Trusts

A trust is a legal entity, like a corporation, that can manage assets (money and valuables) for a particular purpose. People with mental handicaps need trusts so that someone else can make financial decisions for them.

A trustee is someone legally empowered to manage money left in trust for someone. There are two important trusts set up to take care of our children. The first is a testamentary trust (a trust created in our wills) that provides for the children until the youngest is 25 years old. The second trust, which provides for our children in their adulthood, is created in a separate legal document, the Lee Family Trust. (There are other trusts created in our wills to handle unusual circumstances that may arise, but these are the most important.)

While trustees make all financial decisions about the trust, remember that guardians help Daniel with all of his day-to-day financial decisions.

Special Needs Trusts

The Lee Family Trust has been designed to take care of all of our children, but it has been carefully crafted to take care of Daniel. It is called a Special Needs Trust because it contains provisions that specifically handle people with "special needs" like Daniel. It provides funds that can be used for Daniel's behalf without those funds being in Daniel's name. It is critically important that Daniel have no more than $2000 in his own name for several reasons:

• Daniel needs eligibility for government benefits. It is imperative that Daniel have no money in his own name, because the government will either deny Daniel's eligibility for benefits (such as Medicaid and Supplemental Security Income) or they will use the Daniel's funds to pay for his care. A Special Needs Trust complies with federal government regulations to retain Daniel's eligibility for benefits.
• Daniel needs eligibility for AT&T benefits. Daniel needs to meet specific criteria to be eligible for AT&T benefits, including being dependent on others for his support. If Daniel were to have enough assets to throw off a sizable yearly income, that could make Daniel ineligible.
• Daniel needs protection from his own bad decisions. If money is in Daniel's name, he could spent it foolishly or be swindled. Even if it could be shown that Daniel was not competent to make the decision, it might be difficult (or impossible) to locate the party and get court action to restore the money.

If you don't understand anything else about the trust, understand this: Daniel must not have any money in his own name. Not a bank account. Not a savings bond. Not a bequest from your will. No benefits from your life insurance. Nothing. Daniel is entitled for his money to be spent wisely for him and he is entitled to receive all of the benefits that he is eligible for. Ensuring that Daniel's money is in the trust and not in his own name is the only way to do that.

Understand, too, that there are many important reasons to preserve Daniel's eligibility for benefits that have nothing to do with getting things paid for. While it may not make any sense, frequently the government-supplied benefits are superior to what can be purchased with private money. One example is group homes. Not only are privately-funded group homes far more expensive than government-provided homes, they are also frequently of lower quality, because the federal standards for group homes are more stringent than those for homes that accept only private money. People that have money get lower-quality homes until their money runs out, at which point they can then start receiving the benefit of placement in a government home. To ensure that Daniel gets the highest quality of care, it is critical that assets be in the trust rather than his name.

The Lee Family Trust is a legal entity that is run like a corporation. There are no funds in the trust until both Sharon and I have died, when our second-to-die insurance policy pays the trust as its beneficiary. (Our will is carefully crafted to leave our other assets to Elizabeth, Annette, and Derek, and not to Daniel.) Once the trust is funded, it must have taxes filed (form 1041) each year under the Employer Identification Number 22-6759355. Henry Sussman can help you with this.

The way the trust protects Daniel is that the trustees have complete discretion on whether to spend money on Daniel's behalf or not. So, the trustees can refuse to spend on anything that the government or AT&T adequately provides for, and they can agree to spend on things that are not covered (or that are covered at lower quality than desired). So, the government could cover Daniel's room and board in a group home, but the trust could purchase a van for the home that the staff can use to take the residents on trips. Using the trust this way ensures that Daniel has the highest quality of life possible.

Lee Family Trustees

Uncle Les, Uncle Mitch, and Samuel Rodriguez are the trustees of the testamentary trust and the Lee Family Trust (attached). We know they will make competent judgments about disbursement of trust funds to support Daniel's needs or the needs of his guardians. In addition, Elizabeth, Annette, and Derek will each become trustees of the Lee Family Trust as they reach age 25. We intend that there always be at least two trustees of the Lee Family Trust. If the number of trustees dwindles to one, the remaining trustee can appoint a second trustee.

We intend that the trustees consult with each other, as well as Elizabeth, Annette, and Derek (regardless of their ages), on all major decisions for Daniel. Other family members and Daniel himself should also be involved in important decisions. In addition, Henry Sussman, our financial advisor, and Harris Lawton, our lawyer, can give advice to the trustees. (Their fees are paid by the trust.) We expect the trustees to pray for the wisdom to make the right decisions for Daniel. We expect the trustees to respect all opinions and to try to reach a true consensus on major decisions. In the event that a consensus cannot be reached, a decision by the majority of the trustees should be reached. In the event that the trustees are split, the course of action favoring a disbursement on Daniel's behalf should be followed.

Trust Decision Making

The trust pays Daniel's medical expenses (and other expenses not covered by benefits), fees for trust management (such as those for accountants and lawyers), and any items that directly improve Daniel's quality of life (such as tickets to a ball game or a new computer). The trust should also cover indirect costs that benefit Daniel, such as a companion's expenses to go on vacation with him, or paying for a sibling to come visit him. The trust is allowed to make disbursements on behalf of others for specific reasons (such as covering our other children's education expenses), but the trustees should only spend money in this way if they are comfortable that it will not unduly detract from Daniel's needs.

There are a number of factors that must be considered in managing the trust. Obviously, every reasonable effort must be made to conserve the assets of the trust to ensure that it can provide for Daniel's needs over his life expectancy. It is more important, however, to provide for Daniel's true needs than to be absolutely sure that the assets will last. We expect that if the trustees are good stewards of the trust assets, then God will provide for Daniel's needs should the assets become depleted. Each of the trustees should thoroughly read the trust document because it has many good examples of what trustees can do.

We expect the trustees to formally meet each year to assess the financial health of the trust (as stipulated in Article XIX of the trust) and to discuss any issues with Daniel and interested family members. A spending plan for the following year should be approved at this meeting. Obviously, unanticipated situations can arise that cannot be planned, but it is important to have a plan to prepare for the majority of situations that can be anticipated.

If the trustees do not feel they are adequately skilled to invest and account for the trust funds, they should engage professional help in doing so (paid by the trust), such as Henry Sussman or another firm with trust management experience. We wish for the trustees to exercise their own personal discretion (after professional guidance) for all disbursement decisions. We do not wish disbursement decisions to be made by professionals that do not know and care about Daniel unless there is no other reasonable alternative.