1. Is the Trust Necessary? Are public benefits, such as SSI and Medicaid, important to the client? The attorney must consider the restrictions on distributions. There are three important factors that must e considered before determining to use a self-settled special needs trust:

• Sole Benefit of Rule. Distributions from self-settled special needs trusts must meet the “sole benefit of” rule. This means that distributions can only be made for the beneficiary of the trust. This is frequently a problem with family members who tend to look at the personal injury settlement as the family bank account.
• Payback Rules. Under federal law,[1] on the death of the beneficiary of a self-settled special needs trust, Medicaid must be repaid for all medical assistance paid on behalf of the beneficiary since birth.
• Payments to Third Parties. Distributions from a self-settled special needs trust cannot be made directly to the trust beneficiary. This would be considered income and would reduce or eliminate not only SSI but Medicaid linked to SSI. A simple solution is to obtain a credit card in the name of a family member (i.e., a parent). That credit card bill can then be presented monthly to the trustee for payment.

If SSI and Medicaid are not important, then it is not necessary to be bound by these restrictions. An alternative to a self-settled special needs trust is a settlement protection trust, which is much more flexible. Other family members are permitted to incidentally benefit from the trust. There is not Medicaid payback, and distributions can be made directly to the trust beneficiary. The advantage of the settlement protection trust is it provides expert management of funds and prevents the beneficiary from squandering the settlement. Both settlement protection trusts and self-settled special needs trusts can be used in conjunction with structured settlements. The structured settlement is simply paid into the trust.

2. Size of Personal Injury Settlement. Is the personal injury settlement large enough so that public benefits are no longer necessary? A third party could use the transferred funds to pay the client’s expenses during the lookback periods and establish a third-party special needs trust with the balance. That strategy might work like this:

• Transfer the personal injury settlement.
• Lose SSI for three years – calculate the value of that benefit.
• Lose Medicaid for five years if an institutional level of care is involved, or no loss of Medicaid if an institutional level of care is not involved. Calculate the value of the lost Medicaid.]
  • Advantage
  • Third-party special needs trust (TPSNT)
  • No sole benefit rule
  • No Medicaid payback

Calculation – SSI:

$_________    Current SSI Monthly Benefit

x   36  Months

=

$_________    Total Loss of SSI

Calculation – Medicaid:

$_________    Average Annual Medicaid Benefit, Hospital and Physician

+

$_________    Average Annual Medicaid Payment for Prescriptions

+

$_________    Average Annual Payment for HCBS

+

$_________    Other Annual Medicaid Payment

=

$_________    Total Lost Medicaid Payment

x  5  Years

=

$_________    Total Loss of Medicaid – 5 Years

$_________    Total Loss of SSI

+

$_________    Total Loss of Medicaid – 5 Years

=

$_________    Total Loss of SSI and Medicaid

3. Private Medical Insurance. Is private medical insurance available under the Affordable Care Act (ACA) or in the open market to provide the services that Medicaid would otherwise be called upon to provide? One factor that must be considered is coverage. Typically, insurance under the ACA covers hospitals and doctor visits. It is similar to typical Blue Cross or Aetna policies. Many individuals who suffer from personal injuries need additional coverage for home care or extensive therapies. Insurance policies under the ACA can limit the number of visits for such things as psychological counseling, speech therapy, etc. Medicaid has no such limits. If it is anticipated that the trust beneficiary may eventually require care in a group home, this type of care is not covered by ACA or other private insurance. It is funded with Medicaid dollars.

4. Long-Term Care Planning. Would long-term care planning be a better option than establishing a special needs trust? For example, if a client is in a nursing home, the Medicaid payback could be significant. If the client has a long life expectancy, would traditional Medicaid planning involving transfers of assets to third parties make more sense? For example, suppose the net recovery was $2,000,000. Let’s suppose the private pay rate for the nursing home was $10,000 per month plus the client’s other income. The cost would be $600,000 plus inflationary increases over five years. Would it be better to retain this sum of money, have the client private pay, and transfer the balance of the funds to other family members to either use for themselves or to establish a third-party special needs trust for the nursing home resident? Nursing home abuse cases frequently involve plaintiffs who are over age 65 and who are ineligible for a self-settled special needs trust. In those situations, long-term care planning is the only truly viable strategy.

5. Would a guardianship account be as effective as a special needs trust? The problem with a guardianship account is that the funds in that account are considered an “available resource” for public benefits purposes. It is also sometimes difficult to get a court to approve distributions from a guardianship account. In almost every instance, a settlement protection trust is a better alternative than a guardianship account.

6. Alternatives to Public Benefits. While public benefits may be the immediate source of medical treatment, food, or housing, are there other alternatives that could be found to obviate the need for a special needs trust? Where the settlement is large, public benefits may be unnecessary. Depending on the type of coverage the plaintiff needs, private insurance may be available, either on the open market or through the ACA. The monthly SSI payment may not be important.

7. Costs of drafting the trust and administering it must be considered. The cost of drafting a trust is usually very modest in comparison to the total value of the personal injury settlement. The cost of administering the trust is also minimal.

8. Transfer of Assets. Can the beneficiary transfer assets to a third party, wait for three years for SSI, or five years for institutional Medicaid? See item #2 for a calculation as to how this may work.

[1] 42 U.S.C. §1396p(d)(4)(A).

The logic of the airplane oxygen mask applies here: flight attendants instruct parents to affix their own masks first before assisting a child, because you cannot help your child if you are not protected. Likewise, parents are not actually helping their child if they spend money incautiously on the child’s care without also doing the necessary planning for their own retirement. Special needs children are more likely to be at least somewhat dependent on their parents as adults, so it is a help to them for their parents to be financially secure in retirement.
2. Consult with a Financial Planner or Special Needs Attorney

All families can benefit from assistance with financial planning, and this is all the more true for families with special needs. Navigating the complexities of public benefits, taxation and estate planning is not something that should be attempted without guidance. Spending money really will save you money.

3. Make Use of Public Benefits

Many families with significant resources or with higher-functioning special needs children may balk at taking advantage of public benefits such as Supplemental Security Income or Medicaid. However, these benefits are not just for low income families. The programs represent one way our nation takes care of its citizens, including people with disabilities. Just as one would not hesitate to take advantage of any legal tax breaks available, so one should access any public benefits that one has the right to.

4. Create a Special Needs Trust

A special needs trust allow families to set money aside for a child’s special needs without giving the money directly to the individual, which would trigger disqualification for needs-based public benefits. Proceeds from a life insurance policy can be directed toward a special needs trust, and the funds can be used for such things as out-of-pocket medical expenses, personal care aides, education and recreation.

5. Plan Your Estate

Estate planning for special needs families should involve the whole family. Grandparents should be informed that leaving money directly to a special needs grandchild may adversely affect eligibility for public benefits and should therefore be directed to a special needs trust instead. Guardianship in the event of the death of both parents is particularly important and should include a care guide communicating a special needs child’s individual care needs and personal tastes.
6. Be Prepared to Advocate for Insurance Coverage

Treatments for children with special needs may or may not be covered by health insurance. For example, speech therapy should be covered, if the need is medical rather than behavioral. However, getting the insurance company to pay may involve careful and persistent communication with doctors, therapists, and one’s insurance provider. If your child needs respite care, be prepared to advocate for coverage.

7. Find and Make Use of Community Resources

Seek out any and all resources available for special needs families in one’s local community. Nonprofit organizations often provide their own resources or assist families in finding the help they need.
8. Coordinate with Other Special Needs Families

Families with special needs should not try to go it alone. Companionship with other special needs children can be supportive and fun for kids and parents can benefit by sharing resources. Group activities are more economical and provide crucial moral support for families.

9. Make Use of Tax Deductions and Credits

The Internal Revenue Code provides for several tax deductions and credit available for special needs families. Deductions may be allowable for medical and therapy expenses, specialized foods and legal expenses. Tax credits that are particularly useful for special needs families include the child and dependent care credit and the earned income credit. Consult a tax professional in order to make the most of these advantages.

10. Plan Ahead for Your Loved One’s Adulthood

Just as parents plan for their own retirement, so must they plan for their loved one’s life as an adult. Will the child remain living with the parents? If so, will in-home support be needed? If a young adult with special needs is planning to move into a group home or other independent living arrangement, then research should be done well ahead of time in order to be placed on any necessary waiting lists and to budget appropriately.

This post was first contributed by Marion Walsh to Friendship Circle.

In 2002, there were well under $2 billion in the sales of prescription stimulants. In 2012, such sales approached $8.5 billion.

The Centers for Disease Control and Prevention reports that 15% of high school students now have this diagnosis and that the number of children on such medications has increased from 600,000 in 1990 to 3.5 million currently.

What is perhaps most striking is the loosened definition of ADHD. A child may be diagnosed if, for example, she “makes careless mistakes” or “often has difficulty waiting his or her turn.”

This means that there is a similarly striking increase in the number of children who are diagnosed with this disability and have a right to an Individualized Educational Plan (IEP).

The cost to school districts is enormous. They must pay for aides, special services, and sometimes private tuition in a specialized school if the mainstream educational system is not able to handle a severely disabled child. As a result, there are fewer resources for those who are most severely disabled.

If given a choice, every parent would choose a course of action that will allow a child to perform brilliantly.

One doctor who has published prolifically on this point, told Reuters Health: “If a child is brilliant but is doing just okay in school, that child may need treatment, which would result in their performing brilliantly at school.” The New York Times article quotes Dr. Joseph Biederman, a “prominent child psychiatrist at Harvard University in Massachusetts General Hospital.” Dr. Biederman’s research has been substantially funded by the pharmaceutical industry.

Today one in seven children is diagnosed with ADHD by the age of 18. Because the medical literature and pharmaceutical information indicates that one never graduates from this condition, it is a life long diagnosis.

The article points out that the drug industry is now targeting adults.

In 2012, the article points out that almost sixteen million prescriptions for ADHD medication were written for individuals between ages 20 and 39. This is triple the amount from just five years before.

Impact on Public Benefits, Social Services

The excellent and very lengthy New York Times article did not identify or explore the impact on our public benefits and social services systems. With an explosive growth in diagnoses, there has not been a comparable growth in funding for needed support services. The impact on income programs – SSDI and SSI – has not been explored. Yet, the impact is profound. Millions of adults are now receiving or seeking “disability” status so that they can receive government income benefits and Medicaid and/or Medicare as their health insurance programs. This places enormous fiscal strains on such income and health programs. Again, those who are severely and, some would say, legitimately disabled are now sharing limited resources with a dramatically expanded pool of public benefits recipients. The bottom line is that they receive fewer services and, inevitably, lower quality services.

To understand how loose, all inclusive, and arguably inappropriate this is, look at the New York Times article and take the online test that asks “whether you could have ADHD, too.” They reprint a web page of drug marketer Shire and its quiz that, in effect, encourages adults to believe they have or might have ADHD. The New York Times conducted a poll of 1,106 Americans. Almost half had a result of “ADHD possible” or “ADHD may be likely.”

The quiz asks, for example, “How often to you fidget or squirm your hands or feet while you have to sit down for a long time?” It asks, “When you have a task that requires a lot of thought, how often do avoid or delay getting started?” The other four questions identify behaviors that, arguably, the vast majority of us have on a daily basis.

I took the test. I scored 14, which means “ADHD may be likely.” I wonder what would have happened if, when I was in high school, I was given this test. Would I have been medicated? Would I have been as successful?

There is no doubt that millions of Americans have conditions that can be helpfully addressed by sport, counseling, and sometimes pharmaceutical assistance. The inescapable conclusion of the article – a conclusion reinforced by my experience – is that the pharmaceutical industry has been far too successful in generating millions of additional ADHD diagnoses. All of us are harmed as a result.

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