A person who had a disability prior to age 26 may now setup an ABLE Account, and anyone may contribute to such account; provided, however, that total contributions to the account may not exceed $14,000. The person with the disability may use the money for “qualified disability expenses,” such as housing and basic living expenses. The utilization of the ABLE Account funds for such purpose will not be considered in-kind support and maintenance. To demonstrate the value of these accounts, I am going to use two common examples:
Parents Did Not Charge Rent: Ron’s Case
Ron is a 19-year old with Down Syndrome who lives with his parents. Ron just started to receive SSI; but, because his parents do not charge him for food or shelter, he receives a 1/3 reduction of his full benefit amount due to in-kind support and maintenance. The monthly household food and shelter expenses total $2,175, and because Ron is one of three people living in the house, he is responsible for a total of $725. Because of the reduction in income, Ron is unable to start paying his parents his pro rata share of the household food and shelter expenses. An ABLE Account is established for the benefit of Ron, and Ron’s parents contribute $2,000 to the account. Ron will pay his parents his $725 share of rent (from a combination of his SSI check and his ABLE Account). The rent payments will be reported to the Social Security Administration, and the Social Security Administration will then increase Ron’s SSI check to the full $735. To continue to receive the full benefit amount, Ron must continue to pay his parents rent. (Bear in mind that earned and unearned income may also factor into Ron’s benefit amount, but this is for a later discussion).
Household Expenses Too High: Jackie’s Case
Jackie is a 35-year old with Cerebral Palsy who lives with her sister. When Jackie moved in with her sister, her pro rata share of household expenses totaled $1,000 and the full SSI benefit was not sufficient to cover her pro rata share. As a result, Jackie received a 1/3 reduction in her benefit due to in-kind support and maintenance. Jackie established an ABLE Account and the Trustee of her Special Needs Trust distributed $5,000 to the account. Jackie can now pay her sister $1,000 to cover her pro rata share of the expenses (via SSI and her ABLE Account). The change in circumstances will be reported to the Social Security Administration who would then increase Jackie’s SSI check to the full $735 a month. From that point forward, Jackie’s Special Needs Trust will continue to distribute money into her ABLE Account so that she can continue to pay her pro rata share of household expenses and receive her full SSI check.
Ask Kit Kat – All About Skunks
Hook Law Center: Kit Kat, what’s the latest information about skunks, and what should you do if your pet has encountered a skunk?
Kit Kat: Well, this can cause some problems you might not anticipate, though, generally, your pet’s encounter with a skunk can be quite harmless. Usually, the skunk gives some warning before employing its ultimate weapon—the spray. Initially, you may notice the telltale smell, but there may be other symptoms like drooling, sneezing, or vomiting. More severe symptoms can emerge a few days later like lethargy and pale gums. If the more severe symptoms appear, immediately take your pet to the vet to be checked. In most cases, the severer symptoms occur after a direct spray to the face.
Now, how to deal with cleaning your pet after a potent spray. Ordinary pet shampoo will not be strong enough. You will need to make your own mixture composed of 1 quart of 3% hydrogen peroxide, ¼ cup baking soda, and 1-2 tsps. of dishwashing liquid. Lather your pet well and let it sit for about 5 minutes. Then, thoroughly rinse with lots of water. If your pet has long hair, you may want to consider clipping them before shampooing, because a shorter coat will foster more effective results. There may be some bleaching of the fur with this procedure, but it is not harmful to them. Repeat as necessary.
To prevent your house/property from being attractive to skunks, there are several things you can do. First, if you store food in your garage/shed like bird seed or dry pet food, make sure it is in well-sealed containers. Second, make sure areas around decks are blocked, so they cannot make their home there. Third, keep exterior lights at night on or install motion-activated lights. Skunks do not like light. Fourth, discourage their nesting in your yard by sprinkling kitty litter in front of their den/hole or stuffing it with twigs and leaves. This will let them know, that they are not welcome.
Hopefully, with this knowledge, you will be well-equipped to handle your pet’s skunk encounter. If your pet is actually bitten, you should take your pet to a veterinarian right away. Skunks can carry rabies, and prompt medical attention could be crucial. (“Pets and Skunks: A Smelly Dilemma,” ASPCA Action, Issue #3, 2016, p. 8)
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 mail@hooklawcenter.com or fax us at 757-397-1267.The post Maximizing Your Child’s SSI by Utilizing ABLE Accounts first appeared on SEONewsWire.net.]]>
by Thomas D. Begley, Jr., CELA
A Disability Annuity Trust (“DAT”) can be established for a disabled child or any disabled individual.[1] However, in considering the use of a DAT for a disabled person, care must be taken to examine the other government benefits currently being received, or which may be received in the future by the person with disabilities.
If the person with disabilities is receiving Supplemental Security Disability Income (“SSDI”), this is usually accompanied by Medicare. SSDI and Medicare are insurance-based programs, rather than means-based programs. Receipt of income from the DAT would not cause a loss of SSDI or Medicare. However, consideration should be given to other benefits that the person with disabilities may receive in the future. For example, will the person with disabilities be a candidate for group housing in the future? If so, the existence of the DAT may cause them to lose that benefit.
If the person is receiving Supplemental Security Income (“SSI”), that person also receives Medicaid. SSI is a means-based program. Both resources and income are considered in determining eligibility. If the person with disabilities receives distributions from the DAT, this may well disqualify that person from receiving SSI and cause a loss of Medicaid. The assets in the DAT would be “available” which would also disqualify the SSI recipient from both SSI and Medicaid, because the assets in the trust would be considered resources. If a DAT is designed as a Special Needs Trust, public benefits may be preserved.
[1] HCFA Transmittal 64 § 3257(B)(6).
The post ESTABLISHING A DISABILITY ANNUITY TRUST FOR A BENEFICIARY RECEIVING SSDI OR SSI first appeared on SEONewsWire.net.]]>by Thomas D. Begley, Jr., CELA
Historically, a member of the military could arrange for a pension and provide a survivor’s benefit to a spouse or child. A problem arose where the child had a disability and was receiving means-tested public benefits such as Supplemental Security Income (“SSI”) or Medicaid. If the child with disabilities receiving those benefits or other means-tested public benefits received the pension, they would lose the benefits. This is because any income received from any source reduces the SSI income dollar-for-dollar, and if the pension exceeded the amount of SSI income, SSI would be completely lost. Medicaid is frequently linked to SSI, so that if SSI is lost, the Medicaid would be also be lost. What follows is a story of the Power of One.
An Elder and Disability Law attorney in Virginia, named Kelly Thompson, took up the cause of these beneficiaries with disabilities. Kelly enlisted help from the Special Needs Alliance, which is a national organization of lawyers practicing in the disability field and also the National Academy of Elder Law Attorneys. After several years of hard work, in late 2014 Congress enacted the Disabled Military Child Protection Act in the 2015 National Defense Authorization Act. This legislation allows military retirees and service members to designate their survivor benefit to a Special Needs Trust for the benefit of their disabled child or children.
By having the survivor pension benefits irrevocably paid into a Special Needs Trust, those funds are not counted in determining the financial eligibility of the disabled child. The net result is that the military member’s or retiree’s children with disabilities are able to benefit from the pension as well as maintain their vital public benefits.
Part of the requirements under the Disabled Military Child Protection Act is that an attorney certify that the child has previously applied for, or may in the future apply for, SSI or other benefits, and that the Special Needs Trust is compliant with all applicable state and federal laws. A template is provided for completion and signature
The post MILITARY PENSIONS AND DISABLED CHILDREN first appeared on SEONewsWire.net.]]>by Thomas D. Begley, Jr., CELA
Personal Injury attorneys must inquire as to whether their clients are receiving public benefits. Certain benefits are means-tested, so that if the client receives money directly those benefits are reduced or lost completely. This article will outline the common public benefits and indicate whether the receipt of a personal injury settlement will affect those benefits.
Supplemental Security Income
Supplement Security Income (SSI) is a means-tested federal program that provides income (a cash assistance grant) to certain aged (65 or over), blind, and persons with disabilities. The program is administered by the Social Security Administration. It is governed by federal statute,[1] federal regulations,[2] and the Program Operating Manual System of the Social Security Administration (POMS). For 2016, the maximum federal SSI benefit is $733 per month. In addition, the State of New Jersey has a supplement in the amount of $31.25 per month. If an individual has more than $2,000 of assets, he or she will lose SSI. Therefore, the receipt of a personal injury settlement will disqualify the plaintiff from SSI, unless the funds are placed in a Special Needs Trust.
Social Security Disability Income
This program is known as Old Age Survivors and Disability Insurance (OASDI). It is governed by the Social Security Act.[3] Unlike SSI, which is a means-tested welfare program, Social Security Disability Income (SSDI) is an insurance program. Coverage is based on quarters of Social Security insurance coverage during the applicant’s employment. Receipt of a personal injury settlement will not affect the plaintiff’s SSDI.
Medicaid
Medicaid is a medical insurance program that benefits millions of Americans. There are many ways that individuals qualify for Medicaid. The vast majority of Medicaid recipients receive that benefit, because they are also receiving SSI. If they lose their SSI, they also lose their Medicaid. However, since the Affordable Care Act (ACA), millions of Americans now receive Medicaid regardless of whether or not they are disabled and regardless of whether they are receiving SSI.
For SSI-based Medicaid, there is an asset limit of $2,000. For ACA Medicaid, there is no resource limit. Therefore, receipt of a personal injury settlement by an SSI recipient will cause a loss of Medicaid. However, receipt of a personal injury settlement by a Medicaid recipient who obtained Medicaid through the ACA will not affect eligibility, except that the income from the settlement may push the income of the plaintiff above the income limits for eligibility under the ACA. The solution for an individual receiving SSI-linked Medicaid is a Special Needs Trust. However, under the ACA, only individuals with disabilities are qualified for a Special Needs Trust. Individuals receiving Medicaid under the ACA who are not disabled may not utilize a Special Needs Trust.
Medicaid Waiver Programs
Medicaid Waiver Programs are designed to provide Medicaid coverage for long-term care services. These services are typically delivered in the home or assisted living facilities. These services are vital to catastrophically-injured individuals. These programs have an asset maximum of $2,000. Receipt of a personal injury settlement would disqualify the plaintiff from Medicaid Waiver services, unless the funds are placed in a Special Needs Trust.
Medicare
Medicare is a program that pays medical costs of eligible beneficiaries. Unlike Medicaid, which is a welfare program, Medicare is an insurance program. Receipt of a personal injury settlement will not affect Medicare eligibility.
Federally Assisted Housing
The federal government has two housing programs that provide assistance for low-income individuals and people with disabilities. These are known as Section 2.02 and Section 8. Section 8 is the program that has the most effect on personal injury plaintiffs. The Department of Housing and Urban Development (HUD) pays rental subsidies so eligible families can afford decent, safe and sanitary housing. Each section of the country has a maximum income limit for eligibility for public housing. If a tenant is eligible, they pay 30% of their net income for rent. While there is no asset test for federally assisted housing, if the assets produce income, the income may render the plaintiff ineligible or cause an increase in monthly rental. Income for the entire household is considered.
Payments from a Special Needs Trust are not counted as income, so long as the payments are irregular and sporadic.
Supplemental Nutritional Assistance Program
The Supplemental Nutritional Assistance Program (SNAP) is now the name for a program that used to be called Food Stamps. Recipients are provided an electronic benefit transfer (EBT) card that looks much like a credit card. SNAP eligibility is determined on the basis of household eligibility.
In New Jersey SNAP has complex resource and income limits. Therefore, receipt of a personal injury settlement could disqualify the individual from these benefits, unless the personal injury proceeds are placed in the Special Needs Trust.
Division of Developmental Disability
Many Division of Developmental Disability (DDD) programs are now based on Medicaid eligibility. The asset limit is $2,000. If the plaintiff is receiving or would otherwise be eligible to receive those benefits, then receipt of a personal injury settlement would disqualify them unless it has been placed into a Special Needs Trust. Other DDD benefits would be unaffected by receipt of a personal injury recovery.
Group Home
In New Jersey most group homes are paid with Medicaid dollars. The asset limit is $2,000. Therefore, receipt of a personal injury settlement would disqualify the individual from those benefits, unless it is placed in a Special Needs Trust.
Psychiatric Institutions
Many psychiatric institutions are paid for by Medicaid dollars under Medicaid Waiver Programs. Again, the asset limit is $2,000, so receipt of a personal injury settlement would disqualify the plaintiff unless the funds are placed in a Special Needs Trust.
[1] 42 U.S.C. §1381 et seq.
[2] 20 C.F.R. §416.
[3] 42 U.S.C. §401 et seq. The Regulations are found at 20 C.F.R. §404.1 et seq.
The post PUBLIC BENEFITS CONSIDERATIONS IN PERSONAL INJURY CASES first appeared on SEONewsWire.net.]]>by Thomas D. Begley, Jr., CELA
Personal Injury attorneys must inquire as to whether their clients are receiving public benefits. Certain benefits are means-tested, so that if the client receives money directly those benefits are reduced or lost completely. This article will outline the common public benefits and indicate whether the receipt of a personal injury settlement will affect those benefits.
Supplemental Security Income (SSI)
Supplement Security Income (SSI) is a means-tested federal program that provides income (a cash assistance grant) to certain aged (65 or over), blind, and persons with disabilities. If an individual has more than $2,000 of assets, he or she will lose SSI. Therefore, the receipt of a personal injury settlement will disqualify the plaintiff from SSI, unless the funds are placed in a Special Needs Trust.
Social Security Disability Income (SSDI)
This program is known as SSDI. It provides an income to disabled workers. It is an insurance program, not a welfare program. Receipt of a personal injury settlement will not affect the plaintiff’s SSDI.
Medicaid
Medicaid is a medical insurance program. There are many ways that individuals qualify for Medicaid. The vast majority of Medicaid recipients receive that benefit, because they are also receiving SSI. If they lose their SSI, they also lose their Medicaid. However, since the Affordable Care Act (ACA), millions of Americans now receive Medicaid regardless of whether or not they are disabled and regardless of whether they are receiving SSI.
For SSI-based Medicaid, there is an asset limit of $2,000. For ACA Medicaid, there is no resource limit. Therefore, receipt of a personal injury settlement by an SSI recipient will cause a loss of Medicaid. However, receipt of a personal injury settlement by a Medicaid recipient who obtained Medicaid through the ACA will not affect eligibility, except that the income from the settlement may push the income of the plaintiff above the income limits for eligibility under the ACA. The solution for an individual receiving SSI-linked Medicaid is a Special Needs Trust.
Medicaid Waiver Programs
Medicaid Waiver Programs are designed to provide Medicaid coverage for long-term care services. These services are typically delivered in the home or assisted living facilities. These services are vital to catastrophically-injured individuals. These programs have an asset maximum of $2,000. Receipt of a personal injury settlement would disqualify the plaintiff from Medicaid Waiver services, unless the funds are placed in a Special Needs Trust.
Medicare
Medicare is a program that pays medical costs of eligible beneficiaries. Unlike Medicaid, which is a welfare program, Medicare is an insurance program. Receipt of a personal injury settlement will not affect Medicare eligibility.
The post PUBLIC BENEFITS CONSIDERATIONS IN PERSONAL INJURY CASES first appeared on SEONewsWire.net.]]>
by Thomas D. Begley, Jr., CELA
Introduction
Housing for an individual with disabilities is a major concern. The purchase of a residence is a very important decision involving a number of factors. This is particularly true where the individual is receiving means-tested public benefits such as Supplemental Security Income (SSI) and Medicaid. If there is a special needs trust involved, the SSI and State Medicaid Regulations must be carefully considered.
Selecting the Right Home
Often, a home must be made handicap accessible. In selecting a home, care must be taken to ensure that the home can be adapted for the individual with disabilities.
How Much to Spend
In determining how much to spend for the home, there are certain constraints that must be observed. The trust should last the lifetime of the beneficiary. How much can be spent on the home depends on the size of the trust. Most professional trustees will limit expenditures for a home purchase to between 15% and 25% of trust assets.
Who Should Own the Home?
In New Jersey, if the trust pays for the home, it must be titled in the name of the trust. This means that there are only two good options for homeownership:
- Special Needs Trust Purchases the Home. If the Special Needs Trust is a First-Party Special Needs Trust, that is funded with assets of the beneficiary, such as proceeds of a personal injury settlement, an inheritance, or equitable distribution, there are many disadvantages to the trust owning the home:
- One disadvantage is that when the trust beneficiary dies, the home must be sold to payback Medicaid.
- Sole Benefit Of. First-Party Special Needs Trusts follow a “sole benefit of” rule. If other individuals reside in the home with the beneficiary, such as other family members, they must contribute toward the operating expenses of the home.
- Parents Purchase the Home. Another option is to ask the court for an allocation of the personal injury settlement proceeds to one or both parents. Courts will usually be willing to make such an allocation, so long as it is reasonable. If the parents own the home, the Medicaid payback is avoided. However, if the parents own the home, the trust can only pay a pro rata share of the expenses of maintaining the home. If the family consists of two parents and two adult children, all of whom live in the home, the trust could only pay 25% of the expenses of maintaining the home.
Conclusion
Homeownership in personal injury settlement is always a complex issue. If the plaintiff suffers from disabilities, a First-Party Special Needs Trust should always be considered, and a professional trustee should be engaged to administer the trust.
The post PERSONAL INJURY SETTLEMENTS: HOUSING FOR PLAINTIFFS WITH DISABILITIES first appeared on SEONewsWire.net.]]>
by Thomas D. Begley, Jr., Esquire, CELA
Generally, Medicare Set-Aside Arrangement (MSA) funds are deposited in a custodial account with a professional trustee or given to the client to self-administer. For cases less than $100,000, giving the funds to the client to self-administer makes sense. CMS has issued a letter of instructions to be delivered to the client who would be administering his or her own custodial account. Even if a client misuses the money, the personal injury attorney should be off the hook with respect to a subsequent malpractice claim.
If the MSA funds are self-administered by the client or administered by a professional custodian and held in a custodian account, they will be considered countable assets that will disqualify the client from asset-tested public benefits such as SSI and Medicaid. The solution to that problem is to deposit the funds in a Special Needs Trust. MSAs are generally administered by custodians such as Medivest. However, money in a custodial account is considered a countable asset for someone receiving asset-tested public benefits. In those situations, a Special Needs Trust (“SNT”) is required and the trust is designed so that the MSA funds are placed in a separate sub-trust within the SNT. Generally, a professional trustee will hire a professional custodian to administer the MSA sub-account. By wrapping the MSA sub-account in the SNT, the assets in that sub-account are no longer countable to the trust beneficiary.
The post SPECIAL NEEDS TRUSTS AND MEDICARE SET-ASIDE ARRANGEMENTS first appeared on SEONewsWire.net.]]>[This article was originally printed in the Straight Word, a publication of the Burlington County Bar Association.]
by Thomas D. Begley, Jr., CELA
There are a number of mistakes that scriveners make in drafting special needs trusts. This article will discuss those that frequently occur.
- Including a Payback Provision in a Third-Party Special Needs Trust. Payback provisions are a creature of Omnibus Budget Reconciliation Act of 1993 (OBRA-93).[1] This statute relates solely to first-party special needs trusts. There is no federal statute governing third party special needs trusts. These trusts are governed by the Program Operating Manual System of the Social Security Administration (POMS). There is no requirement in the POMS for a payback provision in a third-party special needs trust. Inclusion of such a provision would require the trustee to make such a payback and subject the scrivener to a potentially serious malpractice action.
- Creating a Self-Settled Special Needs Trust for an Individual Over Age 65. Frequently, there is a personal injury settlement for a beneficiary over age 65. Often, these beneficiaries reside in assisted living facilities or nursing homes. They are receiving Medicaid and, in many instances, SSI. The personal injury attorney is anxious to protect the settlement and preserve public benefits. The trust attorney then drafts a self-settled special needs trust without inquiring as to the age of the beneficiary. Once the beneficiary attains age 65, he or she is no longer eligible for a special needs trust.[2]
- Requiring Mandatory Distributions of Income. If a trust distributes income to a beneficiary, it is considered unearned income by SSI and Medicaid. If the income distribution is less than the amount of the SSI payment, the SSI payment is reduced dollar-for-dollar so nothing is gained. If the distribution exceeds the SSI payment, then SSI is lost and if the Medicaid is linked to SSI, then Medicaid is lost as well. The key to a special needs trust is that the trustee must have full discretion over distributions. A mandatory distribution provision would mean that the trustee does not have discretion over these distributions.
- Inclusion of Crummey Powers. Often, an irrevocable life insurance trust (ILIT) is wrapped in a special needs trust. The trust is funded by a life insurance policy. If the special needs trust contains a Crummey Power giving the disabled beneficiary a right of withdrawal, then that right is income to the beneficiary in the month during which the right of withdrawal may be exercised and may disqualify the disabled beneficiary from SSI and Medicaid linked to SSI. The solution is to use a Cristofani Power giving someone other than the beneficiary with disabilities the right to withdraw.
- HEMS Standard in a Special Needs Trust. Most trusts include a direction to the trustee to make distributions to the beneficiary for the beneficiary’s health, education, maintenance, and support. This is commonly known as a “HEMS” standard. Such a trust is generally done for an individual who is not receiving public benefits. This is called a support trust. However, if a special needs trust contains a HEMS standard it is not a special needs trust, because the essence of the special needs trust is the discretion in the trustee in making distributions.
- Failing to Make the Trust Irrevocable. In the case of a self-settled special needs trust, the document must provide that the trust is irrevocable. If the trust is revocable, it is an available asset to the beneficiary and public benefits will be lost. In a third-party special needs trust, the document may provide that the third-party grantor may revoke the trust. Typically, the language will give the grantor the right to revoke the trust until the death of the grantor or until the trust is funded by someone other than the grantor.
- Failing to Adequately Fund a Special Needs Trust. This is perhaps the most common problem with third-party special needs trusts. Parents want to establish a trust for their child with disabilities. They have three children, two of whom are healthy and one whom has a disability. They want the trust assets divided equally among the three children upon death. Good practice dictates that a Life Care Plan be obtained outlining the level of funding that will be required to maintain the child with disabilities in the lifestyle that the parents want for that child. The healthy children can work, so one solution would be to leave them no money or a smaller percentage. The other solution is to fund the third-party special needs trust with a second-to-die life insurance policy on the parents. These two strategies can be used in combination.
- Selection of a Non-Professional Trustee. This is a very common and serious mistake. A professional trustee knows public benefits law, has investment expertise or hires such expertise, knows tax law, and is familiar with navigating the disability system. The professional trustee has no conflicts of interest and is in a position to say “no” to inappropriate distributions. The reason many individuals want a family member is cost. By the time the family member pays the bonding premium, if they can get a bond, hire someone to manage the money, and hire someone to prepare the tax return, they’ve usually spent far more money than they would in hiring a professional trustee. Family members often have conflicts of interest in that they will be receiving any money not distributed for the benefit of the beneficiary. Family members are often inclined to make a distribution that would be inappropriate. There is often conflict between the family member trustee and the beneficiary that destroys a family relationship.
- Failure to Appoint a Trust Protector. When a professional trustee is selected, for the most part, the result are satisfactory to all concerned. However, there are occasions when a beneficiary is legitimately dissatisfied with the performance of the trustee. A trust protector is a good check and balance on the professional trustee. The Trust Protector can removed and replace trustee.
- Failing to Give a Minor with Capacity a Power of Appointment over Trust Assets on Death. In New Jersey, a trustee cannot do estate planning for a minor. The typical self-settled special needs trust states that on death after the Medicaid payback, remaining trust assets go by intestacy. By giving the minor beneficiary a limited power of appointment upon attaining majority, the remainder of the trust assets can be distributed in a more appropriate manner.
[1] 42 U.S.C. §1396p(d)(4)(A).
[2] 42 U.S.C. §1396p(d)(4)(A).
The post TOP TEN MISTAKES IN DRAFTING SPECIAL NEEDS TRUSTS first appeared on SEONewsWire.net.]]>Learn about Wills, Trusts, Special Needs Trust, Guardianship, Defining your child’s lifetime needs, Government Benefits, Proactive Tax Strategies, Communication Techniques, and the importance of integrating all the necessary pieces into a cohesive plan, so the vision you have for your child’s life can become a reality whether you are here or not.
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Learn about Wills, Trusts, Special Needs Trust, Guardianship, Defining your child’s lifetime needs, Government Benefits, Proactive Tax Strategies, Communication Techniques, and the importance of integrating all the necessary pieces into a cohesive plan, so the vision you have for your child’s life can become a reality whether you are here or not.
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What public benefits are means-tested?
- SSI – SSI is an income stream. In 2013, the income will be $710 per month. In addition, some states provide a supplement. There is an asset limit of $2,000 for an individual and $3,000 for a married couple. Unearned income reduces the benefit dollar-for-dollar. Earned income reduces the benefit by one dollar for every two dollars earned after $85 per month. Until a child is 18, the income and assets of a parent are deemed to the child.
- Medicaid – Medicaid provides broad medical coverage for recipients. Medicaid covers not only acute care, but also chronic care. It should be noted that most private insurance covers acute care with limited, if any, coverage for chronic care. The income and asset limits tend to be the same as for SSI. In many states, if an individual receives SSI, they automatically receive Medicaid.
- Medicaid Waiver – Most states have Medicaid Waiver programs that provide coverage similar to basic Medicaid. Many states have an income cap. In 2013 the income cap is $2,130 per month. Most Medicaid Waivers have an asset limit, but they vary significantly from state-to-state and from program-to-program.
- SNAP (Food Stamps) – SNAP provides an Electronic Benefit Transfer (EBT) card to pay for food. The amount depends on household income. There is an assets limit of $2,000 or $3,000 if elderly. Income varies with the size of the household. All household members’ income is counted.
- Federally-Assisted Housing – This is also sometimes known as Section 8. This program provides subsidized rent. The rent is capped at 30% of family adjusted income. There is no asset text. Income must be at or below the Regional Maximum. This varies from region to region.
- Group Homes – Many states have group homes for disabled persons. Generally, Medicaid pays for these group homes. The income and asset tests tend to be the same as general Medicaid.
- CHIP – The Children’s Health Insurance Program (CHIP) provide medical assistance to low and middle-class individuals. The recipient need not be disabled. Only three states have an asset test. There is an income limit that varies from 90% of the federal poverty limit to 350%.
If an individual is receiving means-tested public benefits, a Special Needs Trust is required.
Public Benefits That Are Not Means-Tested
Certain public benefits are not means-tested. These include:
- SSDI – SSDI is a cash benefit. The amount depends on the amount paid into the Social Security system. There are no income or asset tests.
- Medicare – Medicare provides medical coverage for hospital, out-patient, and prescription drugs. Generally, Medicare is limited to acute care. There are premiums, deductibles, copays, and maximums per spell of illness. There are no income or asset tests.
If a person is receiving public benefits that are not means-tested, no special needs trust is required.
What is a Special Needs Trust and How Does it Operate?
A Special Needs Trust is a creature of statute. These trusts were authorized by Congress in 1993.[1] Essentially, there are seven requirements:
- Assets of the Individual – The trust must consist of assets of the individual. The personal injury settlement is an asset of the individual.
- Under 65 – The individual must be under age 65 at the time the trust is established and funded. A structure in place prior to the individual attaining age 65 can continue afterward.
- Disabled – The individual must be determined to be disabled by the Social Security Administration or the State Medicaid Agency.
- Sole Benefit Of – Distributions from the trust are limited to the sole benefit of the individual. This is often a problem as family members tend to view the trust as the family bank account. A strong trustee is essential.
- Established By – The trust must be established by a parent, grandparent, guardian, or a court. A Self-Settled Special Needs Trust cannot be established by the individual except in the case of a Pooled Trust.
- Payback – On the death of the beneficiary, or upon the termination of the trust during the beneficiary’s lifetime, the assets in the trust must be used to repay Medicaid for all medical assistance paid to the beneficiary since birth.
- Irrevocable – The trust must be irrevocable.
Trustee
A professional trustee should always be utilized. Family members often want to serve as trustee. The trustee must be familiar with SSI law, Medicaid law, tax law, have investment expertise, and be familiar with fiduciary standards. The trustee must also be able to say “no” to requests for inappropriate trust distributions. Many states require corporate trustees in all but the smallest of Special Needs Trusts. Most states require an individual trustee to be bonded, which is often difficult if not impossible. Where an individual serves as trustee it is inevitably a question of when, not if, the trust will blow up in everyone’s face. Family members can be appointed as Trust Protectors and given the right to remove and replace the corporate trustee with another corporate trustee. This gives the family members comfort.
Essentially, the trustee makes distributions to third parties who provide goods and services, rather than to the trust beneficiary. A distribution to the trust beneficiary would reduce the SSI payment dollar-for-dollar. Payment to third party providers for good and services are not considered income, unless they provide food or shelter, in which event the SSI payment is reduced by approximately one-third, but Medicaid continues.
Structured Settlement
If a structured settlement is paid to an individual plaintiff, that would cause a loss of means-tested public benefits. By having the same structure paid into a Self-Settled Special Needs Trust, benefits are preserved. Most states require that the beneficiary of the structure on death be the trust to ensure the Medicaid payback.
[1] 42 U.S.C. §1396p(d)(4)(A).
1. Remember to Take Care of Your Own Needs
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.
At the most basic level, is it up-to-date? Are there births or deaths in the family that need to be acknowledged? Have you named the correct person as your trustee? Are you still comfortable with those who are to inherit your estate?
Is your trust far too simple or “vanilla?” I have never met a family that is plain vanilla. Everyone has issues and special circumstances.
If your trust planning does not do all of the following, it should be reviewed and upgraded:
- Does your plan protect inherited assets if your children ever have a divorce?
- Does your trust maximize asset and litigation protection on behalf of your children?
- Does your trust avoid estate tax exposure for your children, your grandchildren, and perhaps more?
- Did you set up a proper protective trust for a child who is a spendthrift or is incredibly naive?
- Does a child or grandchildren have “special needs?” If so, did you establish a Special Needs Trust?
- Do you address the possible need for long-term care?
- Are asset protection planning options built into your plan?
You do not need to have a fortune to benefit from an appropriate, sophisticated, and comprehensive trust and estate plan. Put differently, an appropriately drafted trust can protect assets you built up over a lifetime and it can protect assets you leave your children and not allow them to be exposed or perhaps squandered.
Your trust and estate plan should be reviewed every couple of years. It must be reviewed by an attorney who truly understands trust, tax, and asset protection planning.
Above all, do not use a “one size fits all” trust service, regardless of whether it is offered by an attorney or online software.
Pioneers of Elder Law – For over 30 years, Gilfix & La Poll Associates LLP has innovated creative legal solutions to help you manage and plan the future of your estate.
To contact an estate planning lawyer visit http://www.gilfix.com/ or call 800.244.9424.
The Social Security Act, which recognizes Special Needs Trusts, is silent on the type of trustee which may be selected. However, the Rules of Civil Procedure in Pennsylvania require that where an injured party is a minor or incompetent, a corporate fiduciary must be used (Pa. R.C.P, Rules 2039 and 2264). For-profit corporate fiduciaries, such as trust companies and banks, will generally accept accounts valued in excess of $250,000. For accounts less than $250,000, there are non-profit organizations, such as The ARC and PLAN New Jersey, that will accept smaller trust accounts.
The selection of a corporate fiduciary does not in and of itself guarantee that the Special Needs Trust will be properly managed. There are corporate fiduciaries that are excellent in their administration of Special Needs Trusts, while others have little or no experience. Substantial mistakes can be made if the corporate trustee does not possess the qualifications of administering a Special Needs Trust. These mistakes can result in the loss of Medicaid and Social Security benefits. These mistakes can be expensive and time consuming to correct.
A corporate trustee must be well versed in consulting with attorneys, the courts, and the disabled individuals and their families. The trust officer is perhaps the most vital component of the trust relationship. The trust officer must fully comprehend the trust document, local rules and tax strategy. Additionally, the trust officer should be diligent about the maintenance of trust records, bill payment, investment of assets and trust inventory. The trust officer will be required to make critical decisions relating to the needs of the individual while balancing the preservation and distribution of the assets. The trust officer must often weigh the needs of the beneficiary with both affordability and common sense from an independent perspective.
The right corporate fiduciary will provide both peace of mind and financial security. Family dynamics and the stability of the life of the beneficiary are prominent aspects in the administration of a Special Needs Trust. As a result, the trust officer’s abilities and experience are especially important. First and foremost, the trustee should take the time to introduce themselves to the beneficiary and the family. They should get to know the needs of the beneficiary, the financial situation, and the future goals of the trust. These considerations are all influential in the long term administration of the Special Needs Trust.
Families and individuals should have a high level of comfort when deciding on both the corporate trustee and the trust officer. The individual and family should question the firms experience specifically in administering Special Needs Trusts. The trust officer’s individual education and experience should also be examined. Because of the nuances of Special Needs Trust administration, trust officers should be dedicated and committed to the practice. The trust officer will follow the trials and tribulations of the beneficiary and their family through many ups and downs.
The professional management of assets is another important component in the selection of a corporate trustee. Every professional investment manager must follow the Prudent Investor Act statute. Each state has its own Prudent Investor Act statute. This statute requires investment and portfolio managers to consider a variety of factors when choosing the appropriate investment strategy. These factors include inflation and deflation, taxes, liquidity, and diversification. The overall financial goals of the portfolio should be a primary consideration of the investment professional. These financial goals should be long term. The investment strategy should stretch for the beneficiary’s lifetime. This might mean 10, 20, or even 50 years. Every effort should be made to preserve and even grow the assets held in the Special Needs Trust.
When speaking with the portfolio manager, it is important to ask for their overall money management strategy, as well as how that might compare to the money management strategy of the particular Special Needs Trust account. The corporate fiduciary should provide track records of investment performance. They should also understand liquidity needs and be aware of potential large purchases, such as handicap accessible vehicles and real estate.
The selection of a corporate trustee can be difficult, but it is important to do your homework and choose wisely. Above all, the beneficiary and the family should feel entirely comfortable with both the company and the trust officer charged with handling a Special Needs Trust.
The post How to Select a Corporate Trustee for a Special Needs Trust first appeared on SEONewsWire.net.]]>In such a case, locking assets up in a Special Needs Trust may not be the best way of utilizing assets for the child’s care. There are strict guidelines for the disbursement of a Special Needs Trust’s assets, which are to be used to pay for services not covered by Medicaid, for recreational and cultural experiences and, for the most part, services or items that would enrich the beneficiary’s life. It is important, therefore, that the trust has sufficient flexibility to adapt to changing circumstances. One way of doing this is to initially structure the trust as an inter vivos trust for the benefit of the child. The trustee could have the ability to make income and principal distributions to the child for health, education, maintenance, and other support purposes throughout the child’s life.
If the trustee believes that the child is capable of controlling his finances, then he would have the option of terminating the trust and distributing its assets to the beneficiary. If, however, the trustee determines in the future that the child cannot support himself and would be eligible to receive government assistance, the trustee would have the flexibility to convert this trust to a Special Needs Trust.
This flexible structure permits the child to achieve his potential and allows the trustee to use trust assets in the child’s best interests.
To learn more about New York
Special Needs visit http://www.littmankrooks.com.
The post Flexibility Is Important When Setting Up Trusts for Your Child with Special Needs first appeared on SEONewsWire.net.]]>