Featuring: Dana Hooper, LSA’s Executive Director, & Ellen Cookman J.D., LL.M. – Owner & Principal Attorney, Cookman Law, Certified Specialist in Estate Planning, Trust & Probate Law

Leila Elabed: Hello everyone. Thank you so much for joining us tonight. I’m Leila and I’ll be your host for the night. It looks like some people are still joining us. So while we wait, this is LSA’s 2025 I/DD Topics and Trends. This is our fourth year doing this actually. So, if you’re interested in seeing more content from experts in the field, please go to our YouTube channel. We have many videos as well as transcripts. If you’re looking for resources for tonight’s topic, we have ‘Planning For the Future, Special Needs Trusts, Conservatorships, and Decision Making Options.’ And we’ll have Ellen Cookman from Cookman Law on with us tonight.

For those who are new to Zoom, we’re going to start off with some housekeeping things. There is a chat function at the bottom of your screen. If you’re interested in chatting to any of us panelists or any attendees, you can go ahead and use that chat feature. If you’re looking to find community or resources, please use that to chat to either of us. That is how you switch from all panelists to all panelists and attendees. It’ll be right at the bottom of your screen. Before we hear from our panelists, we want to hear from you first. So we have a couple questions for you.

Give me one moment. I’ll go ahead and launch that poll. There we go. Just three questions. We want to know how you heard about us, and then what is your relationship to someone with I/DD, as well as what is your biggest concern when it comes to future housing and care planning for your loved one? These questions inform us for our next webinars to be able to answer your burning questions. I’ll go ahead and give it about 30 more seconds. If you could please answer those questions, that would be amazing.

While you’re answering those questions, I just wanted to go on to say we’ll have a Q&A section at the end of this webinar. So if you have any burning questions for either Ellen or Dana, please go ahead and use that Q&A function at the bottom of your screen. And we’ll be able to get to those at the end of the session. Thank you so much for answering those questions. And I’m gonna go ahead and introduce our executive director, Dana Hooper. Dana Hooper has been the Executive Director of Life Services Alternatives for the past 17 years, but his journey started many years ago when his son Brent was diagnosed with an intellectual disability. Over the years, he has become involved in many areas of the I/DD world. He became a leader in our community working with government and nonprofits such as Branch Services who he was on the board of… Lighthouse for the Blind and Visually Impaired which he was also on the board of and the State Department of Developmental Services and San Andreas Regional Center where his son Brent is a client in supported living. It also led him to his leadership role at LSA where he can make a difference every day in the lives of the individuals that LSA serves.

Dana Hooper: Thank you Leila. It’s a pleasure to be here and thank you all for attending this webinar. We always look forward to these. I have the pleasure and I am very excited to introduce you all to Ellen Cookman. Ellen is the principal attorney at Cookman Law and a certified specialist in estate planning, trust and probate law where her credentials are from the state board of legal specialization. She received her JD from UC Berkeley School of Law and her LLM in estate planning trust and probate from Golden Gate University. Ellen lives in East Palo Alto with her husband and their two boys. Her older son has high functioning autism. They also live with a Siberian husky mix named Rosie and a kitty named Skittles. So that’s quite a combination. It’s a full house for sure. So good to have you here. 

Ellen Cookman: So glad to be here. Thanks so much, Dana. Great. 

Dana Hooper: So we do a Q&A with me asking the questions and we’ll save those questions that you might have for the Q&A session that will follow. So let me get this rolling. I’d love to start with you. What led you to start Cookman Law and focus on special needs planning, which is the question that is in the back of all of our minds. 

Ellen Cookman: Yeah. Well, that’s a good question. And sometimes I wonder myself, but really you know, I’ve always loved the special needs community and felt comfortable around the community. I think it might be because I have some family members who are on the spectrum, not just my son, but some, you know, older family members. And also mental health challenges run in my family. So that’s always been something that we’ve grappled with and we just interact a little bit differently. But you know, going back, I’ve always volunteered in the community for quite a while and I worked for three long horrible years doing litigation at a big firm dealing with the billable hour requirement and I hated it and burned out and I went to teach for a year at a small private school called Hope Technology School which does full inclusion of typical and special needs because when I don’t know what I’m doing in life, I teach. That’s kind of what I do. So, actually I come from a family of lawyers and teachers, so this combination is really nice for me. And while I was there, I went to a presentation that an attorney gave on special needs trusts. And I listened to this and I’m like, “Oh my goodness, I can actually help people in the community and find out who they love and support my family and really do something good with my law degree.” And so I looked around. I worked at two different firms for six years and then I started my own practice in 2015. So, it’s been 10 years now and I just love it, Dana. It’s so rewarding and so amazing to be able to work with this community. 

Dana Hooper: Well, fantastic. I know personally it’s always good to be your own boss. I haven’t achieved that yet, but I’m always trying. Well let’s dive into the topic of special needs planning. What does that actually involve and why is it an important part of preparing for the future? 

Ellen Cookman: Yeah. Well, so it really involves when you have a loved one, usually a family member with special needs. It could be a child, it could be a niece or nephew, it could even be a parent. But if you have someone that really can’t fully take care of themselves and support themselves and they need some sort of scaffolding, you know, when you’re building a building, we put this protective outer layer around that building to make sure that you can build the building safely and as well as possible, but keep out the bad elements. I think of special needs planning in that way as well. Like we want our children, regardless of their abilities, to be as independent and happy and fulfilled as possible. And to accomplish this, a lot of times we need to have somebody else who’s looking out for their benefit, making sure that they’re not taken advantage of by financial predators. Usually we want to avoid the court process if we can, especially in California, courts are really difficult to navigate. And so we want to accomplish all of this and that’s really what special needs planning is. 

Dana Hooper: Great. Well, I hear terms thrown around and some people call them part of the toolkit, but a special needs trust, an ABLE account, a conservatorship — what are these? What’s a kind of high level and how do they fit into the process? 

Ellen Cookman: Oh, you bet. And I actually love that term, a toolkit. A toolkit is where you use different tools for different things. So sometimes people ask me, Ellen, do I need a special needs trust or an ABLE account? And I say, yes, both of them, but for different purposes. First of all, what’s a trust? A trust is an agreement between somebody setting it up and somebody managing it for the benefit of a beneficiary. It’s a contract that you’re entering into. A special needs trust is a specific type of agreement where the person benefiting from it, the beneficiary, has special needs. They might be receiving needs-based public benefits like SSI, supplemental security income, and medical. They might be receiving other benefits. They might not be, but they might still need that protection. Because with a special needs trust, the beneficiary cannot act as trustee. 

Somebody else is managing the money and making sure that the child — always say child even if they might be a 65-year-old, right? But make sure that the child is being taken care of. The child cannot reach in and grab the money. They can’t change the trust and because of that it doesn’t count as the child’s money. So we have SSI, which has a $2,000 asset limit. You can’t have more than $2,000 basically in your bank account, but you can have a million, $5 million set aside for you in a special needs trust, and it doesn’t count towards that $2,000 limit. For medical, it used to be a $2,000 limit, then it went up to $130,000, and now there’s no asset limit at all. But unfortunately, that asset limit is coming back next year. The really bad news is it’s going back down to $130,000. You can have up to $130,000 in your bank account, still qualify for medical, but you can have $5 million in a special needs trust and it doesn’t count towards that $130,000 limit. Okay, so a special needs trust is really nice because really you can have your cake and you can eat it too. Your child can continue to receive an income stream. They can receive health insurance from the government. That’s really important. I mean, if you don’t have health insurance and you’re in the emergency room for a week, that could be, you know, half a million dollars, right? It’s crazy expensive. So, we always have to make sure that somebody, you know, keeps their income stream, they keep their health insurance, but there’s this pot of money over here that can cover anything that the government doesn’t cover. So, that’s really the concept of a special needs trust. 

And usually it’s funded when a parent dies in their revocable trust. The parent will say, “Upon my death, I want my money to go, let’s say, equally to my kids, but for my disabled child Joey’s portion, it would go to his special needs trust.” And we usually recommend doing a standalone special needs trust as opposed to a trust that’s embedded within the revocable trust. So, usually a special needs trust is funded at the death of the parents because while the parents are alive, they are the special needs trust. As you know, Dana, right? We provide everything for our kids and there’s no reason to put it into a special needs trust and then get it out of a special needs trust, right? So, that’s the special needs trust. 

Then we have an ABLE account. Now, an ABLE account is not a trust. Sometimes people get confused by that. It’s actually a savings account that’s modeled after a 529 plan, which is an education savings plan. So, a lot of people have set up 529 plans for their neurotypical children, and they say, “Well, what about a kid with special needs who may not be going to college? They may not need this money for education, but they need it for many other things.” So the government in 2015 passed the ABLE Act which allows somebody with disabilities to have a savings account that doesn’t count towards that $2,000 asset limit for SSI or that $130,000 next year medical asset limit. Now it’s a little bit different. And it’s not meant to receive an inheritance, unlike the special needs trust, which is because an ABLE account only gets up to $19,000 a year. Once you put in $19,000, it’s capped off. You can’t put in any more money. So, it’s really meant for smaller gifts or if the disabled person is able to work, then they can put their earnings into an ABLE account. 

So there’s different ways that people use an ABLE account. Sometimes it’s not needed, but again, it’s a good tool for certain things. And by the way, Dana, I have a YouTube channel and I have videos on everything that we’re talking about. There’s over a hundred videos. So if somebody’s like, “Wait, what about that ABLE account?” I have three videos on ABLE accounts. Any questions on that? Or I can talk about conservatorships and supported decisionmaking. 

Dana Hooper: Well, probably just the conservatorship or power of attorney conservatorship.

Ellen Cookman: It all kind of comes back to the notion of the child’s at home — parents are the boss, until you’ve been a parent and then you realize how funny that is and then the child’s the boss. 

Dana Hooper: Yeah. and  my special needs son wasn’t much of a boss when he turned 18. 

Ellen Cookman: Yeah, that’s right. I think there’s really two areas especially when our kids turn 18. There’s two areas that we look at. We look at finances like money available for a child and that’s really the special needs trust and the ABLE account. And then we look at decisions for the child. Who’s going to make decisions for the child? Is it the child when they turn 18, they’re presumed to be an adult, which is funny if you know any 18-year-olds nowadays. Most of them, they may not quite be adulting, but legally they’re considered an adult. And so, the parent can’t just continue to make decisions on their behalf. So, you have a few choices. You can go to court and ask the judge to continue to let you parent the child — you make decisions on behalf of your child and it overrides whatever decision your child might want to make and that’s a conservatorship. You have to go to court because basically you’re taking away your child’s rights to make the decisions themselves. That’s only available for individuals with developmental disabilities who are members of the regional center. So that would be a limited conservatorship. For individuals who have physical health challenges or mental health challenges, you’re usually not looking at a conservatorship. Now, there are some lawyers out there who say, “Oh, yeah, you have a child — member of the regional center, slam dunk. Get a conservatorship. You need to do this.” I’m a little bit more hesitant. I don’t think all children need to be conserved. I think we want to encourage them to make the best choices that they can. Now, some do. If you have a child, for example, who is fairly low functioning, they don’t really understand basic things like do you trust your parents and are you okay with them making decisions? If that’s too big of a concept, or if they’re non-verbal and they really can’t communicate, then there are situations where you need to conserve somebody. Another situation is if you’re really worried — this is more why parents conserve them. They’re really worried that their kids’s going to get into trouble and they want to be able to rescue them. In those situations, I look to see, okay, well, what does that look like? Are you worried that your child’s going to get a sign up for a big Visa card and then start charging it, right? Do we need a conservatorship to protect that? Well maybe, maybe not. Maybe you just say, “Hey, my kid doesn’t have any money. They’re judgment proof.” or maybe you’re concerned and you get a conservatorship, right? It really depends on the child and on the parents to see if you don’t want to conserve your child — what are the alternatives? And one of them that’s become a lot more popular recently and actually that courts are trying to funnel families towards instead of conservatorships is something called supported decisionmaking. So this is basically where an adult child kind of surrounds themselves with adults that they trust and they enter into a contract with each adult saying hey adult this is the or the supporter — the adult and the decider — is the child and they say this is the area that I want you to help me make good decisions in and the adult says okay that sounds good. Here’s an example Dana — So when I was in law school at Berkeley, my dad was the dean of a law school on the east coast. And so I called him a lot to ask him questions about law school and get advice. I didn’t ask him for dating advice. I had other friends who I asked for dating advice. I think we all do this. We all kind of choose other people who are helping us out — helping us to make good decisions. And this is just more formalized. It’s so that the supporters really know, hey, this is the role that the disabled adult wants me in and they sign it. Now, there’s no liability if the child ends up making bad decisions. You can’t go back and sue the supporters as far as we know. It really is kind of helping that disabled child to practice and make better decisions. And there’s really great outcomes that have come from it. 

They’ve shown that children who are able to make their own decisions end up being a lot more confident. They’re abused less frequently. That’s an option. The other option is, as you mentioned, a durable power of attorney and an advanced healthcare directive. And that’s something that if you have a child with capacity, they should sign this at age 18. Period. In fact, we should all have them. This is basically allowing somebody else to sign for financial issues or for health care, if you’re unconscious or if you just can’t make those decisions yourself. This avoids having to go to court and get a conservatorship over you because you’re voluntarily allowing somebody else to make decisions for you.

So as long as you’re not conserved, everybody can fill out these forms. And I encourage you if you have a child, if you’re watching this and you have a child who’s age 18 or older, just go online, look up the statutory — durable power of attorney for whatever state you’re in, you know, California or if you’re in a different state, print that out, have your child sign it in front of a notary, and then that just makes sure if something happens to your child and they’re sick or you need to access their bank account, it allows you to do so. 

Dana Hooper: Oh, interesting. So kind of the whole timeline… So when should I start? And if I don’t start or I procrastinate – what are the considerations here? 

Ellen Cookman: Yeah. So, I mean, you should definitely do this planning before you die or become sick. Now, if you know when that’s going to happen, please take me to Las Vegas and we’ll make a lot of money. You know, that’s one of the challenges of this planning is it always needs to be ready for, you know, if you get hit by a car tomorrow, right? So, it’s kind of like planting a tree. When’s the best time to plant a tree? 10 years ago. When’s the next best time? Now. But I do agree this is an area that people delay all the time. In fact, I’m guilty of that myself. I was in this field for six years before I did my own estate plan. I did estate planning and finally I met with a life insurance professional and we were talking for a bit and then he goes, “And Ellen, you have your own estate plan done, right? I mean, it takes some courage to ask an estate planner this question.” And I didn’t want to lie. So I went, we have our durable powers of attorney and advanced healthcare directives. And I remember he said, Ellen, how can you be such a hypocrite? How can you tell your clients that they need to get their own estate planning done when you don’t even have yours done? And I was like, you are totally right. It’s true. So I went back to the office, drafted. Usually you can’t draft your own estate plan. All right? But this is what I do professionally. So I drafted my own estate plan. But I don’t judge anybody because even me who’s in this field, it even took me a little while. And my hangup, by the way, was we had a hard time choosing guardians for our minor kids. Who’s going to raise our kids? And I’m still not totally thrilled about who we chose. But you know, there’s certain hang-ups that usually you get stuck on. And that’s where it’s really good to go meet with an attorney and talk through those hang-ups because as estate planners, we’ve been through that rodeo once or twice and we have some suggestions, some ways to think about it that maybe you haven’t thought about before. So, at least get that started even if you don’t have all the answers. That’s one place where an attorney can really help. 

Dana Hooper: What’s your recommendation to people? How do you recommend they get started? Is there a way to kind of take it a bite at a time or? 

Ellen Cookman: Yeah. Well, I mean, I think watching my YouTube channel or just doing some research online is always very helpful. It’s like you said, it’s a new language. I think about a long time ago when I was 23, I lived in Japan for three years and I took intensive Japanese language classes and I remember it took me like seven tries to learn a new word, right? I’d have to see it, try to say it, see it on a billboard, use it in a sentence and then finally it kind of started to make sense. Estate planning is the same. It’s a different language. And the more you use it, absorb it, watch it, rewind it, try it out again, the more you start feeling comfortable about it. When you go to an estate planning attorney, there’s really two main questions that they’re going to ask you. And so, these are the things to think about before you come in to talk to somebody. The first question is, who’s going to manage things if you’re not able to? Who’s going to manage your stuff? Who’s going to manage your child’s stuff? Frequently people don’t have an answer to that and that’s where we come in. At our firm we play matchmaker. We find out about your situation and we make recommendations. You might need a professional to line up. Maybe it’s a private fiduciary. Those are licensed individuals who can act as trustees. Maybe you use a bank or a trust company. A lot of it just depends on your situation, the size of your estate, what do you need, right? Then a family member could be what we call a trust protector who’s like the overseer. Who can make sure things are going well, but you’re not asking the sibling to take care of the disabled sibling’s money for life. That’s just a very onerous job to give them and that can lead to a lot of resentment. 

The other question that they’re going to ask you is how should your kids receive their inheritance? When you have a child with special needs, they should most likely receive it in a special needs trust. If you have a child who’s neurotypical or very responsible, they might receive it outright. They might receive it at a certain age. They might receive it in what we call a dynasty trust or a lifetime trust, which is basically protection if they end up getting divorced. All the money stays with them. And there’s also some good estate tax protections. If you’re on a wonderful family trip and the boat goes down, where do you want your stuff to go? And as parents, we never think about this because we just assume that our kids are going to outlive us. But, you know, especially as parents with kids with special needs, sometimes they may not, right? It’s important to spell that out in your trust and in your child’s special needs trust. Where’s the money going to go when your child dies, right? That needs to be spelled out as well. So, those are the main questions to consider before meeting up with an estate planning attorney. 

Now, let me put in a little plug, and it doesn’t even have to be for me, but if you have a child with special needs, you should definitely go to an estate planning attorney who specializes in special needs planning. There’s a lot of estate planning attorneys out there who have these form programs and they can press a little button which populates a special needs trust within your revocable trust. That’s not good enough. They don’t know how that affects your child’s public benefits? What should happen? If you die, they’re not going to help out, you know? So, you want to go somewhere that focuses on this. If you look on their website, they have a lot of articles on special needs trust. They don’t just say, “Oh, yeah. We’ll do a special needs trust for you. You know, add $1,000.” I think that’s super important to look for. If you have a current estate planning attorney and they’re not familiar with special needs planning, they most likely will be relieved. Estate planning is a very friendly field most – most of us really want to work with each other and so there’s no bad blood if you’re you know switching law firms so just to keep all that in mind.

Dana Hooper: Interesting. What is all this cost? Lawyers are expensive, right? What is this going to cost me? 

Ellen Cookman: That’s a good question. Well, let’s start with what it costs you if you don’t have an estate plan. Okay, let’s say I don’t know anything about you, Dana, but let’s say somebody has a million dollar estate. Okay, which usually the folks around us have more or just given their house that you know if they own a house, right? But let’s say you have a million dollars in the probate code. If you don’t have a trust, that’s going to cost you $23,000 to go through the court system. So, the executive gets 23,000 and the attorney gets 23,000. That’s $46,000. I guarantee you a trust should cost less than that. Now, exactly how much it’s going to be, it really depends on the attorney you go to and their skill level. How much experience do they have? You can go to somebody down the street who charges 2,000 bucks, but what are you going to get from that? Most likely, it’s fillable forms in a beautiful binder, but the question is, is that going to work? First of all, you want to go to somebody, who does the trust administration as well as who helps to carry out the terms of your trust when you’re gone. What is the value that you’re getting? Are they helping you to find the right professionals? Are they diving into the nuances? Do they understand all the public benefits and how this planning will affect things? Find a professional that has the background and the expertise in the areas that are going to matter because you have a special needs child. 

Dana Hooper: How would you recommend to families to go about finding that person? 

Ellen Cookman: So there’s two national organizations of special needs planning attorneys and affiliates which means like financial advisors and accountants – well it’s really hard by the way to find an accountant who works in the special needs planning field, but maybe life insurance professionals or realtors but one group is called Academy of Special Needs Planners ASNP and another group is called Special Needs Alliance. Being aware of these two groups is also important if you have a family member, a disabled family member who is in a different state or if you’re located in a different state. This type of planning is state specific. So you really do have to go to an attorney who is barred – who is licensed in the state where you live. So, for example, if somebody called in and they live in New York City, but they have a child who lives in California, we could do the special needs trust for the child, but we couldn’t do the revocable trust for the parents and vice versa. So wherever the planning needs to be done, you’ll want to find an attorney in that state. And those two are the top-notch ones. I’m a member of Academy of Special Needs Planning and I’m looking into the other one as well. I think that’s a good place to start. They actually have an attorney search engine on both websites that you can find. 

Dana Hooper: I think we’ve covered a lot of ground. I thought I really knew it all, but I’ve learned a lot. It is complicated. Speaking as a parent is particularly complicated if you don’t know the answers to those questions which are not always obvious. And we’ve had a webinar with siblings. And there’s part of you that wants your neurotypical siblings to step up to the plate and fill in for you, but then there’s another part where, maybe that’s not in the cards. So, it’s good to really have that perspective. We’ll turn it back to Leila for the open Q&A. 

Leila Elabed: Yes, thank you guys so much. That was a very insightful conversation. I really appreciate it. I learned a lot of new information as well. We had a few questions in the chat – one of the very beginning ones going back to the ABLE account. Nico asked, “Is the ABLE account only valid in California or anywhere in the United States?” Ellen? 

Ellen Cookman: Yeah, so that’s a good question. So each state has the responsibility of implementing and creating their own ABLE account. In California we have one called the CALable account. It’s run by this company called Bestwell. The only way to apply for the CALable account is online. So don’t go to Wells Fargo or you know your favorite credit union and say I want an ABLE account. No. Instead, you go online and you have to give them the beneficiary’s social security number and also your social security number if you’re going to be managing the account for the beneficiary and then you set it up and you can get a prepaid debit card that the user can use. You can set it up in other states as well. 

The ABLE account was initially created to have what we call a payback provision which means when the beneficiary dies, the medical wants their money back and medical can bring a reimbursement claim against it and it’s called Medicaid in other states. We always call something in California cutesy like medical CALable – we put the little “CAL” in there, right? So you have this medical reimbursement claim. However, they allow states to waive the reimbursement claim. And California is one of the five states that has waived a medical reimbursement claim. However, now California will only waive a medical reimbursement claim for CALable accounts. So, if you’ve set up an ABLE account in another state and your child is receiving medical benefits and then your child dies, medical will go after the money remaining in the child’s ABLE account in that other state. So, the moral of the story is if you’re a California resident, you need to set up an ABLE account in California. And the fees are pretty comparable. I think it’s like $50 to set up and the fees are not that onerous. None of the ABLE accounts are really like, ‘wow, we can really invest this and make a ton of money.’ They have investment options, but they’re not super incredible. There are some that it seems like ‘we should be able to use it like Fidelity has an ABLE account,’ but their ABLE account is through Massachusetts. So you’ll get an ABLE reimbursement claim against you now brought by medical if you use the fidelity one. So don’t do that. Just go to CALable. 

Dana Hooper: And let me just add that when I looked into the 529s – and that was probably the biggest drawback – there tended to be fees and limited investment options. That’s not a problem for everyone. It may be a problem if you want to have a more aggressive investment strategy. You might want to be able to invest in a stock – a particular stock or a mutual fund that’s a bit more or an index or you know something like that. But you just have to be aware of that.The limit of $19,000 a year – which still seems like a lot of money – but it is a limit. 

Ellen Cookman: That’s right. If you really want a lot of flexibility with investing and what can be held – you’d use a special needs trust. If you have partnership interests or securities, you can put those in a third party special needs trust. Now keep in mind, you’ll need to file annual income tax returns. There’s certain requirements. So again which tool is appropriate for which situation? It really depends. 

Leila Elabed: Speaking of special needs trusts – I see a few people in our audience have a special needs trust and were wondering, when it should be revisited or reviewed. What kind of life events could trigger a review perhaps? 

Ellen Cookman: Yeah. I usually say every 5 to 10 years, it’s good to look things over because laws change just like the medical eligibility laws are changing next year. And so it’s good to go to an attorney and say, “Hey, here’s my trust, what changes… or if there’s been a change in your family, there’s been a birth or a death or a marriage or a divorce. If you’ve received an inheritance, any of those significant life changes definitely warrant a review to make sure that your trust still makes sense. You’re still providing for the people that you love. Sometimes people do a review and they’re shocked to find – I thought my trust said such and such, but it actually doesn’t. So, making sure that what you intended is actually there. And make sure that you look over your beneficiary designation forms for your retirement accounts and life insurance. Usually, you keep those in your name, but you update the beneficiary. You can name a special needs trust as a beneficiary of a retirement account, but sometimes people will name their spouse as a beneficiary and then they forget to name the children or their children’s trust. And then if both spouses die, then that asset is going through probate. It has nowhere else to go. It has to go through the court process. So, that’s another thing to look over every 5 to 10 years. You want a tuneup – kind of like doctors do a tuneup. At minimum every 5 to 10 years. 

Dana Hooper: Wow, that’s great advice. 

Leila Elabed: Yeah, it’s great advice. Dana, I know you have experience with special needs trusts. Have you ever revisited it? Have you ever reviewed it or how was that process? 

Dana Hooper: I should just say I’m guilty as charged and I really have never formally revisited it. And it’s pretty close to 40 years since it was set up. And I did recently actually read it and I thought to myself, excuse my French, – holy crap, it’s still pretty good. But there are certainly some aspects that, you know, need revisiting. So that’s what I learned tonight – that I need to do that. 

Leila Elabed: Yeah. It’s very important – what I’m hearing, to revisit your special needs trust. Along similar lines, what happens if a parent dies unexpectedly without a legal plan in place or maybe not an updated one? What’s the process in that situation? 

Ellen Cookman: Yeah. So that’s what we call probate. Okay. So, California has a statutory process for when you don’t have your own plan. California will provide their plan. So, the money doesn’t just go to the state. By the way, there’s kind of this fallacy that if I don’t have a plan, the state gets everything. That’s not true. But there is kind of a lineup of who will get your stuff when you’re gone, but a court needs to be overseeing that if you don’t have a trust. So back in the 70s, 80s the concept of a revocable living trust developed and this is basically to set up your own plan so that you don’t need court supervision. And courts love this because they’re already totally overworked and probably underpaid, right? And so we want to come up with our own system. And so that’s why you have a revocable living trust which avoids probate. If you don’t have anything or even if you have a will, you’re going to go through the probate court system. It usually takes like one to two years. And again, it costs, as I mentioned, you know, $23,000 for a $1 million estate. It goes up from there, by the way. And it’s public. Everybody gets to see what you have. I’ve heard of houses being broken into once they realize that nobody’s living there because it’s going through probate. So there’s just a lot of horrible things that can happen. I have a video called 10 things I hate about probate. It’s kind of modeled after that movie, right? 10 Things I Hate About You. Going through this court process is so onerous and awful. Please do your planning beforehand to avoid it. 

Leila Elabed: Yeah, that sounds horrible. That does not sound fun at all. It sounds very important to do that planning. We had someone also ask what are some essential documents that would be needed beyond special needs trust and healthcare power of attorney? Are there any other essential documents that you would recommend to people?

Ellen Cookman: Yeah. There’s documents for the parent and then there’s documents for the child. For the parent, you typically need a revocable trust to hold your stuff, to hold your house, to hold your investments and cash accounts. Then in your revocable trust, you say, upon my death, this percentage or all of it, everything goes to this special needs trust for your child. You usually set up both maybe at the same time. And then in addition to the revocable trust, the parent needs what we call a pour over will. So I just mentioned, if you have a will, it goes through probate. But a pour over will is different. This is a type of will that basically its only purpose or its main purpose is to clean up things. If you have an asset that you forgot to put in the trust, the pourover will can be used to scoop up that asset and pour it over into the trust. That’s why it’s called a pour over will. So in California, whenever we’re doing a revocable trust, we always do pour over wills as well. Kind of like an appendage. Hopefully, you don’t need it. Because when you do a will, you also have to retitle your assets. You have to put your assets into the trust. Instead of Ellen Cookman as owner, it would be Ellen Cookman as trustee of the Cookman family trust for example, right? That would be the new owner and that’s how you put that account for example into the trust.

Okay, so we have our revocable trusts and we have our pour over wills. Also for the parents, we need a durable power of attorney and an advanced healthcare directive because what happens if the parents get sick? Somebody else needs to manage things, right? There’s also a few ancillary documents that help to put stuff into the trust, but those are the main documents that the parents need. Now, the child needs their special needs trust, as we mentioned, that the parents are usually going to set up unless the child has their own money. Let’s say a child received an oopsie. They got $100,000 from grandma and that’s going to bump them off their public benefits. What do they do? The child can create what’s called a first party special needs trust and put their own money into that first party special needs trust. So that’s a different type of special needs trust that a child might need. And then the child needs a durable power of attorney and advanced healthcare directive. So those are the main documents. There’s some other ones that are kind of floating out there. If you’re elderly and you have a condition where you don’t want to be resuscitated, you might need something called a pulse form physician order – a life sustaining treatment form which is basically DNR – do not revive me. But that’s kind of in a special kind of situation that probably most people on this call are not in. There’s other things out there but those are the main documents.

Leila Elabed: Seems like a good amount of documents and you know as Ellen said before she has a bunch of YouTube videos up on her YouTube channel if you’re looking for more information on these documents. We had one other question. Make that two questions. I wanted to go ahead and ask Dana – I know you have interacted with a lot of families and I had a question in on if you’ve seen any common misconceptions or assumptions about special needs trust or conservatorship that you’ve seen and then I would like Ellen to maybe debunk those. Dana Hooper: I think the concept of a special needs trust is pretty understandable, but I’ve seen a lot of people be confused over whether it’s revocable, not revocable or third party, first party. There are some subtleties there that one would have to be really careful about because they have different implications in terms of reporting requirements or tax returns and whatnot. I’ll let Ellen answer it, but it seemed like just begging for a professional to be involved to make sure that you, you did the right special needs trust for the right reasons in the right way. 

Ellen Cookman: I think one of the biggest ones that I hear a lot is people think that a special needs trust is really restrictive. You can only use it for like three or four things and otherwise the money is just locked up tight in the trust. This couldn’t be farther from the truth. I mean it depends on how the trust is drafted, but money in a special needs trust can be used for just about anything. There was this really cool court case a few years ago that basically said that you know special needs trust is intended to improve the quality of life of any disabled child. So basically that means you can use it to pay for a trip to Disneyland. That’s like my test of can you use money for a fun purpose. If you can use it to go to Disneyland, which is solely to improve your quality of life and make you smile, right? Then that’s great. And yes, special needs trusts can be used for a trip to Disneyland. So, it’s really not the case that they’re restrictive. Now, I do think sometimes people find that they can have a stigma attached. That means that my child has special needs and they can’t do anything. You can always change the name. You can call it a supplemental trust or just an irrevocable trust. The trust needs to become unchangeable, irrevocable when the parents die. It needs to get locked down because you don’t want somebody else coming along and saying this money can be used not just for the child but also for me or for the caregiver, or whoever else. So it has to become irrevocably unchangeable at that point but until then, parents can make whatever changes they want basically until it gets funded and locked down. It’s a lot more flexible than you might think.

Leila Elabed: That’s really cool. I didn’t know that. We do have a few more questions in the chat. A little more specific, straightforward questions. I do want to honor the fact that these attendees came out today and I appreciate that a lot. Bonnie asked, “Do trust protectors need to live in the same state as the person who is conserved?” 

Ellen Cookman: Yeah. No, you can have a trust protector living anywhere, but they do need to be a US citizen. That’s for income tax purposes, but as long as they’re a US citizen, if they’re living in some other state or even if they’re temporarily living abroad, that can be okay as well. 

Leila Elabed: Do 529 plan assets count against Medicaid, medical income, asset limits? 

Ellen Cookman: So, it really depends on the terms of the 529 plan and UTMA accounts are the same way. Sometimes the plan says that those assets that are being held for the benefit of the child are to be distributed outright to the child at a certain age. At that certain age, when they are distributed outright, that’s when the assets typically count as a countable asset for public benefits purposes. And until then, you really need to check to see what the terms are of that plan. 

Leila Elabed: I see. So, every plan is different. Makes it a little bit more complicated, a little bit more overwhelming. That’s why it’s really important to have someone to give you advice on this. Your YouTube channel, again, I’ve looked at it – it’s a lot. It’s so many different videos. You cover a lot of different things. So, that’s pretty amazing. It looks like we have one more question. When special needs trust funds are used for benefits of a special needs child, are they treated as income to that child? And then does the child need to declare the funds received on the taxes? 

Ellen Cookman: That’s a really good question. Okay, so basically how does it work for taxes, right? So a special needs trust is supposed to pay for things directly. It pays the vendors. It pays Amazon to order things and have them shipped to the child’s address. It’s not supposed to distribute cash to the child to turn around and pay for their own thing. If it distributes cash, then it counts as income and it can interfere with the public benefits. If it distributes an item or it buys something or pays for rent or pays utilities directly, then it doesn’t count as income for public benefits purposes. Now, here’s the trickier part. Okay, what about filing taxes? Because a special needs trust once it’s funded, it’s required to file what we call a 1041, a fiduciary income tax return. And if you’re familiar with taxes, trusts have very compressed tax rates. Usually, you’d get to the highest tax rate at like $500,000 of income for an individual, but trusts get to the highest tax rate at only like $13,000 of income. And basically, it’s because trusts don’t have lobbyists. If there’s income that’s generated in the special needs trust, let’s say you have some securities and it generates $10,000 of income. If all $10,000 of income is used for the child’s benefit, it pays their rent. It does all these things, then that income is reportable on the child’s K1 form. So, the child has to file their own 1040 or somebody does it on their behalf. Usually the trustee files the 1040, the personal income tax return, and attaches the K1 form. And this is really good because probably the child is in the lowest income tax bracket. And even though it’s considered income for income tax purposes for the IRS, it is not considered income for public benefits purposes. Even though money has been distributed out as long as it’s been used to buy stuff and not distribute cash directly. 

Dana Hooper: And the reason is it’s not earned income. And I found that you can distribute all of the income to the beneficiary and do that on a regular basis. And it allows the tax rate to be the lowest possible tax rate, namely the tax rate of your special needs child who doesn’t have a lot of other income. 

Ellen Cookman: Exactly. Yeah. So, usually every year the trustee should meet with an accountant in say October and say, “Okay, how much income has been generated? How much have we spent out?” and make sure that those numbers match or you’ve spent more than the income generated and that guarantees that it’ll all be reported on K1 or at least you know not much has been generated and remains in the special needs trust because that’s going to be taxed at a more compressed rate. 

Leila Elabed: That sounds good. That’s great. It sounds like special needs trusts are nuanced. It’s like you kind of have to see how does this all work, right? Yeah. No, that makes sense. It seems very complicated, a little overwhelming, but it’s good to get some preliminary answers to research further later on. 

I think that’s all the time we have for that tonight. Thank you guys so much. I see some extra questions in the chat. Lucky for you, Ellen has provided her contact information. So right on the screen is her website, her YouTube, again, a plethora of videos, her LinkedIn, and she’s been so kind as to provide her phone number. So that’ll be up on the screen as well as it’ll be in the chat. Also contact us at Life Services Alternatives. You can go on to our website. We also have a family interest list if you’re interested in joining that for housing or programs at LSA – or you can just email us any questions you may have and of course follow us on social media. We’re on everything. So go ahead and do that. Next week we have another webinar, same day, same time, Tuesday at 6:30. It’ll be exploring inclusive housing and communities. So if this is a topic you’re interested in, please head over to the registration page and register for this webinar and also share it with your friends, and anyone who may benefit. Then last but not least, we have an in-person event as well, LSA’s 2025, Run Home. It’ll be fun. You don’t have to run. You can walk or roll or cheer. Everyone is welcome. It’ll be on September 6th at 9:00 a.m. in Los Gatos. So, you can go ahead and scan that QR code to register or head to our website. It’s on there as well. Thank you so much for joining us for this event and thank you to Ellen and Dana. You’ve been amazing and we really enjoyed your insights tonight. And thank you, Ellen. Thank you. This has been such a pleasure. Thank you guys. Okay, have a good night, guys. Byebye.