Transcript Public Benefits, Trust Drafting & Implementation

Public Benefits, Trust Drafting
& Implementation
Sponsored by
Introduction to Special Needs Planning
November 16, 2011
Presented by
Harry S. Margolis
Why Special Needs Planning is a Great
Area of Practice
Growing Need:
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More individuals with special needs
Better medical care
Longevity
Needs recognized
Make a real difference in clients’ lives
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Public benefits
Asset protection
Structure for care and financial management
Relieving burden on siblings
Public Benefits
Available Programs:
♦ Medicaid
♦ Medicare
♦ Supplemental Security Income (SSI)
♦ Social Security Disability Income (SSDI)
♦ Housing
♦ Veteran Benefits
Public Benefits
Medicaid
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 Benefits
Medicare
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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 Benefits
Supplemental Security Income
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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 Benefits
Social Security Disability 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 Benefits
Housing
♦ 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
Veteran Benefits
• 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
Trusts as Primary Planning Tool
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Management
Structure
Asset protection
Eligibility for benefits
Trusts
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
Asset Protection
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Predators
Creditors
Poor decision-making
Alternative of relying on siblings
Public Benefits
♦ 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
(d)(4)(A) or Payback Trusts
♦ 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)(C) or Pooled Trusts
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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
Third-Party Trusts
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By parents and grandparents
Discretionary vs. more limited
Trend towards more discretionary, less limited
Intent language
Revocable vs. irrevocable
Third-Party Trust Funding
♦ Usually at death
♦ May include contributions from others
(grandparents, aunts, uncles)
♦ Life insurance
♦ Retirement plans
♦ How much?
Letter of Intent
♦ 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
Personal Injury Cases
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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
Choice of Trustee: The Family
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:
Professional Trustees
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
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
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Care provider
Advocate
Family members
Special needs attorney
Financial advisor
Specialist in special need, e.g., social worker, physical
therapist, psychologist, etc.
♦ Care manager
Harry S. Margolis
Margolis & Bloom, LLP
[email protected]
Sponsored by