Lancaster Law Blog : Lancaster PA Lawyer & Attorney : Russell Krafft & Gruber Law Firm : Pennsylvania : Lancaster's Legal Link

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I have come across many clients who have a child that qualifies for certain government benefits because the child has special needs. Unfortunately, a well-intentioned gift to a child can, in some cases, inadvertently disqualify the child from the government benefits. In other instances, a child might have become entitled to sizeable funds, such as through a settlement or award in a personal injury lawsuit, which could also disqualify the child from benefits. This is where special needs trusts come into play.

The role of special needs trusts is to provide economic security for a person with special needs without disqualifying them from government benefits. There are three types of special needs trusts, depending on the circumstances: common law discretionary trusts, OBRA-93 payback trusts and pooled trusts. 

Common Law Discretionary Trusts:

This type of trust is referred to as “common law” because it arises from a series of court decisions and not from a particular statute. Typically, common law trusts should be used when the source of the funds is coming from a third party, such as money in the form of a gift to the person with the special needs. 

There are four primary requirements for establishing a common law discretionary trust. 

1. The trust must explicitly state that proceeds of the trust are meant to supplement and not supplant public benefits. 
2. The trust must also require that public benefits be considered by the trustee prior to distribution of any income or principal. 
3. The trust must be irrevocable, which generally means that once funds from third parties are in the trust, they cannot be removed later by the third party. 
4. The trustee must have total, absolute and unfettered discretion to pay, or refuse to pay, the income or principal from the trust to the disabled beneficiary. As a result, required periodic payments are not permissible. It is also helpful if there are other beneficiaries of the trust, such as other children of the parents creating the trust. 

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Making a will is something that occasionally crosses your mind, it's one of those things you think maybe you need but don't have the time or desire to make it a top priority. In addition, there are many things that can deter you from making a will such as lack of money or property, the unlikelihood that something catastrophic will happen to you or just simply procrastination. However, if you are a parent, one of the most important reasons you should have a will is to appoint a person to care for your child upon your death and the death of the other parent. The care of your child upon an unfortunate event such as death can happen to anyone regardless of the size of your estate. As a parent myself, I believe that one of the most important parts of a will is the section that appoints a guardian for anyone with minor children.

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On April 27, 2011, Holly Filius received a Letter of Commendation from the Lancaster County Commissioners in recognition of the Central Penn Business Journal's Women of Influence Lifetime Achievement Award. She will formally receive her award on May 16 at the Women of Influence Luncheon. Holly was presented with the Letter of Commendation during the Lancaster County Commissioners' Meeting. The letter acknowledged Holly's commitment to her clients and community,

"With respect and appreciation, the Lancaster County Board of Commissioners would like to congratulate you on being named the 2011 Central Penn Business Journal's Women of Influence Lifetime Achievement Award recipient. We are honored to recognize your impressive career, leadership skills and accomplishments in the business community. You have committed your life to making Lancaster County and all of Central Pennsylvania a great place to work and live." 

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Holly S. Filius, Managing Partner, of Russell, Krafft & Gruber, LLP in Lancaster, PA has recently been named the recipient of the Lifetime Achievement Award in the Central Penn Business Journal’s Women of Influence Awards program.

Filius received her B.A. in Political Science from Villanova University and her J.D. from Widener University School of Law. She concentrates her law practice in Family Law, Adoption and Estate Planning. Filius joined the firm as an associate in 1998 and attributes her early success to hard work, a commitment to client service and integrity, which has earned her a solid reputation among her clients and the legal community. This success led to a partnership offer after only five years in private practice. Six years later in 2009, she was elected Managing Partner of the firm. Filius' commitment to excellence and her leadership skills made her an ideal candidate for the position.

Filius has earned a reputation as one of the best Family Law attorneys in Lancaster. Over the years she has acted as a mentor to all of the young lawyers at Russell, Krafft & Gruber, LLP. In addition to mentoring lawyers in her own firm Filius often makes time for law clerks and even lawyers in other firms who recognize her expertise and appreciate her professional and approachable demeanor.

Currently, Filius serves as President of the Board of Directors of the S. June Smith Center Foundation. She is active in numerous community and professional groups, has served on the Board of Directors of The Pennsylvania State Foster Parent Association and as a member of the Women in Business Committee of the Lancaster County Chamber of Commerce and Industry.

Filius' career achievements are ones that stand out among both the men and women in her field. Under her leadership the firm has been able to successfully balance growth and caution in the midst of a struggling economy and position the firm for the future. As a long time resident of Lancaster County, she feels a commitment to her community and strives to make Lancaster county a better place to live and work.

The Women of Influence awards were created in 2010 to recognize midstate women leaders who are influential in their companies, industries and communities. In total, 28 local women business leaders will receive awards recognizing their outstanding leadership, integrity and accomplishments in the midstate’s business community at the Central Penn Business Journal’sWomen of Influence event on Monday, May 16, 2011 at the Hilton Harrisburg. The award recipients will also be profiled in a special supplement to the May 20, 2011, issue of the Central Penn Business Journal. This list will also appear in the Business Journal’s 2012 Book of Lists publication.

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Since publishing my recent post regarding The Adoption Tax Credit and Special Needs Children we have received numerous comments and emails asking for clarification. More specifically, most inquiries are related to what evidence is required to prove that a determination of special needs has been made by the state when taxpayers are claiming the adoption tax credit on their 2010 tax return. This issue has arisen because, in many cases where a child would otherwise fit the definition of a special needs child, the adoptive parent has nothing from the state indicating that a determination has been made. 

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On October 27, 2010, Governor Ed Rendell signed into law Act 101 of 2010, which makes several amendments to Pennsylvania's Adoption Act. The most significant change is that Pennsylvania will now enforce open adoptions, or voluntary agreements for continuing contact or communication, for the first time in Pennsylvania. 

Currently, adoptive and biological parents can make their own agreements about continuing contact or communication after the adoption, but unlike 23 other states with open adoptions, the contracts were not legally enforceable. The change to the current law now allows these agreements to be enforceable. If an agreement between the adoptive parents and birth relatives to allow continuing contact or communication between the parents or between the child and parents is breached, then the birth relatives can petition the court to enforce the agreement. The Act also requires parties to an adoption, including a child who is old enough to understand, to be notified about the right to have an open adoption.

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Recently I wrote about the expansion of the adoption tax credit for 2010. The credit was raised to $13,170.00 for 2010 and is generally available to cover qualified expenses incurred as a result of the legal adoption of a child under the age of eighteen. 

When adopting a special needs child, however, the full amount of the credit can be claimed even if there were no actual expenses. For residents of Pennsylvania, in order to claim the credit the Commonwealth must have made a determination of special needs for the child. Generally speaking, the state should make such a determination if the child:

• Is over the age of five and under the age of eighteen;
• Is a member of a minority group;
• Has a natural brother or sister in the same adoptive home;
• Has a physical, mental or emotional condition or handicap; or
• Has a genetic condition which indicates a higher risk of developing a disease or handicap.

Such circumstances tend to reduce the likelihood that a child will be adopted without some form of assistance. Hence, the adoption credit serves to subsidize the adoption of a special needs child.

A taxpayer claiming the adoption credit must file IRS Form 8839. In addition, the taxpayer must include a copy of the determination of special needs. For more information on adoption and related issues, please refer to the Pennsylvania Statewide Adoption and Permanency Network.

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Since it was enacted on March 23, 2010, the Patient Protection and Affordable Care Act (the “Act”) has been quite the topic of conversation. While many of the Act's tax provisions focus on providing various health care related tax incentives, it also raised the maximum amount of the adoption credit to $13,170 per child for 2010. The maximum for 2009, was $12,150. The Act also made the adoption credit refundable, which means that qualifying taxpayers will receive the credit even if they do not owe any tax for that year.

The adoption credit is generally available to cover various expenses incurred as a result of the legal adoption of a child under the age of eighteen. Qualified expenses include fees, court costs and attorney fees directly related to legally adopting the child. Traveling expenses, including meals and lodging while away from home in connection with the adoption, are also included in the credit. The credit is not available to taxpayers who are adopting a spouse’s child or to the extent that they are reimbursed under an employer or government program. For example, if a taxpayer incurs $11,000 in qualified expenses and $6,000 of those expenses are reimbursed to the taxpayer, only $5,000  of the expenses may be covered by the credit. However, certain expenses incurred by an employer for certain qualified adoption expenses may be excluded from the employee's gross income under Section 137 of the Internal Revenue Code.

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Recently, WITF aired a three part series on adoption which highlighted how important permanency is for children, particularly those children who are often perceived to be unadoptable because of their age, physical disabilities or mental health issues. I have had the pleasure of working with many families during the last 12 years that have adopted children regardless of any challenges the children may face. These families simply opened their heart to a child in need and never looked back. 

In the last several years I have become more involved in contested adoptions. While I have always handled contested adoptions, I have come to realize that the legal risk to adopting families is not always clear when a child is placed.