with kevin urbatsch editor of special needs trusts: planning, drafting, and administration, co-chair...
TRANSCRIPT
With Kevin Urbatsch
Editor of Special Needs Trusts: Planning, Drafting, and Administration, Co-Chair of the 2009 ASNP National Meeting
January 29, 2009
Understanding Special Needs PlanningPart One:
Overview of Special Needs Planning and Public
Benefits
The Basics ofSpecial Needs PlanningPart 1 – Overview & Public Benefits
Kevin Urbatsch
Special Needs Planning AttorneySan Francisco, California
[email protected](415) 710-7886
Overview of Special Needs Planning
Section One:Summary of Special
Needs Planning
What is Special Needs Planning?
Benefits of Planning• Preserving public benefits to provide lifetime
financial support and medical care;• Providing supplemental lifetime financial support by
purchasing additional items and services that make life more rewarding;
• Providing a system of advocacy to preserve civil rights;
• Establishing an efficient, knowledgeable, and long-term management team;
• Providing a safe and clean living arrangement;• Aiding in finding employment; and• Providing avenues for enjoying all social and
recreational activities that enhance the quality of life.
Do All Persons with Disabilities Require Special Planning?•No! Persons with disabilities are each
unique and have different planning requirements Only those who are so severely disabled
that they meet the definition of disabled for public benefit programs require planning
Even if disabled and receiving public benefits only certain public benefit programs require planning
Defining Disability
•Someone could be substantially disabled in the commonly understood sense (e.g., if the person must use a wheelchair for mobility)
•However, that individual would not be considered disabled under public benefit rules if he or she holds a full-time job and earns a living wage
Only Needs-Based Public Benefits Require Special Planning
Other Public Benefit Programs for Persons with Disabilities
Dual Eligibles
Confusion of Public Benefit Programs Very Common•Often persons with disabilities, their families,
their attorneys, and others are confused about the public benefits received because: ▫Both SSI and SSDI are administered by the
Social Security Administration (SSA) and checks come from same place
▫Medicaid and Medicare are administered by the Centers for Medicaid and Medicare Services (CMS) and they are provided single card
Why “Special” Planning is Needed•If assets are in the name of a person with
a disability then would eliminate eligibility for SSI and Medicaid▫Counted as income in month of receipt▫Counted as resource first day of next
month•Loss of SSI generally acceptable, however
loss of Medicaid can be devastating
Private Paying for Medical Care
•Medical Costs are skyrocketing. For example, one coronary bypass operation in the Bay Area costs between $150,000-$330,000 or for an operation involving multiple trauma as if in an automobile accident costs between $175,000-$400,000 Prices from http://www.vimo.com/hospital/cost.php
•One trip to the emergency room could destroy a person with a disability’s inheritance if forced to privately pay for it
Special Needs Trusts
•The Special Needs Trust (SNT) is the primary tool when planning for a person with a disability
•There are various types of SNTs▫Third Party SNTs▫First Party SNTs
(d)(4)(A) SNTs or Payback SNTs Miller Trusts or Pooled SNTs or (d)(4)(C) SNTs
Special Needs Trusts
•The SNT holds title to assets owned by the needs-based public benefits recipient so that his or her eligibility is preserved
•Administration of an SNT can have an effect on eligibility if distributions are made without understanding public benefit rules
Overview of Special Needs Planning
Section Two:Public Benefit Programs for
Persons with Disabilities
Types of Public Benefit Programs
What SSI Provides
Where is SSI Law?
▫Finding the Law, Regulations, and SSA Policy▫42 U.S.C. §§1381–1383f ▫20 C.F.R. §§416.101–416.2227▫SSA’s Program Operations Manual System
(POMS) governs administration of SSI. POMS guidelines are available on the SSA’s website at http://policy.ssa.gov/poms.nsf
SSI Eligibility
•Person Must Meet Two Tests:▫Disabled Under SSI’s Definition▫Poor
▫Resource Test▫Income Test
SSI Definition of Disability
SSI Resource Test
•“Countable resource” limits for SSI are:▫$2,000 for an eligible individual and ▫$3,000 for an eligible couple
•Not all resources are counted, some are exempt:▫Home of any value▫Automobile of any value▫Furniture, clothing, and personal care items▫Burial plots, certain types of life insurance
contracts, and miscellaneous other assets
SSI Income Test• Income reduces the amount of the monthly SSI
payment available to the person with a disability
• Income is divided into:▫Earned Income (e.g., wages)▫Unearned Income (e.g., cash gifts or
inheritances) ▫In Kind Income (e.g., gifts of food or shelter)
•The type of Income will
NOTE: Definition of “Income” for SSI purposes is different than definition of “Income” for IRS purposes
SSI Exempt Income and Earned Income•The first $20 of any income is exempt plus
the first $65 of earned income•Earned income after the first $85 reduces
the SSI monthly benefit:▫$1 for every $2 earned▫Example: If $585 was earned in a month,
the SSI check would be reduced by $250 ($585-$85 exemptions – 250 (50% of
remaining earned income) = $250
SSI Unearned Income
Unearned income reduces the SSI monthly cash payment dollar-for-dollar, after taking the $20 "any-income" exemption
The effect of Unearned Income is much greater than Earned IncomeExample: Parent gives child SSI recipient
$585 cash gift. Child will lose $565 of his monthly SSI check
SSI In Kind Support and Maintenance (ISM)
•A special category of SSI unearned income, ISM consists of food or shelter provided directly to the recipient or paid for by a third party▫Clothing used to be considered ISM but no
longer is, see POMS SI 00835.400•Depending on the SSI recipient's living
arrangements, the SSI check reduction is subject to either the "value of the one-third reduction" (VTR) or the presumed maximum value rule (PMV) (see next slide)
Applying VTR and PSM to SSI Recipient
•VTR applies when the SSI recipient lives in another's house throughout a month, receives both food and shelter from a person inside the household, and does not meet his or her pro rata share of cost of the food and shelter
•PMV applies when the VTR does not (e.g., SSI recipient is living alone but whose rent is paid by a third party)
Effect of VTR and PMV on SSI Recipient
•VTR reduces the SSI benefit by one-third of the SSI federal benefit rate (FBR) ▫Year 2009 FBR is $674/month
•PMV reduces the SSI FBR by one-third plus the $20 any income exclusion▫Example: John, a SSI recipient receives $653.
John’s lives with his parents who pay for all of his food and shelter. John loses $224.67 from his SSI check because of VTR. If he lived alone and his parent paid his rent of $1,000/month, he would lose $244.67 from his SSI check because of PMV.
SSI Deeming of Income to Minor or Spouse
• Income and resources of a person having a duty of support are attributed or "deemed" to the person who is legally entitled to support. In the most common cases:▫Parents income and assets deemed to minor▫Spouse’s income and assets deemed to spouse
•“Deeming” is an irrebuttable presumption: It does not matter if money is actually provided to an eligible individual for deeming to apply.
SSI Penalty for Giving Away Assets• Individuals who give away assets are
ineligible for SSI for up to 36 months• To calculate the period of ineligibility, the
amount transferred is divided by the transferor's monthly SSI benefit (including state supplement), rounding the result up or down to the nearest whole number▫Example: Eric receives $674/month from SSI.
He receives $20,000 from his mother. He gives the entire amount to his brother. Eric loses 29 months of SSI eligibility (20,000 ÷ 674 = 29.67 or, rounded down, 29 months.
SSI Recipient Transfers Assets to Trust• Transfer to trust are generally disqualifying
▫ Assets transferred to an irrevocable trust that can no longer be accessed by the benefits recipient is a invalid gift causing disqualification
▫ If payments from the irrevocable trust could be made to or for the benefit of the individual, the portion of the trust from which the payment could be made is a resource to the individual.
▫ If the assets can still be accessed by the SSI recipient under any circumstances, SSI treats the transfer as if it had not occurred at all, and regards the assets as fully available—and therefore disqualifying him or her on the basis of excess resources. The POMS use the example of an irrevocable trust whose assets can only be used if the beneficiary needs a heart transplant or on his or her 100th birthday—the trust is considered a resource to the beneficiary.
• The trust principal of a trust revocable by the benefits recipient is a resource to the individual
• Special needs trusts are “safe harbor” trusts which will be discussed later in presentation
SSI Reporting Requirement• Benefits recipients are under a legal obligation
to notify the SSA of changed circumstances, e.g., a change in income or assets.
• The report should be in writing and mailed by certified letter within 10 calendar days of the end of the month in which the assets were received to the local SSA office. Reports should include:▫The reporter's name;▫The name and Social Security number (SSN) of
the person the report is about;▫Facts about the change; and▫When the change happened
What Medicaid Provides
Where is Medicaid Law?
•42 USC §§1396-1396v•42 CFR §§430.0-456.725•Check local state rules
▫The Federal government has given the States the authority, in establishing their Medicaid plans, to adopt their own rules, tailoring the plan to the specific needs of their population
Eligibility for Medicaid
Eligibility for Medicaid• 1634 States
▫ Section 1634 of SSI law allows SSA to enter into agreements with States to cover all SSI recipients with Medicaid eligibility. Thus, SSI rules apply and $1 of SSI eligibility means automatic Medicaid eligibility.
• SSI Criteria States▫ States elect to provide Medicaid eligibility for all SSI
recipients, but only if the recipient completes a separate application with the State agency which administers the Medicaid Program.
• 209b States▫ The most restrictive allows States to authorize Medicaid
eligibility criteria which are more restrictive than SSI criteria, so long as the criteria chosen are not more restrictive than the State's approved Medicaid State plan in January 1972.
Other Public Benefit Programs
•Social Security Disability Insurance (SSDI)
•Medicare•Social Security for Childhood Disability
Beneficiary•Section 8 Housing (Housing Choice
Voucher Program)•Veteran Benefits
Social Security Disability Insurance (SSDI)
• A worker must be so severely mentally or physically impaired as to be unable to perform any substantial gainful work, and the impairment must be expected to last (or has lasted) one year or to result in death
• Generally, for disability benefits, a worker needs at least 20 credits (perhaps more), of which at least 20 credits must be earned in the last 10 years (40 quarters) ending in the year he or she becomes disabled. Younger or blind workers may qualify with fewer credits.
SSDI-Medicare Eligibility
A person with a disability is automatically eligible for Medicare if he or she has been receiving Social Security disability insurance or railroad retirement disability benefits for 24 months
Person with Disability May Have SSI, SSDI, Medicaid, and Medicare•Claimants may be eligible for concurrent
benefits under both SSDI and SSI, if the claimant's SSDI payments and other benefits do not exceed SSI income and asset limitations
•Claimant may also be eligible for health coverage such as Medicare, Medicaid, or private medical insurance coverage.
Social Security – Childhood Disability Beneficiary• The SSDI program pays benefits to adults
whose disability began before the age of 22.• This program is currently called the Childhood
Disability Beneficiary (CDB), formerly referred to as a Disabled Adult Child (DAC). The SSA considers this SSDI benefit as a "child's" benefit because it is paid on a parent's Social Security earnings record.
• The amount of the disabled adult child's monthly check is roughly 50 percent of the parent's monthly cash payment at retirement, and 75 percent at death.
Section 8 (Housing Choice Voucher Program)
•Section 8 programs are currently the primary vehicle for the federal government's participation in providing low-income housing to persons with disabilities
•Section 8 provides tenant based or project based assistance
•Eligibility for Section 8 is based on income•Persons with disabilities receive
accommodation•Special Needs Trusts are not designed to
assist with eligibility
Veteran Benefits
•Veterans with disabilities may receive benefits for:▫Service Connected Disabilities▫Non-Service Connected Disabilities
•Income and Resource limitations apply•Special Needs Trusts are not currently
recognized by the Veteran’s Administration
Conclusion of Public Benefits• Has this summary provided comprehensive
coverage of all public benefit programs for persons with disabilities? No.
• Public benefits laws are generally difficult to navigate because:▫The statutes, regulations, and policies are
difficult to find, are complex, and sometimes contradict each other;
▫Local program administrators cannot be relied on for authoritative advice; and
▫The law governing eligibility may change during the term of an SNT.
Special Needs Planning in the Era of Change:
New Opportunities for You and Your Clients
March 6-7, 2009Rancho Bernardo, CA
www.specialneedsplanners.com/conference2009
or call (866) 296-5509
The Urbatsch Law Firm
Special Needs Planning Attorney
101 Howard Street, Suite 490San Francisco, CA 94105
(415) 710-7886