Glossary of Terms

Advance Medical Directive ─ An advance medical directive is a document that provides instructions concerning a person's healthcare if the person can not give those instructions. There are two different types of advance medical directives. The first is a living will that gives instructions concerning a person's healthcare if the person is dying. The second is a medical or healthcare power of attorney that appoints an agent to make healthcare decisions for a person who is incapable of making these decisions. Frequently, an advance medical directive will include both a living will and a medical power of attorney.

Ancillary Administration  ─ This refers to an additional probate in another state, which is required when the decedent owns real estate in state outside of his or her state of domicile and that is not titled in the name of a revocable trust.

Annual Exclusion ─ This is the amount you can give someone each year without having to file a gift tax return or pay a gift tax.

Antitransfer Laws ─ Laws regulating the transfer of assets in order to become eligible for benefits such as SSI and Medicaid, or to transfer assets to others for less than fair market value.

Asset ─ Any item of property that has monetary value. Assets are shown in balance sheets of businesses and inventories of probate estates. There are current assets (which includes accounts receivable), fixed assets (basic equipment and structures), and such intangibles as business good will and rights to market a product.

Beneficial Interest ─ The right of a party to some profit, distribution, or benefit from a contract or trust. A beneficial interest is distinguished from the rights of someone like a trustee or official who has responsibility to perform and/or title to the assets but does not share in the benefits.

Beneficiary ─ Any person or entity entitled to inherit to receive property under a will or trust. The person for whom a special needs trust is created and whose needs will be paid for under the terms of the trust is the trust beneficiary.

Burial Policy ─ An insurance policy that covers the cost of burial.

Code of Federal Regulations (C.F.R.) ─ A set of publications containing regulations issued by federal agencies and organized by subject. Regulations for the SSI program are found in 20 C.F.R. §§ 416.101 and following.

Community Trust ─ See pooled trust.

Conditional SSI Payments ─ Temporary SSI payments made on the condition that the recipient divests of certain assets in an appropriate manner. They are made if an applicant for SSI has too many assets to qualify for that program.

Conservator ─ A person appointed by a court to make personal and/or financial decisions for another person (the conservatee) who is not able to make them.

Conservatorship ─ The relationship between a conservator and conservatee.

Corporate Trustee ─ A bank or other financial institution that provides trustee. Corporate trustees generally require a special needs trust to be funded with a minimum of $250,000.

Corpus ─ A Latin term for the assets held in a trust.

Cotrustee ─ One of two or more persons or institutions named to manage trust assets together.

Countable Resource ─ Property that the SSI and Medicaid programs consider countable assets of an applicant or recipient of benefits. Generally, assets held by a third-party special needs trust are not countable assets.

d(4)(a) Supplemental or Special Needs Trust ─ The so-called “d(4)(a)” supplemental or special needs trust is designed to hold the assets of a disabled person. The assets in a d(4)(a) trust are not considered countable resources for determining the beneficiary's SSI or Medicaid eligibility. The trust must be: (1) irrevocable, (2) established for a disabled person under age 65, (3) created by the disabled person's parents, grandparents, guardian, or by a court, and (4) required at the disabled person's death to repay the state any assets remaining in the trust up to the amount paid under the Medicaid program for the disabled person.

d(4)(c) Supplemental or Special Needs ("Pooled") Trust ─ Congress authorized the creation of d(4)(c) supplemental or special needs trusts with the assets of a disabled person. The assets in a d(4)(c) trust are not considered countable resources for determining the beneficiary's SSI or Medicaid eligibility. The trust must be: (1) created by and managed by a nonprofit organization, (2) maintained in a separate account for each beneficiary, (3) created by the disabled person, the disabled person's parents, grandparents, guardian, or by a court, and (4) required at the disabled person's death to repay the state any assets remaining in the disabled person's account up to the amount paid under the Medicaid program for the disabled person, or to leave these assets in the trust for the benefit of other disabled persons.

Direct Inheritance ─ Property left outright to someone. SSI and Medicaid benefits may be reduced or eliminated if a recipient receives a direct inheritance, since the inheritance will be counted as income in the month received and as a resource in the following months. Property left to a special needs trust is not counted as a direct inheritance.

Disability ─ For the purpose of obtaining SSI and Medicaid, a disability is a mental or physical condition that leaves someone permanently unable to participate in gainful activity or employment for at least 12 months.

Disabled ─ Having a disability.

Disbursements ─ Payments of trust funds by the trustee. In a special needs trust, the trustee typically makes disbursements to pay for the beneficiary's needs that aren't covered by SSI or Medicaid, such as a companion, school tuition, books, or hobby equipment.

Disclaimer ─ A person may file a written instrument or “disclaimer” with a fiduciary or an appropriate court having jurisdiction, pursuant to which the person refuses to accept a gift or bequest of property. It serves as an effective post-mortem estate planning tool.

Disclaimer Trust ─ A disclaimer trust is a trust funded by a disclaimer. It is frequently used to permit a surviving spouse to fund a credit shelter trust with that amount of property necessary to limit the size of the surviving spouse's estate to the Applicable exclusion amount.

Durable Power of Attorney ─ A durable power of attorney is legal document by which a person, known as the principal, designates another person, known as the agent, to manage the principal's assets or affairs. Unlike a common law power of attorney, the durable power of attorney does not terminate upon the principal's incapacity or disability. The durable power of attorney can be effective upon execution ("effective immediately") or upon the principal's incapacity or other event ("springing"). Typically, the durable power of attorney over finances or assets is separate from the durable power of attorney over health care, which is also know as an “advance medical directive” (see above).

Earned Income ─ Wages paid by an employer or income from self-employment. Earned income can result in a reduced SSI payment.

Elder Law ─ Legal issues faced by the elderly, including government benefits, nursing home care, and elder abuse.

Estate Planning ─ Creating documents and strategies to carry out a persons wishes for what should happen to their property and children after their death.

Estate Tax ─ Federal and state taxes imposed on the value of a person's net worth at death.

Estate ─ The assets and liabilities held by the executor or personal administrator or trustee at a person’s death, . It does not include property which passes to another individual or entity automatically upon the individual's death such as jointly owned property or the life insurance policy payment.

Estate Planning ─ Creating documents necessary to carry out your wishes for what should happen to your property and children after your death. Often, estate plan­ning involves strategies designed to minimize probate fees so that more is left for inheritors.

Estate Tax ─ Federal and state taxes imposed on the value of a person's net worth at death.

Executor ─ Individual or institution named in a Will to carry out the terms of the Will. An executor is also known as a personal representative.

Exempt Asset ─ See Noncountable asset.

Family Limited Partnership or Family Limited Liability Company ─ A family limited partnership (FLP) or a family limited liability companies (FLLC) is an entity used to provide for the centralized management and investment of family business assets. They are taxed as partnerships for income tax purposes and may provide significant discounts in valuation for gift and estate tax purposes. They also are effective asset protection devices.

Federal Benefit rate ─ The share of the SSI grant paid by the federal government. Many states add a supplementary grant to the federal benefit rate.

Fiduciary ─ Person having a legal duty to act for the benefit of another person. Usually this means persons such as a Trustee or Guardian.

Financial Planner ─ A professional who assesses a person’s needs and develops strategies to meet those needs, including, but not limited to, various types of insurance and investments.

Food ─ Ordinary food. If the trustee of a special needs trust pays for the beneficiary's food, the amount paid is considered income to the beneficiary and deducted from the SSI grant, up to a certain amount, unless the food is necessary for special medical or dietary needs.

Funding a Trust ─ Putting property into a trust by assigning the property to the trust or changing title documents to reflect the trust's ownership. Technically, the trustee owns the trust property, subject to the trust's terms and the trustee's fiduciary duty.

Furniture and Personal Effects ─ As defined by the SSA, just about any property typically used in a home. Furniture and personal effects are not counted as resources for the purpose of determining a person's eligibility for SSI and Medicaid.

Gift Tax ─ A gift tax is a federal or state transfer tax imposed on a donor when the donor makes a gift of property.

Gift ─ Property permanently transferred to someone without receiving anything in return. Property transferred to an irrevocable living trust while the giver is alive is considered a gift because the property can't be taken back. However, property transferred to a revocable living trust is not a gift, because the giver does not give up control over it and can revoke the trust at any time. Finally, property left at death under a will or living trust is commonly called a gift.

Good Faith ─ The honest belief that one's actions arc correct and appropriate. Most special needs trusts provide that trustees are not liable for losses caused by actions taken in good faith.

Grantor ─ The person who sets up or creates the trust is the Grantor. This person is also called the creator, settlor, Trustor or donor.

Gross Estate ─ This is the value of an estate before debts are paid.

Group Home ─ For purposes of the Medicaid program, a. home in which two or more SSI recipients live and receive food and shelter for one overall price.

Guardian Ad Litem ─ A guardian appointed by a Court in connection with specific matter.

Guardian and Conservator ─ Guardians and conservators are persons appointed by the Probate Court. The individual for whom they are appointed is called a ward.

Heir ─ This is a person who is entitled by law to receive part of an estate.

Independent Trustee ─ A trustee who is not related to the beneficiary of the trust and does not stand to inherit any property under the trust. Independent trustees are preferred when family members are likely to disagree over management of the trust. However, independent trustees' fees are usually higher than those charged by a family member.

Inheritance ─ Property received as a result of another person's death. Typically, a person receives an inheritance under the terms of a will, revocable living trust, or state law (termed the law of intestate succession).

In-Kind Support and Maintenance (ISM) ─ Also called In-kind income. Shelter or food provided to an SSI recipient.

Intervivos Trust ─ A Trust that a person creates while they are alive. Contains instructions for managing the assets with which the Trust is funded during the person’s lifetime and for their distribution upon incapacity or death. It avoids probate at death but not Federal and State Estate taxes. Also called a Revocable Trust, Living Trust, etc.

Intestate ─ The condition of dying without a Will or Trust.

Irrevocable Trust ─ A Trust that cannot be changed or cancelled once it is set up.

Joinder Agreement ─ The written contract between a person who contributes funds to a pooled trust on behalf of a disabled loved one and the nonprofit organization operating the pooled trust. The joinder agreement "joins" the beneficiary's funds with the other funds in the pooled trust.

Joint Ownership ─ Two or more people own the same property. When one of them dies the survivor becomes the sole owner. Also

Letter of Intent ─ A term commonly used to describe a letter in which the creator of a special needs trust provides personal details about the trust beneficiary for the guidance of future trustees of the trust.

Living Trust ─ A trust created during the grantor's lifetime, usually to avoid probate and sometimes to also avoid federal estate tax. The grantor is usually the trustee during his or her life; then the successor trustee takes over and distributes the trust property to beneficiaries named in the trust document. Sometimes called inter vivos trust or revocable living trust.

Living Will ─ A legal document whereby you indicate your wishes concerning life support should you become terminally ill and be incapacitated and unable to communicate your wishes.

Long-Term Care ─ Nursing home care that lasts more than two months.

Marital Deduction ─ This is a deduction on the federal estate tax return that lets the first spouse to die leave an unlimited amount of assets to the surviving spouse outright or in certain types of trusts free of estate taxes. However, if no other tax planning is used, and the surviving spouse’s estate is more than the amount of the federal estate tax exemption in effect at the time of his/her death, estate taxes will be due at that time.

Master Trust ─ A special needs trust under which a nonprofit organization operates a pooled trust on behalf of many individual beneficiaries.

Medicaid ─ Medicaid is a joint Federal and state program that helps with medical costs for people with low incomes and limited resources.

Medically Needy ─ People whose income is too high for regular Medicaid eligibility but who are eligible for benefits if they contribute part of their income (called their share of cost) towards their medical care.

Medicare ─ Medicare is a federally-funded health care program, primarily for Americans over age 65 who are covered by Social Security or Railroad Retirement benefits.

Negligence ─ Failure to act in a way that a reasonable and prudent person would act under similar circumstances.

Noncountable Resource ─ Property that is not considered as a resource by the SSI and Medicaid programs for purposes of determining program eligibility.

OBRA ─ The federal Omnibus Budget Reconciliation Act, a law that, among other things, describes the circumstances under which property in a special needs trust may be considered the trust beneficiary's resource for the purpose of determining eligibility for SSI and Medicaid. (42JJ.S.C. §§ 1395 and following.)

Payback Provision ─ A provision in a special needs trust requiring that, after the beneficiary dies, the trustee must use any property left in the trust to reimburse Medicaid for benefits the beneficiary received. Special needs trusts containing property originally belonging to the beneficiary (self-settled trusts) must have a payback provision to avoid having the property considered the beneficiary's resource for program eligibility purposes. Third-party trusts, like the one in this book, do not have a payback provision.

Per Stirpes ─ A way of distributing your estate so that surviving descendents will receive equal shares of only what their immediate ancestor would have received if he/she had been living at your death.

Personal Property ─ This refers to movable property and includes furniture, automobiles, equipment, cash and stocks. Opposite of real property that is permanent such as land.

Personal Representative ─ See Executor.

Plan for Achieving Self-Support (PASS) ─ A plan (approved by SSI) that allows an SSI recipient to own otherwise countable resources as part of an effort to become self-supporting.

POMS ─ Program Operations Manual Systems, a set of guidelines issued by the Social Security Administration to help lower-level employees interpret the federal statutes and regulations that govern the SSI and Medicaid programs.

Pooled Trust ─ A Trust managed by a not-for-profit association where by assets are pooled for investment purposes but separate accounts are maintained for each individual investor.

Pour Over Will ─ A short Will used with a Revocable Living Trust (RLT). It states that any assets left out of the RLT will become part of the RLT upon your death and will be distributed according to the terms of the RLT.

Power of Attorney ─ The power of attorney names an individual to act on your behalf during your lifetime if you become disabled or incapacitated and cannot make decisions.

Power Of Attorney (POA) ─ A legal document giving the individual named therein the legal authority to act in your place in accordance with the particular powers specified therein. A general POA allow the individual to act in your place in all matters. A Durable POA allows the person to act even if you become incapacitated. All POA's granted terminate upon the grantor's death.

Presumed Maximum Value (PMV) ─ The presumed value of food or shelter provided to an SSI recipient by a third parry.

Principal Residence ─ A person's home and the land on which it is situated. SSI does not consider a person's principal residence a resource, regardless of its value.

Principal ─ Property held in trust. Income generated by the trust principal is considered income in the year received and principal if retained in the trust after that time. Also called trust corpus.

Probate ─ Probate is the judicial process by which an instrument is proven to be the decedent's will.

Prudent Investor Act ─ A law containing investment principles articulated by a group of nationally respected judges and law professors. Most states apply these principles to trustees in the absence of contrary investment Instructions in the trust document. As a whole, the law requires trustees to make commonsense investment decisions that will best serve the purposes of the trust.

Real Property ─ Real Estate, land and buildings attached thereto.

Remainder Beneficiary ─ A person or institution named in a special needs trust to receive trust property that remains in the trust at the death of the disabled beneficiary. Also called the remainderman.

Representative Payee ─ Typically, a person authorized by a government agency such as the Social Security Administration to receive benefits such as SSI payments on behalf of a recipient who is not competent to handle his or her own money.

Resource ─ For purposes of determining SSI eligibility, any property that the SSI program considers available to the applicant. See Countable resource and Noncountable resource.

Revocable Living Trust ─ A Trust in which the person establishing the Trust retains the right to change the terms of the trust during his/her lifetime.

Section 8 Housing ─ A federal rent subsidy program under which landlords accept low-income tenants. Tenants' pay a portion of their income, and the agency pays the rest.

Self-Settled Trust ─ A special needs trust funded with property belonging to the beneficiary, such as a direct inheritance, recovery in a personal injury lawsuit, tit gift.

Settlor ─ Another term for grantor.

Shelter ─ For SSI purposes, any item commonly associated with housing such as rent, heat, utilities, and mortgage payments. Disbursements from special needs trusts for shelter are considered in-kind support and maintenance (ISM) and are deducted from the SSI grant up to a certain amount.

Sheltered Workshop ─ A place of employment designed and managed to accom­modate the needs of people with disabilities.

Social Security Act ─ A collection of federal statutes that govern a variety of federal programs, including Social Security retirement and disability benefits. Medicare, SSI. and Medicaid.

Social Security Administration (SSA) ─ The agency charged with administering the programs created under the Social Security Act, including SSI and Medicaid.

Social Security Disability Income ─ SSDI ─ Social Security Disability Insurance (SSDI) is a program financed with Social Security taxes paid by workers, employers and self-employed persons. In order to be eligible for a Social Security benefit, the worker must earn sufficient credits based on taxable work. Disability benefits are payable to disabled workers, disabled widow(er)'s or adults disabled since childhood, who are otherwise eligible. Auxiliary benefits may be payable to a worker's dependents, as well. The monthly disability benefit payment is based on the Social Security earnings record of the insured worker on whose Social Security number the disability claim is filed.

Special Needs Trust ─ A Trust established for the benefit of a disabled person who is receiving governmental benefits and which complies with specified requirements so that distributions from the Trust would not result in the loss of such governmental benefits. The Trustee can distribute assets of the Trust to the disabled person only for his supplemental needs and not for any needs covered by the governmental benefits.

Spend Down ─ To spend resources on medical needs when an applicant for certain Medicaid benefits has resources over the resource limit. When the applicant's resources are sufficiently reduced, he or she will qualify for Medicaid.

Spendthrift Clause ─ A spendthrift clause is a provision in trust that is designed to protect the trust assets from the beneficiary's creditors.

SSDI  (Social Security Disability Insurance) ─ This federal program provides monthly cash payments to disabled persons who qualify because they have paid enough Social Security taxes. There are no resource or income ceilings.

SSI. (Supplemental Security Income) ─ SSI is the main form of government support for people who aren't eligible for Social Security retirement or disability benefits and who meet the program's income and resources requirements.

Successor Trustee ─ A person named in a trust to take over as trustee when the first trustee dies or is otherwise unable to serve. In a revocable living trust, the first trustee is the person who sets up the trust (the grantor). The successor trustee is the person who carries out the provisions of the trust after the grantor's death.

Supplemental or Special Needs Trust – Also called a Special Needs Trust. An supplemental needs trust is a trust created for the benefit of a beneficiary who receives SSI or Medicaid. The trust is drafted to provide discretionary benefits to the beneficiary, but not to be considered a countable resource for the beneficiary's SSI or Medicaid eligibility. A third party supplemental or special needs trust is one that is created for the benefit of a disabled person with the assets of someone other than the disabled person.

Supplemental Security Income – See SSI. –

Survivorship (Second-To-Die) Life Insurance ─ This type of coverage insures two people and pays the death benefit at the death of the second insured. The premiums are significantly less than two traditional insurance policies because the policy insures two lives.

Tenants-In-Common ─ Two or more persons own the same property. When one of them dies, the deceased heirs inherit his share of the property rather than the other property owners..

Testamentary Trust ─ A Trust established under a Will which will take effect upon the death of the Testator( the individual whose Will it is).

Testamentary Trust ─ A trust created as part of a will that goes into effect at the will maker's death.

Testator (M) / Testatrix (F) ─ The individual who makes the Will.

Third-Party Trust ─ A special needs trust funded exclusively with property given by people other than the beneficiary.

Transfer of Assets ─ The act of getting rid of property for less than its fair market value in order to become eligible for SSI or long-term care benefits under Medicaid.

Trust ─ A legal relationship created by one person, called the Grantor, in which another person(s), called the Trustee(s), manages property donated to the Trust by the Grantor for the benefit of yet a third person (or persons), called the Beneficiary.

Trustee ─ The person or entity who manages the Trust for the benefit of the beneficiary.

Trustee Powers ─ Specific grants of authority given to a trustee by the trust document.

Unearned Income ─ For SSI purposes, all income that does not result from employment.

Uniform Transfers to Minors Act ─ A law adopted by all but two states (Vermont and South Carolina) that provides a method for transferring property to minors and arranging for an adult, called a custodian, to manage the property until the child is older.

Will ─ A will is a written document with instructions for disposing of assets after death. A will can only be enforced through the probate court.