefits a surviving spouse receives depends, in part, on when their deceased spouse began claiming benefits. However, husbands usually don’t take survivor’s benefits into account when claiming benefits, according to a recent study, meaning that many widows will needlessly experience a significant drop in income. 

Because women typically live longer than men and men are often the higher earners, most married women will be widowed and will have their income drop below what they need to maintain their accustomed standard of living. Spouses of a worker who has died are entitled to the worker's full retirement benefits once they reach their full retirement age. If the worker delayed retirement, the survivor's benefit will be higher. Husbands have the option of increasing their surviving spouse’s income by delaying Social Security benefits, but according to a study by the Center for Retirement Research at Boston College, most husbands do not take their wives’ future needs into consideration. 

The study looked at whether greater awareness of Social Security Survivor’s benefits would affect claiming decisions. The study found that husbands tend to take more immediate concerns into consideration, such as their health and whether they have another pension, rather than their wives’ Survivor’s Benefits. Giving the husbands information about how they could improve their wives’ financial well-being by claiming benefits later did not change their claiming decisions. 

The study concludes that in order to protect widows, the government should consider providing Survivor’s Benefits in a way that doesn’t tie the surviving spouse’s benefits to the decision of when to claim benefits. As things stands now, however, if you are the higher earner and are nearing retirement, you may want to take into account how your decision on when to claim benefits will affect your spouse if he or she survives you. 

Contact us

Elise Lampert, Esq,

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com

 

Receiving an Inheritance While on Medi-Cal

For most people, receiving an inheritance is something good, but for a nursing home resident on Medi-Cal, an inheritance may not be such welcome news. Medi-Cal has strict income and resource limits, so an inheritance can make a Medi-Cal recipient ineligible for Medi-Cal. Careful planning is necessary to make sure the inheritance doesn't have a negative impact.

An inheritance will be counted as income in the month it is received.  You or whoever is representing you will have to inform the state Medi-Cal agency, and Medi-Cal coverage will then end until you have again spent down your assets to the countable limit, which is $2,000 in most states. If you receive an inheritance and the amount puts you over the income limits for your state, you will not be eligible for Medi-Cal for at least that month. If you can properly spend down the money in the same month it is received, however, you will be eligible for Medi-Cal again the following month. The first thing to do is pay the nursing home for the current month (at the Medi-Cal rate).

If you have money left after paying the nursing home, your elder law attorney can advise you on the proper way to spend down the money. You may be able to give it to a spouse, a child with special needs, or the child's special needs trust. You may also pre-pay an irrevocable funeral contract or buy burial items for a close relative.  It could also be spent on travel, dining out, clothes, television, DVD player, and paying off any debts you may have. In most cases, you cannot make gifts with the money, but there are some exceptions to this rule and in some states good planning techniques that may permit some gifting. To be sure, you will need to consult with your elder law attorney.

If the inheritance is too large to spend in one month, your attorney may be able to use other techniques to protect a portion of it.  

Contact us

  Elise Lampert, Esq,

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.co

 

How to Fix a Required Minimum Distribution Mistake

The rules around required minimum distributions from retirement accounts are confusing, and it’s easy to slip up. Fortunately, if you do make a mistake, there are steps you can take to fix the error and possibly avoid a stiff penalty.  

If you have a tax-deferred retirement plan such as a traditional IRA or 401(k), you are required to begin taking distributions once you reach a certain age, with the withdrawn money taxed at your then-current tax rate. If you were age 70 1/2 before the end of 2019, you had to begin taking required minimum distributions (RMDs) in April of the year after you turned 70. But if you were not yet 70 1/2 by the end of 2019, you can wait to take RMDs until age 72. If you miss a withdrawal or take less than you were required to, you must pay a 50 percent excise tax on the amount that should have been distributed but was not.

It can be easy to miss a distribution or not withdraw the correct amount. If you make a mistake, the first step is to quickly correct the mistake and take the correct distribution. If you missed more than one distribution – either from multiple years or because you withdrew from several different accounts in the same year -- it is better to take each distribution separately and for exactly the amount of the shortfall. 

The next step is to file IRS form 5329. If you have more than one missed distribution, you can include them on one form as long as they all occurred in the same year. If you missed distributions in multiple years, you need to file a separate form for each year. And married couples who both miss a distribution need to each file their own forms. The form can be tricky, so follow the instructions closely to make sure you correctly fill it out. 

In addition to completing form 5329, you should submit a letter, explaining why you missed the distribution and informing the IRS that you have now made the correct distributions. There is no clear definition of what the IRS will consider a reasonable explanation for missing a distribution. If the IRS does not waive the penalty, it will send you a notice.

Contact us

Elise Lampert, Esq.

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com