November 9, 2015



            What is an "advance directive" and why do I need one? An advance directive includes two major components -- an appointment of health care agent, in which you direct a person to make decisions for you if you cannot; and what is sometimes called a "living will," a legal document that specifies your health care wishes when you are no longer able to do so. The key is to prepare this in advance, before you have health issues, and while you are still competent to make these decisions. An advance directive covers all health care issues, physical and mental. It could cover simple things like routine health care decisions that you can no longer make, or more complicated issues including whether you wish to have life support, cardio-vascular resuscitation, tube feeding, pain medications, or surgery.

           In order to make a valid advance directive, it must be signed in the presence of two witnesses, while you are mentally competent and can understand what you are directing. The person that you are appointing as your "health care agent" to make such decisions if you become incapacitated, cannot be a witness. In addition, at least one of the witnesses must be someone who would not financially benefit by your death or handle your estate.  It does not have to be notarized. You should discuss your wishes in detail with this person and be comfortable that they both understand and agree to carry out your wishes if needed. Often a spouse or parent fills this role but there is no requirement on who can serve as a health care agent. This is a personal decision that should not be made lightly.

            You do not have to hire an attorney to draft an advance directive, but many attorneys, including the attorneys at Taylor Legal, routinely include these documents as part of an overall estate planning package. The Office of the Maryland Attorney General has an approved advance directive form on its website at  However, you are not required to use this form.

            What do you do once you have an advance directive? Be sure to keep a copy
with your permanent documents and give a copy to your health care agent and doctor. You can
also obtain a wallet card showing that you have an advance directive.

            Suppose you do become incapacitated and cannot make an informed medical decision,
what happens if you have an advance directive? Before an advance directive is used a doctor must certify in writing that you are not capable of making such a decision. Once these steps are completed, your advance directive should be honored.

            While Maryland law does not require that anyone have an advance directive, it can alleviate a lot of stress and uncertainty.  Thus, discussion and planning ahead with an advance directive, is advisable.

            You need not worry about being locked into your advance directive. As long as
you still have legal capacity to understand what you are doing, you can always change or revoke
it. This gives people added assurances that any changing wishes or needs can be carried out.  

November 2, 2015

Why Do I Need a Will and What Will Happen if I Die Without One?

                                   WHAT HAPPENS IF I DIE WITHOUT A WILL?

            It is very difficult, emotionally, to think about needing a will, because it makes us think about death. Many people occasionally think about this and plan to look into it but don't go any further. The reason why is obvious -- it's not a fun thought and easy to say "I'll get to this later, when I'm less busy." But for many, "later" never comes. The result can have far reaching negative consequences. So, while difficult, thinking about a will is very important and could be the best gift you leave to your heirs or descendants.

            In order to understand this whole process, a little background information is helpful. 
First, what is a "will?" A will is a written legal document directing a person's wishes regarding their property and other financial affairs, or nominating a guardian for minor children, after death. In order to make a valid will in Maryland, a person must be at least 18 years old and be competent. A will must be in writing and signed by two or more credible witnesses. A will can do many helpful things including:

            1. Appointing a "Personal Representative," the person you select to administer the closing
of  your estate, pay your bills, and carry out your wishes.
            2. Appointing a "Guardian,"  who will have legal custody of your minor child or child
with a disability.
            3. Dispose of your personal and real property as you direct.
            4. Make charitable bequests.
            5. Set up a trust or special needs trust (for persons with a disability).
            5. Safeguard your finances through proper tax planning.
            6. Avoid family disputes by clearly setting forth your intentions.
            7. Explain, if you chose to, why you are doing certain things in your will.

In failing to make a will, you lose the opportunity to control all of the above important
matters after your death.
          If you already have a will, but need to make a minor change, a change after a will is made to part of the will is called a "codicil" (like an amendment). A properly drawn codicil will keep a will intact with a change only to the part specified in the codicil. This enables a person to make a change without the time and expense of drawing up a whole new will.  If you have major changes to an existing will, it is best to have an entirely new will prepared. Most wills should have a provision that any prior will is "revoked" by a more recent will. 

          If you do not have a will, or if no valid will can be located, each state, including Maryland, by statute, sets forth what happens if you die without a will. Thus, you are leaving important decisions up to the State, rather than taking control of your own affairs. 

         First, because an "estate" handled by someone, State law will determine who should serve as the Personal Representative of your estate. The Personal Representative is the person who must identify the decedent's assets and file required forms and tax returns, pay estate taxes and other expenses, pay bills and funeral expenses, and then distribute any remaining assets pursuant to Maryland law. State law cannot determine if a certain person is ready, willing or able to handle this work and the job may to to a person not suited to the task at hand.

         Second, State law will direct how your assets are distributed under the rules of "intestate succession" (without a will). There are many possible scenarios. These include a decedent who:
            1.  is married or unmarried;
            2.  has surviving children or grandchildren;
            3.  has siblings or parents; and/or  
            4. has grandparents or more distant lineal relatives.

            The rules of intestate succession set up a complicated division of assets based on the surviving family and relationship with the decedent. An overall scheme of this is set forth by the Office of the Register of Wills ( An example of some or the rules of intestate succession are
  • If a spouse and minor child/children survive, the spouse receives only one-half of the probate assets and the child/children receive the other one-half.
  • If there are no surviving minor children but other surviving children or parents, the spouse receives the first $15,000.00 plus one-half of the balance of the estate; the remainder passes to the decedent's children, if any, otherwise to his or her parents.
  • If a spouse but no children or parents survive, the spouse receives the entire probate estate.
  • If children but no spouse survive, the children will receive everything.
  • If no relatives (brothers, sisters, nieces, nephews, cousins, etc.) survive, the assets will be distributed to the Board of Education in the jurisdiction where the estate was administered.

            The rules that apply to intestate succession are complicated and the above is a simplified
version. The actual statutes must be consulted in estate planning and checked regularly for any
changes or new requirements. This article does not attempt to cover every scenario or guarantee
what will happen if you die without a will. In addition to the Maryland Office of the Register of
Wills website, another helpful website for general information is Maryland Orphans Court,

            Because there are complicated personal, financial and legal ramifications involved, it is
advisable to hire an attorney at the outset of estate planning and to review your will regularly for
legal sufficiency and changing needs and circumstances of your surviving loved ones.

            Most people find that making a will and doing estate planning relieves a lot of underlying
stress and is something they wish they would have done sooner.

October 26, 2015

What is the Maryland SDAT and why do I care?


Anyone doing or planning to do business in Maryland should be familiar with the State Department of Assessments & Taxation ("SDAT").  As a broad overview, SDAT governs business formation and taxation.  The SDAT website,, provides a wealth of information and many forms and required filing information may be found there.

Register, Change, Revive or Dissolve a Business
SDAT filing services include filing forms to register a business in Maryland. These can include: Maryland Limited Liability Company, Foreign (Non-Maryland) Limited Liability Company, Stock Corporation, Tax-Exempt Nonstock Corporation, Close Corporation, and Foreign (Non-Maryland) Corporation.  SDAT also has forms to change, revive, or dissolve a business. However, a business owner should be cautioned that many considerations go into what type of business to register and what the tax and other legal ramifications are. SDAT does not provide legal advice on these issues. Instead, an experienced business attorney can offer such advice.

Look for an Existing Business or Find Out if a Business Name
 is Taken for Your New Business
SDAT also provides a search engine for business name availability. You can search to see if any other company has registered a company name you want to use. If not, you can.register the name. You can also register a trade name which is commonly known as a t/a or d/b/a name. This name is different from the actual registered entity name but one that the SDAT authorizes you to use. (For example, my business is registered as Katherine L. Taylor, P.A., but the trade name is registered as Taylor Legal.)

Obtain Information About a Business
The status of a business can be checked through SDAT. SDAT can provide certified copies of Articles of Organization or Incorporation.  It lists the "Resident Agent," (person authorized to receive service of process for a Maryland business) and the legal status of a business (whether the charter is active or forfeited). In addition, SDAT can provide specific information about a business. For instance, you may want to see if a business is legally registered in Maryland, whether it is a close corporation or a stock corporation, the purpose of the business, or if it is in good standing or forfeited.

File Personal Property Tax Returns
SDAT has forms for filing personal property tax returns. SDAT administers the valuation of annual property taxes based on the value of a business' personal property.  SDAT automatically registers corporations, limited liability companies, limited partnerships, and limited liability partnerships for this type of tax and once your business is registered, you will receive notice that you are required to file property tax returns. However, sole proprietorships and general partnerships, which are not registered with the SDAT, must obtain an SDAT registration number and file an annual business personal property form for this assessment.

Learn How the SDAT Website Can Help You!
The website is easy to navigate but can be overwhelming, content wise, for someone not familiar with the intricacies of business requirements in Maryland. While attorney advice is recommended, it is a good idea to check out and become familiar with all SDAT has to offer.

October 19, 2015


                                                           ADVERSE POSSESSION

            Adverse possession seems to be a particularly unusual legal right. In simple terms, it
provides that a person who does not have legal title to a property can obtain it under
specified circumstances. The legal requirements to obtain adverse possession include:
(1) actual or constructive possession of the property, (2) under color of title or claim of right, and
for 20 years uninterrupted.

            Actual possession means just what it sounds like - that the person claiming adverse
possession is in actual peaceable possession of the property. Constructive possession means
possession under "color of title" or "claim of right." Color of title applies when
someone erroneously thought they owned the property but did not legally, perhaps because of
an improperly worded or recorded deed. Claim of right applies, for example, when a person
makes a legal claim that they own the property by reason of a predecessor's adverse possession.
Maryland cases have used the terms "hostile," "actual," "open," and "notorious" to explain the
type of ownership required for adverse possession. This does not necessarily mean
asserting ownership in the ordinary meaning of "hostile," which brings up ideas of malice or ill
will. Instead, the goal is that the asserted ownership is made clear, thereby giving notice to an
actual or purported owner that possession and ownership is asserted. Thus, property owners
are admonished not to "sleep on their rights."

            The 20 year requirement supports the public policy of promoting land development and
rewarding productive use and ownership of property. It also aims to deter an owner's neglect of
his or her property rights.

            Under what circumstances might an adverse possession claim arise? There are many
possible scenarios. A common one is a boundary dispute, perhaps between neighbors regarding   
a strip of land between properties. Another could be when someone abandoned a property and an
adverse possessor stakes a claim and meets the legal requirements above.  Or maybe an
owner has a defective deed, and never legally owned the area in question. Yet another scenario
could be where there is an "easement," or allowed use of part of a property without a transfer of
ownership, such as a shared driveway or road that a person is able to use to access their property.

            How and when does an adverse possession claim come before a court? A person who is
not in possession of property, but who claims title, may bring an action against the person in
possession of the property. This is called an action to  "quiet title." The legal standard or "burden
of proof" falls on the adverse possessor. Thereafter, the burden of proof shifts to the who claims
to be the owner.

            The court, hearing an adverse possession claim, will decide who has legal ownership of
the property.

            Adverse possession claims are, by nature, complicated. They are very fact specific.
Each element of an adverse possession or claim of rightful ownership must be proven.  Adverse
possession cases may require experts, factual witnesses, surveyors, title examiners, and others to
support a claim or defense to a claim. It is advisable to retain an attorney regardless of what side
you are on should one of these cases arise. It is also important, if you believe that someone may be adversely possessing your land, that you take action immediately to remove the possibility that a claim can be made. Katherine Taylor and Andrea LeWinter have represented many clients on both sides of adverse possession claims. 

October 12, 2015


            There are a series of steps involved in recording a deed in Maryland. While the overall
process is uniform, counties can differ in the technical requirements and costs. A deed to
be recorded can be prepared by an attorney licensed in Maryland or by one of the parties named in the deed. It is critical that each step is followed precisely and that the wording of the dead is accurate. Otherwise, an intended deed transfer may not be effective. If improperly done, a deed may not transfer legal title, resulting in complicated and expensive legal issues later on.
            First, what is a deed? A deed is a legal document that changes or transfers ownership of real
property in Maryland. This is done through a "conveyance." For example, upon the sale of a
home, a prior owner would convey new ownership and legal title to the purchaser through a
properly written and recorded new deed. Or a property owner may wish to gift a property to
someone without any "consideration," or payment. Nevertheless, this too must be properly
recorded in a new deed that states that no consideration was paid. A new deed may also be
required to show a change of name.
            A deed must specify the type of ownership interest that is being conveyed. This is
done through important and precise language in a "habendum clause." There are different types
of property ownership in Maryland. If not worded correctly, the attempted transfer of legal title
may not be effective.
            Once you have a properly drafted deed, the next step is recording the deed. Deeds
are recorded in the Land Records Department in each Circuit Court where the property is
situated.  While you should consult specific requirements for each county, what follows
is a general description of the process.
            1. A deed must include a "certificate of preparation," stating that the deed was either
prepared by an attorney or by a party.
            2. A deed must be notarized (signed in person before a notary public).
            3.  A "lien certificate" must be attached, if required. This will show any unpaid
taxes or liens on the property which must be paid before property can be deeded or transferred.
            4. A "State of Maryland Land Instrument Intake Sheet" must be filled out. This Sheet
will be used to determine any required transfer or recording taxes. These must be paid before
the deed will be recorded. Certain transfers may be exempt from transfer and recording taxes.
            5.  A deed can be recorded after steps 1-4 have been done. A deed, along with the above-
referenced documents will be filed by the court Clerk.  There are fees to record a deed.
Once the Clerk has recorded the deed, ownership transfers. However, if a deed
was recorded with inaccuracies in the wording or transfer language, though recorded, the deed  
may not transfer legal title.  Beware that Court Clerks cannot and will not advise you if your
deed is legally sufficient or effective to accomplish your goals.
            It is impermissible to include a social security number or driver's licenses in a deed.
            Court Clerks make and maintain a full and complete alphabetical general index of every
deed, in both the names of each grantor, donor, mortgagor and assignor, and each grantee, donee,
mortgagee, or assignee. In addition, the Clerks make a microfilm picture or other copy of every
recorded document, which is sent to the State Archivist annually.
            Recording a deed in Maryland is a multi-step exacting process. Before recording a deed,
take care to examine your intent and be sure to comply with each step of Maryland law. This
can avoid errors in ownership and deeds, which can be difficult to correct, and can cause of host
of unintended legal problems later on.


October 5, 2015



Eminent domain occurs when the state takes an owner's real property for public use. The process is called condemnation. This seems unusual to many. Why, they ask, can the government take my property? It's not that simple and there are safeguards in place to protect an owner facing condemnation.

A brief history of this process is helpful. The U.S. Constitution provides safeguards against government taking our property.

  • The Fifth Amendment states that the Federal Government cannot deprive individuals of "life, liberty, or property," without due process of law.
  • The Fourteenth Amendment forbids states from denying any person "life, liberty or property, without due process of law."

Article 3, Section 40 of Maryland's Constitution also includes safeguards:
  •   there is no taking of private property for public use without just compensation,
  •   the private property must be appraised and the fair market value determined,
  •  these matters may be submitted to a jury, and
  •   there can be an immediate taking for certain needs such as roads and right of ways.
   With this brief overview, you can see how complicated eminent domain and condemnation cases are. Many questions arise. What is a "public use?" Who determines the "fair market value?" How does an "immediate taking" work? Should an owner contest a proposed condemnation? How much will it cost? Can the state take only part of the property? What if there is a lease in effect? What does "due process" require? Should an owner settle or fight a proposed condemnation? Will a displaced owner be paid relocation expenses or reimbursed for financial losses incurred because of a condemnation?

 Each case in unique and factually specific. This article does not attempt to and cannot provide absolute answers to the many possible scenarios. However, the following tips can be helpful for a property owner dealing with this situation.

  First, the state can establish the "public use" requirement, making this difficult to challenge. Nevertheless, a property owner in this situation should beware of the following potential issues, among others:

1.     A property owner must be given proper notice of the proposed condemnation. This includes advance notice (except in cases of immediate condemnation noted above).
2.     Except for immediate condemnation cases, an owner has a right to request a jury trial. For example, a jury trial may be requested on specific issues such as fair market value. Owners also have appeal rights.
3.     Once a property has been condemned, an owner is entitled to damages. Damages can be awarded for the taking of an entire tract of land or where part of a tract is taken, for the fair market value of the part taken.
4.     The value of condemned property is critical to an owner. The state must provide evidence, including a written appraisal of the fair market value of the property performed by a qualified impartial appraiser. An owner can also present appraisal evidence or can rely on the assessed value of the property as determined by the State Department of Assessment and Taxation.
5.     There are special considerations if the property being condemned is a dwelling. An owner or occupant of a dwelling may be entitled to additional compensation for the reasonable cost of a replacement dwelling, or other increased interest costs and other debt service costs a person is required to pay for financing any comparable replacement dwelling.  Also, moving and relocation expenses must be paid to a displaced person.
6.     If the property owner prevails, the state must pay courts costs in a condemnation proceeding, including an allowance for reasonable legal, appraisal, and engineering fees. In addition, the owner may be entitled to interest on damages at the rate of 6% per annum. An owner is also entitled to receive a credit for taxes paid before the property was condemned.
7.     An action for condemnation must be brought within 4 years of the authorization to administratively or legislatively acquire the property. This period can be renewed by a new authorization.

An owner facing condemnation is wise to retain an attorney at the inception of the proceeding to help with the complicated issues along the way. Experienced counsel can untangle the complicated issues and focus on maximizing an owner's damages. This can make the whole process, which is understandably something most people would rather not face, more successful.

September 21, 2015



                Did you know that you can record a judgment from another state in Maryland? Through a simple procedure a recorded out of state judgment becomes legally enforceable in Maryland, increasing your options for collection and satisfaction of a judgment.

                To record a final judgment from another state, you need a  certified copy of the judgment from the jurisdiction where it was entered. You can then file the certified copy in any county in Maryland, after giving proper notice to the debtor, and it becomes a valid judgment ripe for collection here. A final judgment can be recorded in any county. Each county charges a filing/recording fee.

                So, if you have a foreign judgment from another state when should you think about recording it in Maryland and in which county? It makes sense to record the judgment in a county where the debtor lives, works, or has any property or assets, because you can move to attach them.

                What can you do with a recorded final judgment? It automatically becomes a lien from the date of entry on the debtor's interest in land located in that county. In addition, it enables you to do various forms of "discovery," such as Interrogatories in Aid of Execution or a Deposition, to learn specifics about a debtor's finances, including attachable assets. It also opens up a variety of potential collection avenues, including bank account and wage garnishment, and attachment and sale of property.

                The procedure to record a foreign judgment may be a cost effective option to obtain payment on a judgment. 

September 18, 2015



            What should you do if you get a zoning violation notice in Howard County?  First, some background on the Howard County Department of Planning and Zoning ("DPZ") is useful. DPZ's stated mission is: "To create collaborative, innovative plans and implement strategies that effectively address growth and redevelopment challenges. DPZ seeks to enhance Howard County's high quality of life, prosperity and stewardship of natural and cultural resources." As part of this mission, DPZ issues various zoning regulations contained in the Code of Ordinances and Municipal Code. These can be found online at  The Howard County Planning Commission, Board of Zoning Appeals and their delegates are designated to enforce these zoning regulations.  If you received a zoning violation notice, the complaint could have been made by these zoning  authorities or by a private citizen, even anonymously.

            Once a complaint is made, it will be investigated by county zoning authorities. Action
may or may not be taken, depending on what the investigation shows. Investigations can
result in inspections of property, emergency remedies, and denial of access to property. The 
DPZ, upon becoming aware of a zoning violation, may institute an injunction, mandamus (court
order to correct a public record or title), abatement, or any other action to prevent or stop the
violation.  A notice may be issued ordering a stop to the violation within 10 days or within a
reasonable time specified. Such notice must be served personally or by registered mail. If the
violation is not timely remedied, DPZ can take whatever action is necessary to end the violation.
DPZ may enforce zoning regulations by issuing citations. These citations can be heard in court or
in administrative proceedings.

            If a violation notice is not issued, an aggrieved person may request that DPZ issue
a written notice, fairly describing the property and alleged violation. This must be done within
60 days of receiving the written request. If no notice is issued during this time period, it means
DPZ has decided that the violation does not exist. Thereafter, the complainant has appeal rights.
If an appeal is taken, DPZ must send a copy of the appeal to the owner and occupant of the
premises where the alleged violation exists.  
            If a violation is found, failure to remedy the violation is a misdemeanor with a monetary
fine of up to $500 per day that the violation continues. There are also other civil penalties and
enforcement remedies available to DPZ under the Howard County Code.

            There are many types of potential zoning violations including for example prohibited
placement of a structure, sign, improvement, or change of land use; failure to obtain a permit for
improvements or land use; or prohibited use of land. Zoning violations and hearings are often
complicated and time consuming. An attorney can be help a person facing an alleged zoning 
violation navigate this process. Katherine Taylor and Andrea LeWinter have assisted many clients who have received zoning violation notices, and those who sought to ensure that violation notices were issued to other landowners who were violating the zoning regulations. 

June 8, 2015

ABLE or SNT? How Can I Save for My Child with Special Needs?

While many parents are very responsible and do their best to provide for their kids, many families also depend on government benefits which can be very helpful to a family – even a family with adequate resources – especially where there are other children, and when the parents have retirement and college accounts to fund. Most of the time when a child with special needs is in the family, parents (very responsibly) fund UTMA accounts for all of their kids, including the child with special needs.

Many parents, however, actually end up doing their child a disservice, because funds in the name of a child who is seeking government benefits can prevent a child from qualifying for certain government aid. Accounts in the name of the child (UTMA funds become the property of the child when the child reaches the age of either 18 or 21 – depending on how the account is set up) are considered to be owned by the child, even if the parent funded the account (the funds are deemed to be gifts to the child).  In some cases, when a child turns 18, (s)he may be eligible for SSI (Social Security Income and other benefits such as Medicare) as a result of a disability. However, for many programs he or she will NOT be considered fully eligible until all of his or her other assets are exhausted. If the potential recipient has funds in his or her name, the potential recipient may have to “spend down” those funds before becoming eligible to receive benefits.

Therefore, the parent is between a rock and a hard place. Do the parents start saving now in the name of the child, or do the parents opt NOT to put funds in the name of the special needs child? If the parent opts to NOT put funds in the name of the child, they can put the funds in the name of a third person with instructions to use that money for the benefit of the special needs child, but many times the parents do not know someone who can be relied on to care for the child if the parents are no longer able to.

Until very recently, the only safe way for families to plan in advance to both (1) provide for their child, and (2) arrange the child’s finances so that the child upon becoming an adult (age 18) will be eligible to receive government benefits in addition to funds set aside by the parents, was to set up a Special Needs Trust, also called a Supplemental Needs Trust (SNT).   After the SNT is created, the parents (or others) can add money to the SNT as gifts to the child (up to the maximum amount per year that is exempt from gift tax). That trust would also be in existence throughout the life of the child to accept any death benefits payable to the child, should either of the parents or grandparents pass away and leave funds to the special needs child.

If set up properly, the funds in the Parent SNT do NOT disqualify the child for government benefits (because the trust, not the child, “owns” the funds and the funds are distributed by a trustee strictly in accordance with the terms of the trust). The main thrust of the SNT is that the trustee (the parents or any successor) can only use the funds in the trust to pay for any supplemental needs not covered by government benefits. Thus, the child gets the benefit of government help AND other supplemental needs met (such as recreation, education, etc.) from the funds set aside for the child’s benefit. While a SNT trust is a good idea, it cannot be funded with funds that are already considered to be owned by the child (UTMA account in existence), so it is important for parents to set up an SNT as soon as they realize the need for one.

Recently, Congress passed a law that will provide another alternative to parents wishing to save for special needs children, or for persons with disabilities to save for themselves.  In late 2014, the president signed the Achieving a Better Life Experience Act, or ABLE Act. This new law, which is modeled after 529 college savings plans, will allow people with disabilities (or others on their behalves) to open special accounts where they can save up to $100,000 without risking eligibility for Social Security and other government programs. While contributions to the accounts are not tax deductible, interest earned on savings will be tax-free. Funds accrued in the accounts can be used to pay for “qualified disability expenses” which is any expense related to the designated beneficiary as a result of living a life with disabilities and includes education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services education, health care, transportation, housing and other expenses. To be eligible, a person has to have a “significant disability” with an age of onset of disability before turning 26 years of age.
As of now, the total annual contributions to an ABLE account by all participating individuals, including family and friends, is $14,000. There are other limitations, including maximum amounts that can accrue in an ABLE account and limitations on the amount that is exempted from the resource limits for certain government benefits. For example, the first $100,000 in ABLE accounts would be exempted from the SSI $2,000 individual resource limit, but if the amount in an ABLE account exceeds $100,000, the beneficiary would be suspended from eligibility for SSI benefits and no longer receive that monthly income. However, the beneficiary would continue to be eligible for Medicaid, but states would be able to recoup some expenses through Medicaid upon the death of the beneficiary.

The US Treasury Department, through regulations that are likely in process of being written and that will hopefully be completed in 2015, will publish more details explaining what a “significant” disability is and how to set up and qualify for ABLE accounts. In addition, each state also put its own regulations in place — much as they have done for 529 plans — so that financial institutions can make the new accounts available.

While the addition of the ABLE account will provide more choice and control for the family of a person with disability, the ABLE account will not replace the SNT entirely. The cost of establishing an ABLE account will be considerably less than a Special Needs Trust, because an ABLE account will be able to be opened with a bank or financial advisor (a SNT can be costly to set up, as it generally requires the services of a lawyer). Further, with an ABLE account, account owners will have the ability to control their own funds (rather than having the trustee of a SNT control the funds) and, if circumstances change, the account owner will still have other options available to them.  However, the ABLE account can only be opened by someone with a “significant” disability (to be defined in regulations) and, because of the likely monetary and qualification limitations that will be imposed on ABLE accounts, a SNT may be more advantageous for some families. Determining which option is the best for any family or person will depend upon individual circumstances.

* “Special Needs” in this article refers to a condition or disability that will likely prevent a person from supporting himself or herself fully.

February 27, 2015

Do I need to create a Special Needs Trust for my child with a disability?

What is a Special Needs Trust?

A Special Needs Trust (also called a Supplemental Needs Trust) for a disabled child is a trust formed by the parent and funded with assets that normally would placed into a regular account for the child, and which "shields" those assets from being considered assets of the child for governmental benefit purposes.

Many times, parents (very responsibly) fund UTMA (Uniform Transfer to Minors Act) or other accounts for their kids. Those funds are considered to be owned by the kids as a result of gifts from the parents to the kids. When the kids are minors, they cannot take legal ownership of the funds – that only happens when they reach the age of majority (either 18 or 21, depending on the actual account set up). Once a child reaches that age, he or she can legally do anything they want with the money. (Yes, sometimes, children don’t really know that the accounts can be accessed by them, and they allow their parents to direct as to how the funds should be spent - such as when the child is in college, and the child “pays” college tuition or other expenses with the funds.)

In some cases, when a child turns 18, (s)he may be eligible for SSI (Social Security Income) and other benefits such as Medicare/Medicaid as a result of a disability. However, for many programs he or she will NOT be considered fully eligible until all of his or her other assets are exhausted. (The government does not pay social security income or Medicare/Medicaid if a recipient has other available funds, and requires the potential recipient to “spend down” those funds before becoming eligible to receive benefits.)

While many parents are very responsible and do their best to provide for their kids, government benefits can be very helpful to a family – even a family with adequate resources – especially where there are other children, retirement and college accounts to fund, etc. So, many families plan in advance to both (1) provide for their child, and (2) arrange the child’s finances so that the then-adult child (age 18) will be eligible to receive government benefits in addition to funds set aside by the parents (or others) as gifts to the child during the child’s younger years.

What a parent may want to do now is set up a Special Needs Trust (also called a Supplemental Needs Trust) (Parent SNT) that will be funded with future gifts from the parents and others (up to the maximum amount per year that is exempt from gift tax – now $13,000 per person per recipient - $26,000 per year from both parents and $13,000 per year from any other person). That trust would also be in existence throughout the life of the child to accept any death benefits payable should either parent or even a grandparent pass away. If set up properly, the funds in the Parent SNT do NOT disqualify the child for government benefits (because the trust, not the child, “owns” the funds and the funds are distributed by a trustee in accordance with the terms of the trust). The trustee (you or any successor) can use the funds in the trust to pay for any supplemental needs not covered by government benefits -- the funds cannot be used to pay for ordinary daily needs that would be covered by governmental benefits. Thus, the child gets the benefit of government help AND other supplemental needs met (such as recreation, education, etc.) from the funds set aside for the child’s benefit.

What if We Already Have UTMA Accounts in the Child's Name?

Here is the kicker. A parent cannot fund a Parent SNT with funds that are already considered to be the child’s (UTMA account in existence), and thereby convert those funds that are already in the name of the child to funds that are not considered the child’s for government benefit purposes. So, even if you set up a Parent SNT now, at age 21 when the UTMA funds legally vest in the child’s name, the UTMA funds may have to be used to  pay back government benefits (s)he had been receiving from the age of 18 and/or the existence of the UTMA accounts will disqualify her for benefits (even if (s)he was previously qualified) if the account still has a balance . So, while a child may have become eligible for and been receiving benefits from the age of 18, once the UTMA funds vest (s)he will become ineligible until those funds are spent to payback benefits already received. After the spend down, (s)he will then be eligible again for government benefits.

Again, when the child turns 18 years old, (s)he may become eligible for certain government benefits, and the UTMA funds vest in him/her when (s)he turns 21.  What some people do is use the UTMA funds already set aside for the benefit of the child with the intent that by the time (s)he turns 21 (s)he has no assets that (s)he owns and legally controls. During the period before the child turns 21, the funds in a UTMA account can be used to pay for supplemental expenses for the child –pay for school, pay for an apartment, pay for camp or a car, etc. If those funds are exhausted before (s)he turns 21, then she will not lose her benefits eligibility as a result of having available funds in her name when (s)he turns 21.

In the meantime, you can set up a Parent/Third Party SNT and fund that with future gifts to the child. That trust would be mentioned in the parents' wills as the trust that would receive any testamentary bequests from either or both parents, and would maintain eligibility for government benefits for a child who may be eligible.

For more information, consult:;; and a lawyer experienced in handling special needs trusts in your State.