Transcript THE First Florida POOLED TRUST (d) (4) (C) Trust

An Introduction to:
OBRA ‘93
Special Needs
Trusts
OBRA ‘93
• When Congress enacted the Omnibus Reconciliation Act of
1993 (OBRA ‘93), it created a specific exception to the rules that
normally apply to trusts. OBRA trusts share the following
characteristics:
– Trust assets are not counted as an available resource;
– Transfers to OBRA trusts are not subject to transfer
penalties; and,
– Interest or dividend income generated within OBRA trusts
are not counted as income for purposes of public benefit
eligibility.
42 U.S.C.
§1396p(d)(4)(A)
• OBRA ‘93 was codified in the law at 42 U.S.C.
§1396p, where three specific types of trusts are
found that preserve public benefit eligibility. These
three trusts include:
• (d)(4)(A) Trusts, or “Special Needs Trusts;”
• (d)(4)(B) Trusts, or “Miller Trusts;” and,
• (d)(4)(C) Trusts, or “Pooled Trusts.”
(d)(4)(A) Special Needs Trusts
A Special Needs Trust (SNT) must
meet the following requirements:
• The beneficiary must be disabled as defined by law and under
age 65;
• Only the beneficiary’s parent, grandparent, legal guardian, or a
court may establish the SNT;
• The SNT must be irrevocable, funded with the beneficiary’s
assets, be established and administered for the sole benefit of
the beneficiary; and,
• Any funds that remain in the SNT at the beneficiary’s death
must be used to reimburse the State for all medical benefits
provided during the beneficiary’s lifetime.
– The requirement to reimburse the State is commonly referred to as
a payback provision.
(d)(4)(B) Miller Trusts
Miller Trusts are also called Income Trusts and
serve a very limited purpose. They can solve
income problems for benefits such as long
term nursing home care.
 The trust can only receive and hold income.
 Except for a small personal needs allowance, all of the income
received each month must be spent for the beneficiary’s care.
 Any funds that remain in a Miller Trust at the beneficiary’s death
must be used to reimburse the State for all medical benefits
provided during the beneficiary’s lifetime.
(d)(4)(C) Pooled Trusts
Pooled Trusts are very similar to Special Needs Trusts, but there are some important differences
A Pooled Trust (PT) must meet the following
requirements:
•
The beneficiary must be disabled as defined by law, but there is no age
limit;
•
The PT account must be established by the beneficiary’s parent,
grandparent, legal guardian, or a court, but the beneficiary may also
establish the trust on his or her own behalf;
•
The PT account must be irrevocable, funded with the beneficiary’s assets,
be established and administered for the sole benefit of the beneficiary;
•
PTs must be created and managed by a non-profit association;
•
A separate account must be maintained for each PT beneficiary, but the
trustee may “pool” the accounts for investment and management
purposes; and,
•
Any funds that remain in the SNT at the beneficiary’s death must either be
retained in the trust or used to reimburse the State for all medical benefits
provided during the beneficiary’s lifetime.
Third Party Trusts
Third Party Special Needs Trusts are NOT OBRA
Trusts, but are simply trusts that are created with
funds belonging to someone other than the
beneficiary. They must:
•
Be established by someone other than the beneficiary who has no legal
duty to support the beneficiary;
•
Be funded with funds in which the beneficiary has no ownership
interest; and,
•
Contain special need provisions regarding trust distributions.
•
Third Party Trusts may be revocable or irrevocable and can be
incorporated into traditional estate planning because they do not require
“payback” provisions.
Deficit Reduction Act of 2005
Effects on Medicaid Planning
• The look-back period for all transfers below fair market value is
now 60 months, and penalties will now begin at the date of
application.
• No rounding down for monthly gifting, and all transfers are
lumped together.
• Annuities may no longer include balloon payments, and in
most cases, they must name the State as a contingent
beneficiary.
• Personal Services Contracts are limited and narrowly defined in
some states.
• Home equity over $500,000-$750,000 will be a countable asset.
• Purchase of a life estate will be disallowed if the beneficiary is
not living in the home.
Who Can Benefit from a Special Needs
Trust?
• People who are disabled as defined by law
Some Examples:
• Elderly persons who have become infirm;
• Nursing home residents;
• ALF residents;
• Minor children with disabilities;
• People with disabilities living in the community;
• Disabled recipients of or applicants to government assistance
programs such as Medicaid or SSI; and,
• Recipients of personal injury settlements who need to apply
for or protect, government assistance benefits.
How Trust Funds Can Be Used
Examples
•
•
•
•
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Care-Giver services
Attorney fees
Guardian fees
Supplemental nursing care
Medical procedures not
provided through
government assistance
• Tuition
• Transportation
• Purchase a home
• Purchase a vehicle
• Travel expenses
• Entertainment
• Differentials in housing costs
between shared and private
rooms in institutional settings
• Any other expense not
provided by government
assistance programs
How Professionals Benefit
• SNTs and PTs can provide additional resources for helping
clients augment or increase the level of care and services they
receive.
• Increasing the level of care and services ultimately translates
into an additional revenue source for professionals who add
value.
• SNTs and PTs can reduce potential liability in the decisionmaking process of settlement allocation.
The Florida Pooled Trust
• The Florida Pooled Trust was created to assist in public
benefits planning across the country and to protect the
interests of a vulnerable population.
• The end result is that beneficiaries of the Florida Pooled Trust
can continue receiving public benefits for meeting essential
needs and still have resources available for their special, or
supplemental needs.
Safety and Protection
• With an eye toward safety, protection, and stability, the Florida
Pooled Trust has been structured with an internal safety
system.
• The Trust’s safety system consists of a check and balance
system that is supported by professional money management
as well as separate custodians.
Conclusion:
• Many of the previously-used public benefit planning vehicles
have been eliminated.
• Because of the increasing complexity of public benefit
programs, the use of specialized administrative professionals
has become a critical consideration.
• Attorneys are becoming increasingly more concerned about
protecting public benefit eligibility at the time a settlement is
reached. Helping a client to establish a SNT or PT can alleviate
that concern.
Who Operates The Florida Pooled
Trust?
The Not-for-Profit Trustee is:
The Center For Special Needs
Trust Administration, Inc.
4912 Creekside Drive  Clearwater, FL 33760
1-877-766-5331
www.sntcenter.org