What Is A Special Needs Trust?
For our General Mills clients who have a child or other loved one with special needs, you may want to establish a special needs trust. A special needs trust (or supplemental needs trust) is an estate planning tool that can help provide for the needs of an individual who is disabled without jeopardizing his or her eligibility for government benefits. A qualified attorney can help you establish and administer this type of trust.
Tip: We'd like our General Mills clients to be aware that the term 'special needs' is used in this discussion to describe any trust that is established to fund the supplemental needs of an individual with disabilities while maintaining that individual's eligibility for government benefits. The term includes not only trusts funded with the individual's own funds (as governed by the Omnibus Budget Reconciliation Act of 1993 (OBRA '93)), but also trusts funded with assets from a third party (e.g., a parent or grandparent).
Why Establish A Special Needs Trust?
Some General Mills employees may be wondering, why establish a special needs trust? Unlike other types of trusts often used in estate planning, the primary goal of a special needs trust is to provide for the needs of an individual who is disabled throughout his or her life. Federal and state benefits are generally available to qualifying children and adults who have special needs. If your child qualifies for government benefits, one of your goals may be to ensure that his or her eligibility continues into the future. A special needs trust can help you attain this goal. In addition, this type of trust can provide for supplementary care and services for your loved one.
Tip: We'd also like these General Mills employees to note that although this discussion focuses on using a special needs trust to benefit a child with disabilities, some types of special needs trusts may be established for a parent or other individual over age 65 who wants to preserve eligibility for nursing home benefits under Medicaid.
To Preserve Eligibility for Medicaid
For our General Mills clients who are considering a special needs trust, one pro is that it preserves Medicaid eligibility. Medicaid, a joint federal-state program, provides medical assistance to those who are disabled and can demonstrate financial need. Children and adults can qualify for Medicaid only if their monthly income and the value of their other assets fall below certain limits, which vary from state to state. (Most states set a $2,000 asset limit.) In determining eligibility for Medicaid, a state may count only the income and assets that are legally available to the applicant. A special needs trust restricts the beneficiary's own direct access to the assets in the trust to such an extent that the assets are not considered legally available to the beneficiary. Thus, a special needs trust can protect Medicaid eligibility because assets in the trust are uncountable.
To Preserve Eligibility for Supplemental Security Income (SSI)
Children and adults with special needs who have limited income and resources often receive monthly benefits from Supplemental Security Income (SSI). These cash benefits can be used for basic needs such as housing and food. But because SSI benefits are need-based, inheriting money can mean that a child with special needs will lose his or her eligibility for this benefit program. By these General Mills clients naming a special needs trust as your beneficiary instead of their child, however, assets can be devoted to the care of their loved one. In addition, since SSI recipients are normally automatically eligible for Medicaid benefits, preserving your child's eligibility for SSI may preserve his or her eligibility for Medicaid as well.
To Provide Additional Care and Services
A special needs trust can be especially useful for our General Mills clients who want to provide care and services necessary for their child's well-being, without supplanting Medicaid benefits. Although Medicaid pays for a number of medical costs, including hospital bills, physician services, and long-term care, it will not subsidize items and services considered nonessential. These may include health-related expenses such as eyeglasses, dental care, rehabilitation services, and home health aide services, as well as personal expenses such as transportation, computer equipment, and vacations.
Caution: To ensure that trust assets are unavailable to the beneficiary, the trustee must have sole discretion over the distribution of trust income and principal. The beneficiary must have no control over the trust and no right to demand distributions from the trust. The trustee should purchase goods and services directly on the beneficiary's behalf, instead of giving the beneficiary money from the trust to purchase items needed.
What Requirements Must A Special Needs Trust Meet?
If the trust is intended to supplement, rather than replace, government benefits, it must be properly drafted. Although requirements vary according to state law and the type of special needs trust being established, here are some of the rules that apply to special needs trusts in general, and are good for our General Mills clients to be aware of:
- Funds in the special needs trust may not be available to the beneficiary.
- The beneficiary cannot revoke the trust.
- The individual with special needs must be considered 'permanently and totally disabled' under SSI criteria. Different rules apply to adults and children.
- Under the terms of the trust, the trustee may not be permitted to make payments or distributions that might interfere with government benefit eligibility (e.g., distributions cannot be made directly to the beneficiary).
- Special needs trusts may be established as part of a will (known as a testamentary trust) or during the creator's lifetime (known as a living or inter vivos trust).
- Special needs trusts can hold an unlimited amount of funds and can be added to at any time.
What Types of Special Needs Trusts Are Available?
Although there are many types of special needs trusts, they fall into two general categories: the third-party special needs trust (funded with assets belonging to someone other than the beneficiary) and the self-settled trust (funded with assets belonging to the beneficiary).
Third-Party Special Needs Trust
The third-party special needs trust is established with funds that belong to someone other than the beneficiary. For instance, a parent or grandparent may create such a trust under a will and fund it with a gift of cash, life insurance, or another asset. Upon the death of the beneficiary, any assets that remain in the trust can be distributed to whomever has been designated; if the third-party trust is properly drafted, the state will not have to be 'paid back' for long-term care services when the beneficiary dies.
Self-Settled Trust
A self-settled special needs trust is established with funds owned by the person with disabilities. For instance, a self-settled trust might be established using a personal injury award or inheritance. One type of self-settled trust is the qualified self-funded special needs trust. This kind of trust is created for the sole benefit of an individual who is disabled and who is under age 65 at the time the trust is established. Upon the beneficiary's death, Medicaid must be 'paid back' from the trust assets for any long-term care provided. This type of trust is also known as a (d)(4)(A) trust.
Featured Video
Articles you may find interesting:
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
Another common type of self-settled trust is the qualified pooled trust, also known as a (d)(4)(C) trust. This kind of trust is established and managed by a nonprofit organization. Separate accounts are maintained for each trust beneficiary, but funds are pooled for investment and management purposes. Upon the beneficiary's death, the nonprofit organization receives assets remaining in the trust, and will reimburse Medicaid for benefits paid to the beneficiary. In some cases, surviving family members may be entitled to receive some or all of the remaining funds.
Caution: Self-settled trusts are complex and must comply with the requirements of OBRA '93 that govern them.
Caution: A parent can preserve his or her own eligibility for nursing home benefits under Medicaid by transferring his or her funds into a special needs trust established to benefit a child with disabilities, as long as the trust has a Medicaid payback provision.
How Is A Special Needs Trust Typically Funded?
Many General Mills employees are probably wondering how these trusts are typically funded. In many cases, a special needs trust is established, but not funded, while the parent or other creator is alive. Upon the parent's death, his or her will transfers the special child's portion of an inheritance to the special needs trust. The trust (instead of the child) can also be designated as the beneficiary of various assets, such as employee benefits and life insurance policies.
Typically, a special needs trust is funded using:
- Life insurance
- Cash (including gifts from relatives)
- Investments (e.g., stocks, bonds)
- Retirement plan benefits (e.g., pension benefits, IRA funds, 401(k) assets)
- Personal and real property
- Proceeds from a personal injury settlement (applies to self-settled trusts)
Although life insurance is one of the most popular funding methods (in particular, lower-cost survivorship life insurance), each method has advantages and disadvantages. To ensure that the trust is adequately funded, these General Mills employees will need to estimate how much income their child is likely to need over the course of his or her lifetime.
What Else Should You Consider?
For our General Mills clients who are thinking about setting up a special needs trust, there are a few other points you should consider.
Selecting a Trustee
A trustee is a person or institution selected to administer a trust and manage its assets. The trustee's role is to adhere to the terms of the trust document and fulfill its objectives. You may wish to name yourself or another family member as trustee of the special needs trust, or you may wish to name an attorney, bank, or other professional trustee. There are advantages and disadvantages to each. Another option for these General Mills employees is to name a family member and a professional trustee as co-trustees.
Providing a Letter of Intent
For our clients from General Mills who set up a special needs trust through their will, you might also want to draft a letter of intent to describe how you want your child to be cared for after you're gone. Although it's not a legal document, it can provide important information to guardians, trustees, family members, and others involved in the care of your child. The letter may address such issues as your child's medical needs, daily routine, interests, likes and dislikes, religious practices, living arrangements, social activities, behavior management, and degree of self-sufficiency. Such a letter can prove invaluable to your child's caregivers and can also make the transition to a new living situation as smooth as possible for your child.
Informing Family Members
These General Mills employees should consider explaining to siblings or other family members why they're setting up the special needs trust. Although siblings might expect to receive equal inheritances, more resources will probably need to be set aside for the benefit of your child with special needs. Explanations and clear directions now may help avoid family conflicts later.
Working With a Qualified Attorney or Financial Professional
Special needs planning is complex and technical, and the laws that govern special needs trusts differ from state to state. To properly plan for your child's future, we suggest these General Mills employees work with a qualified attorney or financial professional who has experience with the planning needs of families of individuals with disabilities. This person should also have a thorough understanding of the income, gift, and estate tax consequences that must be considered when funding and administering a special needs trust.
How can employees of General Mills, Inc. maximize their benefits under the BCTGM Retirement Plan, and what factors are considered in determining pension amounts for those nearing retirement? This question aims to explore the intricate details of how General Mills, Inc. structures its pension benefits to support employees’ future financial stability. It's important for employees to understand the value of their years of service and how this affects their ultimate pension payout as they approach retirement.
Maximizing Benefits under the BCTGM Retirement Plan: Employees of General Mills can maximize their benefits under the BCTGM Retirement Plan by understanding how their years of service and negotiated benefit levels directly affect the pension they receive. The pension amount is determined by the length of service and a defined benefit formula based on the number of years of Benefit Service accrued. As employees approach retirement, they should consider whether they meet eligibility criteria for early or normal retirement, as these factors influence the ultimate pension payout(General_Mills_2024_Pens…).
What are the eligibility requirements for participating in the BCTGM Retirement Plan at General Mills, Inc., and how does this participation impact future retirement benefits? Employees should be well-informed about what constitutes eligibility to participate in the retirement plan. Understanding criteria such as service length, employment status, and union participation is crucial, as it directly relates to their ability to accrue retirement benefits.
Eligibility Requirements for BCTGM Retirement Plan: To participate in the BCTGM Retirement Plan, employees must be regular employees of General Mills covered by a collective bargaining agreement. Eligibility is automatic after completing a probationary period. Participation impacts future retirement benefits as employees begin to accrue pension benefits based on years of service, which contributes to their final payout during retirement(General_Mills_2024_Pens…).
In what ways does General Mills, Inc. ensure that benefits from the BCTGM Retirement Plan remain protected under federal law, and what role does the Pension Benefit Guaranty Corporation (PBGC) play in this? Knowledge of the protections available can significantly influence employees' assurance in the viability of their pension benefits. It is vital for employees to recognize how federal guarantees work in safeguarding their retirement benefits.
Federal Law Protections and PBGC's Role: The BCTGM Retirement Plan is protected under federal law, ensuring that employees’ retirement benefits are safeguarded. The Pension Benefit Guaranty Corporation (PBGC) insures vested benefits, including disability and survivor pensions, up to certain limits. This protection provides employees with assurance that their pensions are protected, even in the event of plan termination(General_Mills_2024_Pens…).
How does General Mills, Inc. address the complexities of vesting in the BCTGM Retirement Plan, and what can employees do if they are concerned about their vested rights? Vesting is a key concept that affects employees' access to benefits over their careers. Employees need to understand the vesting schedule outlined by General Mills, Inc. and the implications it has on their retirement plans.
Vesting in the BCTGM Retirement Plan: Employees vest in the BCTGM Retirement Plan after completing five years of Eligibility Service or upon reaching age 65. Once vested, employees have a non-forfeitable right to their pension benefits, which means they retain their pension rights even if they leave the company before reaching retirement age(General_Mills_2024_Pens…).
What options are available to employees of General Mills, Inc. if they experience a change in their employment status after being vested in the BCTGM Retirement Plan, and how might this impact their future retirement pensions? This question prompts discussion on the plan's provisions regarding reemployment and what employees should be aware of when considering changes to their employment status.
Impact of Employment Status Changes on Pension: If an employee's status changes after being vested in the BCTGM Retirement Plan, such as leaving the company, they may still be entitled to pension benefits. The plan outlines provisions for reemployment and how prior service years are counted toward future pension calculations. Employees who are reemployed may have their previously earned service restored(General_Mills_2024_Pens…).
How does the BCTGM Retirement Plan at General Mills, Inc. work in conjunction with Social Security benefits, and what should employees be aware of regarding offsets or deductions? This can encompass the interplay between corporate pension plans and governmental benefits, which is critical for employees to plan their retirement effectively.
Coordination with Social Security Benefits: The BCTGM Retirement Plan operates in addition to Social Security benefits. There are no direct offsets between the pension and Social Security benefits, meaning employees receive both independently. However, employees should be aware of how the timing of drawing Social Security and pension benefits may affect their overall financial situation(General_Mills_2024_Pens…).
What steps must employees of General Mills, Inc. take to initiate a claim for benefits under the BCTGM Retirement Plan, and how does the claims process ensure fairness and transparency? A clear comprehension of the claims process is essential for employees to secure their pension benefits. This question encourages exploration of the procedures in place to assist employees in understanding their rights and options.
Claiming Benefits under the BCTGM Retirement Plan: Employees must terminate employment before claiming their BCTGM Retirement Plan benefits. The claims process involves submitting the required forms, and employees must ensure they provide all necessary documentation for a smooth process. The pension is generally paid monthly, with lump-sum options available under specific circumstances(General_Mills_2024_Pens…).
How does the retirement benefit formula of the BCTGM Retirement Plan operate, and what specific factors should an employee of General Mills, Inc. consider while planning for retirement? Delving into the calculations involved in determining retirement benefits is important for employees to understand how their service years and other contributions come together to form their final retirement payout.
Retirement Benefit Formula: The retirement benefit formula is calculated based on the years of Benefit Service and a defined benefit level. As of 2024, for each year of Benefit Service, employees receive $87 per month (increasing to $88 after June 1, 2025). Planning for retirement involves considering how long they will work and the benefit level in place at the time of retirement(General_Mills_2024_Pens…).
What additional resources or support does General Mills, Inc. provide to assist employees in planning their retirement and ensuring they make the most of their benefits offered under the BCTGM Retirement Plan? Understanding the tools and resources available can empower employees to take proactive steps in managing their retirement plans effectively.
Resources for Retirement Planning: General Mills offers resources like the Benefits Service Center and online portals (e.g., www.mygenmillsbenefits.com) to assist employees with retirement planning. These tools help employees understand their benefits, calculate potential payouts, and explore options for maximizing their retirement income(General_Mills_2024_Pens…).
How can employees contact General Mills, Inc. for further information about the BCTGM Retirement Plan or specific queries related to their retirement benefits? This question is crucial so employees know the appropriate channels for communication and can seek clarification on any concerns they may have regarding their retirement planning.
Contact Information for Plan Inquiries: Employees can contact General Mills for more information about the BCTGM Retirement Plan through the Benefits Service Center at 1-877-430-4015 or visit www.mygenmillsbenefits.com. This contact provides direct access to support and answers to questions about their retirement benefits(General_Mills_2024_Pens…).