William H. Overman Provides Reliable Insights about Testamentary Special Needs Trusts By Jacquelyn H. Saylor, The Saylor Law Firm LLP

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1 William H. Overman Provides Reliable Insights about Testamentary Special Needs Trusts By Jacquelyn H. Saylor, The Saylor Law Firm LLP If you have the phrases health care or standard medical care in any Special Needs Trust (SNT), remove them now. Furthermore, if you want the beneficiary of a testamentary SNT to be eligible for needs-tested government benefits, it is recommended that you include the following language: The Trustee has full discretion and authority to deal with any changes in the beneficiary s circumstances. Who gave us these words of wisdom? It was William H. Overman, JD, who spoke to the Estate Planning & Probate Section of The Atlanta Bar Association on November 9, Mr. Overman is the Director of Trust Services at Health Management Systems. He accompanied his speech with a handout titled Testamentary Special Needs Trusts - Insights from Review Experience. Mr. Overman s speech and the handout are the source of almost all the material and quotes in this article. Why do we need to know what Mr. Overman thinks? In Georgia, a SNT needs to be reviewed by the Trust Unit of the Legal Services Section of the Georgia Department of Community Health (DCH). The Trust Unit is required to report to DCH s Third Party Liability (TPL) which is now part of the DCH Office of Inspector General. Mr. Overman and his team know what we need to do to draft a viable SNT. Why does a testamentary SNT need to be reviewed by the Trust Unit when a Medicaid payback requirement does not apply to a testamentary SNT? In Georgia, whenever a person receiving Medicaid has a trust of any kind, the Trustee must file an annual inventory update and accounting with the Trust Unit. If the beneficiary gets Supplemental Security Income (SSI), he or she is automatically eligible for Medicaid, according to Mr. Overman. Therefore, it is considered best practice to turn in the testamentary SNT for review whether or not the beneficiary is currently receiving Medicaid. The Trust Unit will then be able to determine if the accounting requirement applies. Furthermore, if the Trust Unit finds any problems, you can fix them before the Will is signed. Where does an attorney send a testamentary SNT and in what form? The draft of a template for a SNT should be sent to the Trust Unit Director, who is Mr. Overman. Mr. Overman allows attorneys to send the draft for a full draft review before the Will is signed and not have it put on file. The attorney only needs to send the SNT information and the powers section. Additionally, the full name and date of birth of the beneficiary and the

2 contact information of the named trustee needs to be included. Mr. Overman said that he will rush reviews in emergency or serious situations so you should feel free to contact him. Mr. Overman s is woverman@hms.com; his phone is x2136 and his fax is Since the Trust Unit is a paperless office, the SNTs and additional documents should be scanned and ed. However, if the information cannot be scanned, use the post office to send the SNTs to the Georgia Department of Community Health, Attn: Trust Unit, 900 Circle 75 Pkwy, Suite 650, Atlanta, GA Who performs the first review of Georgia trusts filed with the Trust Unit? Richard Gambrell, a Program Specialist/Paralegal now performs the initial review of all Georgia Trusts filed with the Trust Unit. Mr. Gambrell s is richard.gambrell@hms.com; his phone is and his fax is Fred Phillips, CPA, is the Trust Accounting Reviewer; Mr. Phillips is fred.phillips@hms.com; his telephone number is x2130 and his fax is the same as the other two members of the Trust Unit. However, Mr. Overman advises that an attorney should feel free to contact any of them directly, preferably by . What needs to be filed if the testator of the Will has died and consequently the SNT is being submitted for full approval? The full copy of the Will plus information on the beneficiary, including the last 4 digits of the social security number, and named trustee should be filed. Mr. Overman advised to be sure you indicate who you represent in your letter of representation. Specifically, the Trust Unit will need: 1. Letter of representation (cover or letter to the filing); 2. Testator s date of death; 3. Copy of Letters Testamentary issued by the Probate Court (the date of the Letters will be used as the date of establishment of the SNT); and 4. An initial inventory, as Georgia law does not recognize unfunded trusts. Mr. Overman noted that the trust can say, for example, $10 cash received, but there has to be something in it for review. Additionally, as Mr. Overman noted in his speech, if the beneficiary is on Medicaid, you should also send in information on the anniversary of the trust, that is, when the trust came into existence.

3 What does the Trust Unit need to find in the Will and the Special Needs section? Mr. Overman told us to pay special attention to the Special Needs Language in number Identification of the beneficiary and trustee; 2. Relationship of testator to the beneficiary; 3. Special needs language, preferably including statements regarding an intent to protect obtaining or maintaining eligibility for government benefits; 4. Full discretion in the trustee regarding disbursements; 5. Prohibition on the beneficiary controlling or forcing disbursements; and 6. Powers granted to the trustee. Mr. Overman stated that there are some powers that might trip us up. Social Security policies are fluid. There is the issue of repayment of expenses for a family to visit a beneficiary. Do not put these expenses in the powers. It is ok to pay for a family member if he or she visits a facility to check on whether medical care is adequate. When drafting a SNT, what mistakes needed to be avoided? 1. Any language that gives the beneficiary any control over the trust or trustee, especially as to trust distribution. 2. An ascertainable standard that includes health care, medical care or medical needs 3. Required distributions to the beneficiary. The trustee must have full discretion, as Mr. Overman explained to the section. What if it is unclear whether the deceased testator meant for the testamentary trust to be a SNT or not? The powers granted in the Will determine the best way to handle this situation. Usually a trustee or co-trustees go to court and obtain a court order to reform the trust. If successful, according to DCH policy, the trust will be considered as a first party SNT and there will be Medicaid payback provisions. There is another way to make sure that a trust is a SNT; one can amend and restate the trust to incorporate special needs provisions if the document has authority to do that. DCH policy is that the authority to restate the trust must be clearly and explicitly stated in the document. The Department looks to see if it is clear within the four corners of the document that the maker recognized that the beneficiary had special needs and desired to protect the beneficiary s eligibility for government benefits, then the resulting trust will be treated as a SNT.

4 Should we routinely give authority to decant to the trustee? Mr. Overman said yes, put it in there. He suggested using very old language giving the executor or trustee discretion to create a SNT where a beneficiary is disabled. Can a corporate fiduciary located outside Georgia be a trustee of a SNT? Yes, in certain circumstances, Georgia trust law permits foreign trustees to serve here. A nationally chartered financial institution that offers trust services may offer those services in Georgia without needing to obtain a certificate of authority from the Secretary of State. For local banks and pooled trusts from states outside Georgia, the foreign corporation must be organized or existing under the laws of any state of the United States which borders upon this state, namely, Florida, Alabama, Tennessee, North Carolina, or South Carolina, and is required to make filings with the Secretary of State. Pooled trusts in states like Indiana and Pennsylvania that do not border Georgia, as well as one of our border states, Florida, have set up domestic Georgia corporations to allow them to provide trust services in Georgia. The Trust Unit also has cases that deal with pooled trusts from other states that are now serving as trustees for Georgia beneficiaries. Does the Social Security Administration (SSA) also review testamentary SNTs? Yes. The SSA, as of April 28, 2014, now sends all Supplemental Security Income (SSI) applications when the applicant has a trust, to knowledgeable Regional Trust Reviewer Teams (RTRTs) to analyze the trusts to determine if they comply with SSI rules. According to Mr. Overman, the RTRTs used to have a backlog, but as November 2016, they no longer do. The Teams review the field officer s earlier decision and decide whether to accept it or revise it before it is sent back to the field office for a final adjudication. The SSA now has a Trust Training Fact Guide that their workers use to evaluate SNTs. Additionally, the RTRTs look over pooled trusts to see if they are in compliance with SSA regulations and state and federal laws. There is some controversy of how valuable the program is. When should we expect changes in law or policy that affects SNTs? In 2017, the trust sections of the SSA s Program Operation Manual System (POMS) is being revised and updated by the SSI Policy Office. The trust sections of the POMS include policy that applies both to self-settled SNTs and third party SNTs. Ken Brown is the POMS policy person. Mr. Overman writes that it is important for the Trust Unit to closely observe the POMS so that its program remains compliant. Furthermore, Mr. Overman writes, that if a person receives SSI

5 and later becomes the beneficiary of a testamentary SNT, an SSI policy office may want that trust to be sent to them for review. Jackie Saylor, a founding partner of The Saylor Law Firm with her attorney-cpa partner, Murray Saylor, wrote this article. She is now the Treasurer of the Estate Planning & Probate Section, having previously served as Secretary of the Section and as President of the Atlanta Bar Association. jsaylor@saylorlaw.com