Comprehensive Planning. Lifelong Solutions.

New Guidance for Special Needs Trusts

By Shannon Laymon-Pecoraro, CELA

On April 30, 2018, the Social Security Administration (SSA) released new Program Operating Manual System (POMS) provisions, which are essentially a set of guidelines utilized by eligibility workers processing claims for Social Security benefits that directly relate to special needs trusts. Although we received a peek into what the POMS might look like at the Special Needs Trust Conference last October, advocates were uncertain what the final provisions would be. Much to our delight, the new POMS promote flexibility. Understanding that there were a number of updates, I have incorporated some of the highlights I believe my clients will most appreciate:


A key element of a special needs trust is the “sole benefit rule.” Essentially, the SSA has held that all distributions must be for the sole benefit of the beneficiary, and those receiving an incidental benefit must contribute a pro rata share. POMS SI 01120.201.F.3.a now establishes a new “primary benefit” rule, thus recognizing that others will inherently receive an incidental benefit and that such incidental benefit is acceptable provided the purchase was for the beneficiary. The examples provided by SSA indicate that others may reside in a home owned by the trust, but that a car purchased by the trust, which is titled in the name of a non-beneficiary, used by the non-beneficiary daily, but also used to transport the beneficiary twice a month would not be considered for the primary benefit of the beneficiary.


One controversial inconsistency among the various regions has been the treatment of caregivers. The POMS now clarifies that a caregiver may be a family member, a non-family member, or a professional agency and that such a caregiver may provide companion services.  A special needs trust may compensate such individuals for services and pay related expenses incurred by the provider during the course of service. The example provided by the SSA is payment for an admission ticket to a museum when accompanying the beneficiary.  Additionally, the POMS were updated to clearly indicate that SSA should not request evidence of training for, or the income tax information of, family caregivers.  Payment for such services shall be considered “reasonable” based on the time, effort, and prevailing rate of compensation for similar services within the geographic region.


SSA has consistently held that distributions to a pre-paid debit card owned by a beneficiary are treated like cash. The new POMS, however, clarifies that if the pre-paid debit card is owned by a special needs trust and controlled by the trustee such that the trustee is able to prevent the use of the card for food or shelter-related items, then distributions will be permitted. Although there may be a number of companies that have “administrator-managed prepaid debit cards,” the most commonly used by advocates would be True Link Financial.


For years, the payment of non-beneficiary travel expenses, to include transportation, lodging and food, were unclear. Under the POMS, SSA has permitted that payment of non-beneficiary travel expenses when the attendance of the non-beneficiary is necessary to permit the beneficiary to travel. This would be applicable in the situations where a minor cannot travel unaccompanied, as well as beneficiaries that require extensive medical care.  The ability for such care provider to pay his or her own travel expense is irrelevant in determining the reasonableness of the travel expense.

Additionally, the trust may pay for a non-beneficiary’s travel expenses when such travel is necessary “to ensure the safety or medical well-being of the trust beneficiary.” As a result, there is now clarification that travel expenses may be paid for by the trust when the non-beneficiary is traveling to oversee beneficiary’s living arrangements within some sort of facility or supported living arrangement. Additionally, the trust may pay for travel expenses of a trust fiduciary to ensure the welfare of the beneficiary when the beneficiary does not reside in an institutional setting.


Kit KatAsk Kit Kat – Vets in Rural Alaska

Hook Law Center: Kit Kat, what can you tell us about how rural Alaskans receive veterinary care for their pets?

Kit Kat: Well, thanks to an organization called Pets for Life, Alaskans in certain parts of the state receive free veterinary care for their pets. As you may know, many parts of Alaska are in extremely, isolated areas. Therefore, many receive pet care through Alaska Native Rural Veterinary (ANRV), a Fairbanks-based nonprofit. Because ANRV could not handle all of the vast state’s needs, it formed a partnership with Pets for Life (PFL), another nonprofit devoted to pet care. The area chosen for service for the 2 organizations is in the Yukon-Kuskokwim Delta, about 400 miles west of Anchorage. There are 3 villages that were chosen—Napaskiak, Napakiak, and Kwethluk—none of which is on a road system. Located on arctic tundra, they rely on snowmobiles in cold weather, airplanes, or a network of raised wooden platforms during warm periods when the tundra becomes a soupy mess. Napaskiak’s population is 425. It’s a largely Native American population who lives in the area, and sources for employment are few. Residents mostly rely on hunting and fishing to supply their needs. There is not a lot extra for pet care.

The vets that serve usually do so in teams of 3. One will prep the animals for anesthesia, one does the surgeries, and one provides dental cleanings. When they come to town and use a school which is not in session, the electricity is not even turned on. They have to pay in advance at the general store to pre-pay the bill, before they have power. Over the course of 3 days, they will perform 106 surgeries, give 295 rabies shots, and give 176 dogs de-wormer pills. Cats are a rarity, but there are some. PFL tries to go in several times a year to get the location caught up on the pets’ veterinary needs. After that, they can come less frequently as a community goes into maintenance mode.

This is a tremendous effort for a very worthy cause. The ASPCA and the HSUS help, too, by providing some ancillary support staff who cart animals to the care site, prepare areas for surgery, etc.  By working together, all the organizations make a big difference in the lives of these pets and their owners. (Kelly L. Williams, “Doing the work—Pets for Life brings free veterinary services to rural Alaska, All Animals, May/June 2018, p. 22-27)


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Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at or fax us at 757-397-1267.

Posted on Friday, May 25th, 2018. Filed under Senior Law News.

I am a Beneficiary of an Estate – Why Did I Receive a Schedule K-1?

By Hook Law Center

For the most part, property you inherit is not included in your income for tax purposes. However, items which are considered “income in respect of a decedent,” or “IRD” may be taxable to you or a portion thereof.

First, let’s review what IRD actually is. IRD is income which the decedent (person from whom you inherited the property) would have included on his/her individual tax return, except the income was earned/received after their death. Some examples of IRD include but not limited to: Compensation-related benefits paid after death (vacation pay), benefits from an individual retirement account, stock dividends, interest income, stock sales, etc.

Now that we understand IRD, let’s review a decedent’s estate. A decedent’s estate is a separate legal entity for federal tax purposes and comes into existence at the time of death of an individual. A decedent’s estate figures its gross income in the same manner as an individual. However, there is one major distinction, which is that an estate is allowed an income distribution deduction for distributions to beneficiaries. The income distribution deduction determines the amount of any distributions taxed to the beneficiaries. For this reason, a decedent’s estate is sometimes referred to as a “pass-through” entity. The beneficiary, and not the decedent’s estate, pays income tax on his or her distributive share of income. Schedule K-1 is used to notify the beneficiaries of the amounts to be included on their individual income tax returns. Regulation section 1.651(a)-2 discusses income required to be distributed currently and reportable to the beneficiaries. Also, Code section 662 provides information on inclusion of amounts in gross income of beneficiaries of estate and trusts accumulating income or distributing corpus.

The distributable net income is calculated by taking the total IRD received for the estate in that year less expenses in respect of a decedent. The remaining net amount is the estates taxable net income before any distributions to beneficiaries. Distributions to a beneficiary(ies) can then be deducted on the estate’s fiduciary tax return, which decreases taxable income and helps to minimize any tax liability.

A beneficiary in most cases is not being taxed on 100% of the income from the estate’s tax return. Property and principal assets of the estate (which includes cash from the decedent’s bank accounts) are not taxed to the beneficiary since this is not included in IRD. Only the portion of the distribution you received from the DNI that is from the estate’s taxable income is taxable to the beneficiary and then reported on Schedule K-1.

Here is an example: At John’s death, $50,000 of IRD items were included in his gross estate, $10,000 of which was paid to Sally. There were also $3,000 of deductions in respect of a decedent, for a net value of $47,000. Sally will include in her income the $10,000 of IRD she receives from the distributable net income of the estate. The $10,000 will be reported on a Schedule K-1 and must be reported on Sally’s individual tax return for that year. The decedent’s estate return will then be taxed on $37,000 ($50,000 IRD – $3,000 expenses – $10,000 of distributions to Sally).

Since Estates have a higher tax bracket in most instances, it is usually more beneficial to record distributions to beneficiaries so that the Estate can receive a deduction for the distribution and will result in less taxable income.


Kit KatAsk Kit Kat – Reviving Brook Trout

Hook Law Center: Kit Kat, what can you tell us about brook trout in Virginia?

Kit Kat: Well, this is truly a heartening tale! Apparently, brook trout used to be very common in Virginia and could be found in almost all parts of the state. However, today because of farming, foresting, mining, and development pressures, their range has been greatly reduced. In fact, their reduction represents a 38 percent complete disappearance from prior levels, and a 34 percent reduced presence in other areas of Virginia.

Now enter students from the Students for Environmental Action club at James Madison High School in Vienna, VA. They had an interest in raising brook trout and seeing whether they could re-introduce them in certain favorable areas and whether or not their lives could be sustained there. Fortunately, at their school, they had an excellent resource—a faculty adviser who in his 2011 dissertation for George Mason University rated streams that were suitable for brook trout habitation in Maryland. Using this information he and the club created a rating scale which could be used to evaluate streams in Virginia. A score of 80 or more on a 100-point scale indicated that brook trout could be sustained there. The club then checked out various streams in the Shenandoah Valley and northern Virginia and rated them. Their club had raised brook trout fingerlings, and they were looking for a place to launch them. They settled on Catharpin Creek in northwest Prince William County. It had a great score of 87.5, but it had one drawback of a summer water temperature being a little high. So their adviser, Kirk Smith, diverted a spring to cool down the area. They also decided to plant trees along the banks of the creek to lower the temperature of the area during the day. So state officials gave permission for the club to release 50 trout fingerlings, as the young are called, last spring in 2017. They then checked back in December 2017, and they found at least one survivor. That gave them the incentive to try again this spring with 55 more fingerlings.

Time will tell how well their endeavor will succeed. No matter the outcome, this club’s efforts will definitely yield a lot of great information, so that one day in the future the brook trout can be once again a live symbol of its status as being the freshwater fish of Virginia. (Peter Cary, “Budding scientists try to revive state’s once-thriving brook trout,” The Virginian-Pilot, May 7, 2018, p. 1 & 9)


Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at or fax us at 757-397-1267.

Posted on Friday, May 18th, 2018. Filed under Senior Law News.

The Importance of Good Recordkeeping – and Which Documents to Keep

By Emily Martin, Esq.

As the ease of managing accounts and finances online continues to increase, many of our clients wonder which documents, records, and papers they actually need to keep around the house. Not having certain documents on hand can be frustrating and can cause a delay in getting the legal services you need, especially if you’re thinking about funding a trust, applying for the VA Aid & Attendance Pension, or applying for Medicaid. Another good reason to keep these documents in a safe place and in an organized format is to make it easier for your children or loved ones to find and interpret your financial and personal information after you pass away or become incapacitated. No one wants to be a pack rat, but it can be even worse to discard documents that you’ll end up needing later on. If you’re looking to de-clutter but you’re worried about discarding an important document, use the following list as a guide as to which documents are important to keep around:

  • Previously filed income tax returns. Not only should you keep the past seven years’ worth of tax returns in the event that you are audited, but these documents often prove to be an important source of information about your income and expenses when you begin to plan for long-term care.
  • Pensions and social security statements. If you meet with an estate planning and elder law attorney for the purpose of getting an income-based benefit, such as Medicaid or VA Aid and Attendance, you will need documentation of what benefits you already receive in order to determine your eligibility.
  • Documents regarding prepaid funeral and burial arrangements. This paperwork will be something that your children will need to see after you pass away. Additionally, information about prepaid funeral plans can be useful information for your estate planning attorney to have, especially if they are looking into crisis planning techniques in order to preserve your assets from a Medicaid spend-down.
  • DD-214. If you served in the military, you know that a DD-214 serves as proof of your military service. It is the document that you receive upon your separation from the military. If you plan on applying for VA benefits, you’re going to need a copy of this document to prove that you are eligible for the benefit.
  • Proof of financial accounts, even those closed within the previous five years. These documents are important so that your attorney can determine your eligibility for Medicaid benefits, as well as for estate planning purposes.
  • Originals of estate planning documents, including your last will and testament, any trust that you may have executed, general durable power of attorney, advance medical directive, medical power of attorney, and HIPAA authorization. It is important to keep these documents in a secure area such as a fireproof safe or safe deposit box so that your loved ones can access them and your wishes can be carried out if you become incapacitated or after you pass away.

If you have all of these records, it is important to keep them organized in a filing cabinet or safe where they will be easily found and interpreted if something were to happen to you. Always make sure that your loved ones know which documents you have and where to find them so that they can access them if they need to. When the time comes to destroy important documents, it is always best to shred them in order to avoid the possibility of identity theft and to prevent others from learning confidential information about you.

Remember, most of these documents can be replicated or found somehow if you accidentally discard them, but that is not always the case. Additionally, the time it takes to find these documents, as well as the cost to replace them, can be devastating. If you are ever in doubt about whether to keep a specific type of paperwork, contact your estate planning attorney before you put it through the shredder.


Kit KatAsk Kit Kat – Outer Banks Ospreys

Hook Law Center: Kit Kat, what can you tell us about ospreys in the Outer Banks of North Carolina?

Kit Kat: Well, this story is a pleasant one. Apparently, ospreys have been nesting near power lines along the Wright Memorial Bridge which crosses Currituck Sound in North Carolina for years. Of course, they like to perch high, and would make their nests on the power line poles or wooden platforms constructed by Dominion Energy that lie next to the bridge. When the platforms were rotting from age, Dominion Energy replaced the wooden platforms with aluminum ones. Experts weren’t sure how it would affect the ospreys, but apparently it hasn’t affected them much at all! There are four nests this year—an improvement over last year when there was only one on the aging, wooden platforms.

Ospreys are quite common in the area, and they provide good viewing for people on their way and back from the Outer Banks. Dominion Energy learned a long time ago that it made sense to help their avian friends, rather than fight them. So they decided to build nesting platforms for the ospreys on older, concrete poles which were no longer in use. This way their wings and feet would not destroy or interfere with power transmission, as sometimes previously happened.

Jill Hailey, an operations engineer for Dominion Energy, said the new aluminum platforms should last for decades. The platforms have to be quite substantial as nests can weigh up to 600 pounds. Ospreys mate for life and have a life span of about 20 years. While they winter in the Caribbean and Central and South America, they return year after year to the place of their birth, and so the cycle continues with a new babies each spring.

We are lucky to have such beautiful creatures in our midst. They are graceful and skillful hunters, catching fish every fourth attempt. Watching their comings and goings is pure delight! (Jeff Hampton, “Ospreys nesting on new aluminum platforms along Wright Memorial Bridge,” The Virginian-Pilot, May 3, 2018, p. 3)


Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at or fax us at 757-397-1267.

Posted on Monday, May 14th, 2018. Filed under Senior Law News.

Elder Abuse, Neglect, and Exploitation, Part Two: What to Watch For and What is Being Done to Combat the Problem

By Jennifer Rossettini, CFP®

This is the second article in a three-part series discussing Elder Abuse, Neglect and Exploitation. In Part One, we discussed the definitions for elder abuse and the prevalence of it in our society. In Part Two, we will discuss what to watch for in detecting the signs of elder abuse as well as identifying the situations in which our elderly citizens are most vulnerable to abuse.

You may be aware of the story surrounding the abuse of the famous actor, Mickey Rooney. Mr. Rooney suffered abuse mainly at the hands of his step-son, who physically abused him and financially abused him by misappropriating approximately $8.5 million. He did this by issuing himself majority stock in a production company started by Mr. Rooney and appointing himself as Treasurer of the company.  Before his death, Mr. Rooney testified before the Senate Special Committee on Aging that his life had become unbearable. “I felt trapped, scared, used, and frustrated. But above all, I felt helpless. For years I suffered silently. I could not muster the courage to seek the help I knew I needed,” he said.

Elder abuse does not only happen to the rich and famous, but the story shows that it can happen in any situation in which an elder adult is vulnerable. Vulnerability can come in several different forms. If an elder adult is dependent on someone for their physical or financial well-being, this can sometimes open the door for abuse. A perpetrator may threaten to discontinue assisting them in order to manipulate the elder into meeting his or her demands. If an elder adult is suffering from a cognitive impairment, they may lose both their good financial judgment and their ability to detect and prevent exploitation.  If an elder adult is in poor physical health, they may not have the time or energy to review their financial statements, making detection of financial exploitation unlikely.

So who are the primary perpetrators of elder abuse? You may or may not be surprised to learn that it is those who are closest to us: family members, caregivers and fiduciaries. Often abuse at the hands of a family members goes unreported because the older adult is fearful of being placed in a nursing home, fearful that their only caregiver (the family member) may be removed from the home, and quite simply, ashamed. Dependence on or by the family member is a key indicator of the potential for abuse. Caregivers may create reliance and dependency on their services alone and then exploit their care recipients out of the idea that they have “earned” the extra compensation. Fiduciaries, such as agents under a Power of Attorney, have been known to abuse the powers granted to them under the document. For example, by using the power to make gifts, they could gift all of the elder adult’s assets to themselves.

Some of the warning signs of physical abuse include unexplained injuries, persistent physical pain and soreness, nutrition and hydration issues, and sleep disturbances. Some of the warning signs for psychological abuse are distress and depression, learned helplessness and posttraumatic stress disorder. For financial exploitation, watch out for the unexplained disappearance of funds, valuables, or personal belongings; excessive payment for care and/or services; the sudden appearance of previously uninvolved relatives and friends; a sudden change in a person’s power of attorney or Will; and checks no longer coming to the older adult’s home.

The Federal Government has attempted to begin addressing the problem by passing the Elder Justice Act, which authorizes a specific source of federal funds to address elder abuse, neglect and exploitation, but funding for the Act has never been approved. Similarly, the Social Services Block Grant, which is intended to be used for elder abuse victims, pales in comparison to federal support for other services. It is estimated that federal funding provides only $.89 per elder abuse victim, compared to $6,000 per child victim, or $240 per domestic violence victim.

The State of Virginia has made some legislative changes over the past several years to enhance the safety and well-being of older adults. These changes include: expanding the list of professionals who are required to report suspected elder abuse; requiring Local Department of Social Services (LDSS) to refer relevant information to the appropriate licensing, regulatory, or legal authority for action or investigation; authorizing LDSS, with informed consent, to take or request relevant photographs, video recordings, or medical imaging of the adult and his environment; expanding the list of Adult Protective Services (APS) situations in which law enforcement must be notified; authorizing civil penalties for cases of non-reporting by all mandated reporters of elder abuse; making financial exploitation a criminal offense; and removing the $50,000 threshold for prompting APS to report suspected financial exploitation to law enforcement.

In the next and final part of the series, we will discuss what you can do to protect yourself, your loved ones, and/or your clients from elder abuse, neglect and exploitation.


Kit KatAsk Kit Kat – Canine Pair

Hook Law Center: Kit Kat, what can you tell us about the unusual canine pair of a pit bull and a blind dachshund?

Kit Kat: Well, this is indeed an unusual pair. The pit bull’s name is Blue Dozer (age 6) and the blind dachshund’s (age 12) name is OJ. Sadly, their owner became homeless, and surrendered them to the Richmond, VA Animal Care and Control shelter. The Richmond shelter had instructed the adopting person to keep the pair together, because they were a devoted pair. Blue Dozer would lead the way, and OJ would follow behind. OJ can see some shadows, but in essence, were he a person, he would be considered legally blind.

On April 22, the shelter thought they had found the right person to take the pair. Two days later, however, OJ was found wandering along the side of a road. A Good Samaritan turned him in to the Shenandoah Valley Animal Services Center near Staunton, VA. Staunton is about 2 hours from Richmond, but he was identified via microchip. When the adopting person was contacted, she said that someone had been watching OJ for them. She didn’t know how he got loose. She didn’t want to give up Blue Dozer, but she eventually reconsidered after receiving pressure to do so on social media. So the pair went back to the Richmond shelter where they are stabilizing.

The Richmond shelter will re-offer them for adoption, after a thorough screening process. Hundreds of people have made inquiries about the pair. The shelter will require the next adopter to sign a pledge that they not be separated. In the meantime, however, the two seem to be content. 10-pound OJ and 90-pound Blue Dozer, who always stay close to one another, are quite a sight! Christie Chipps Peters, director of the Richmond shelter says, they always try to find the right person to adopt a pet, however, sometimes we “cannot account for decisions that are made by citizens after adoption. In the end, we have to trust people—trust them to love the pets we have cared for and  trust them to do what is best.” (Dana Hedgpeth, “A blind dachshund and his guide dog, who were adopted then split up in Virginia, have been reunited,” The Washington Post, April 26, 2018)


Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at or fax us at 757-397-1267.

Posted on Friday, May 4th, 2018. Filed under Senior Law News.
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Ask Kit Kat: Pet advice and wisdom as Kit Kat sees it.