presented by sponsored by introduction to special needs planning public benefits, trust drafting...
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Introduction to Special Needs Planning
Public Benefits, Trust Drafting & Implementation
November 16, 2011
Harry S. Margolis
Growing Need:♦ More individuals with special needs♦ Better medical care♦ Longevity♦ Needs recognized
Make a real difference in clients’ lives♦ Public benefits♦ Asset protection♦ Structure for care and financial management♦ Relieving burden on siblings
Why Special Needs Planning is a Great Area of Practice
Available Programs:♦ Medicaid ♦ Medicare♦ Supplemental Security Income (SSI)♦ Social Security Disability Income (SSDI)♦ Housing ♦ Veteran Benefits
Public Benefits
Often vital♦ Coverage can be more extensive than Medicare or private insurance♦ Often provides supplemental benefits, such as personal care
attendants
• Eligibility and benefits differ among states• In many states tied to SSI
Public BenefitsMedicaid
♦ No financial restrictions♦ Eligible after receiving SSDI for 2 years♦ Not as comprehensive as Medicaid♦ But more doctors accept reimbursement♦ Co-payments and deductibles
Public BenefitsMedicare
♦ Restrictive♦ $2,000 limit on countable assets♦ Federal benefit level plus state supplement♦ Dollar-for-dollar income offset (after $20 disregard)♦ In-kind income♦ Upper limit on reduction for housing and food
Public BenefitsSupplemental Security Income
♦ Not based on financial eligibility♦ Benefit based on beneficiary’s work record or that of
parent♦ If based on parent’s work record, child must have
been disabled before age 22, and parent must either be receiving SS benefits or be deceased
♦ Benefit may be more or less than SSI benefit♦ Can change from SSI to SSDI when parent retires♦ Easier to manage than SSI
Public BenefitsSocial Security Disability Income
♦ Section 8 most prominent♦ Other state and federal programs, so ask♦ Section 8 has tough rules on treating recurring
payments as income♦ But applied differently by different agencies
Public BenefitsHousing
• Veterans with disabilities may receive benefits for:• Service Connected Disabilities• Non-Service Connected Disabilities
• Income and Resource limitations apply• SNTs not currently recognized by the Veteran’s
Administration
Veteran Benefits
♦ Management♦ Structure♦ Asset protection♦ Eligibility for benefits
Trusts as Primary Planning Tool
Management:♦ Trustee or trustees manage trust property for benefit
of beneficiary or beneficiaries♦ Held to a fiduciary standard♦ Trust lays out ground rules for how funds are
managed and distributed
Trusts
Structure:♦ Succession of trustees♦ Trustee oversight♦ Care committee♦ Trust protector♦ Succession of beneficiaries♦ Power of appointment♦ See ASNP Model Trust
Trusts
♦ Predators♦ Creditors♦ Poor decision-making♦ Alternative of relying on siblings
Asset Protection
♦ Trust funds not counted (if properly drafted and administered)
♦ Self-funded vs. third-party trusts♦ Self-funded: must fall under a statutory exception♦ Third-party: must be discretionary, not support
Public Benefits
♦ Presumption that self-settled trusts are available assets
♦ Just as they may be reached by creditors♦ Exception under 42 USC §1396p(d)(4)(A)♦ For both Medicaid and SSI
(d)(4)(A) or Payback Trusts
♦ Sole beneficiary♦ Must be disabled and under age 65 (when the trust is
funded)♦ Trust created by parent, grandparent, court or
guardian♦ For SSI, must be “seeded” – $20♦ At beneficiary’s death, must provide for
reimbursement of state for Medicaid expenditures made
(d)(4)(A) or Payback Trusts
♦ Exception under 42 USC §1396p(d)(4)(C)♦ For both Medicaid and SSI ♦ Trust must be managed by not-for-profit organization ♦ Must be disabled and, depending on the state, under age 65
(when the trust is funded)♦ Trust created by parent, grandparent, court, guardian, or
beneficiary♦ At beneficiary’s death, must provide for reimbursement of
state for Medicaid expenditures made, unless remaining in the pooled trust• See www.specialneedsanswers.com for comprehensive listing of
pooled trusts
(d)(4)(C) or Pooled Trusts
♦ By parents and grandparents♦ Discretionary vs. more limited♦ Trend towards more discretionary, less limited♦ Intent language♦ Revocable vs. irrevocable
Third-Party Trusts
♦ Usually at death♦ May include contributions from others
(grandparents, aunts, uncles)♦ Life insurance♦ Retirement plans♦ How much?
Third-Party Trust Funding
♦ Guide trustees♦ Provide in depth information about beneficiary, likes
and dislikes, medical information, parents’ hopes for child
♦ Updating necessary♦ Often seems to fall by the wayside
Letter of Intent
♦ Generally self-settled trusts♦ Disabled prior to injury?♦ To structure or not to structure?♦ Still need SNT♦ Last minute nature of cases♦ Dealing with PI attorneys
Personal Injury Cases
The Bad:♦ Poor investments♦ Poor reporting♦ Difficulty following SSI rules♦ Education burden
Choice of Trustee: The Family
The Good:♦ Knows the beneficiary’s needs♦ Knows service providers♦ Care♦ Continuity
Choice of Trustee: The Family
The Bad:♦ Don’t know beneficiary♦ Don’t know benefit rules♦ Arbitrary♦ Lack of control♦ Trust officers changing♦ Banks changing
Choice of Trustee: Professional Trustees
The Good:♦ Investment acumen♦ Ability to say “no”♦ Proper accounting♦ Proper tax reporting♦ No conflict of interest♦ Ability to set up accounts properly
Choice of Trustee: Professional Trustees
Choice of Trustee
Traps for the Unwary
♦ Distributing more than $20 directly to the beneficiary in a calendar month
♦ Commingling the beneficiary’s funds with the trust funds, with the trustee’s own money or between trusts
♦ Poor record-keeping♦ Leaving disabled individual as beneficiary of IRAs and
life insurance policies♦ Savings bonds♦ Failure to notify state and federal agencies
House Ownership by Trust
♦ To be avoided, if possible♦ Not a countable asset for SSI or Medicaid♦ But subject to estate recovery and bad
management♦ So SNTs often own houses♦ What if parents and other siblings live in
house?♦ Co-ownership? Rent? Ancillary beneficiaries?
Who will take over from parents? Advocacy and Monitoring Care
• Parents are primary advocates and care providers
• Who will take their place?♦ Other family members♦ Professional care managers♦ Guardian♦ Attorneys♦ Trustees
• Coordinating care
Who will take over from parents?Trust Protectors
May be written into the trust or may be informal♦ Care provider♦ Advocate♦ Family members♦ Special needs attorney♦ Financial advisor♦ Specialist in special need, e.g., social worker, physical
therapist, psychologist, etc.♦ Care manager
