Transcript TOOLS FOR ADVANCED CHARITABLE PLANNING

BENEFITS AND SPECIAL NEEDS
TRUSTS PRIMER
PREPARED BY:
MELISSA LADER BARNHARDT, J.D., LL.M.
F.V.P. & TRUST CONSULTANT
SunTrust Bank and its affiliates and the directors, officers, employees and agents of SunTrust Bank and its affiliates (collectively “SunTrust”)
cannot provide legal services or give legal advice. SunTrust’s services or advice relating to “estate planning” are limited to (i) financial planning,
multi-generational wealth planning, investment strategy, (ii) management of trust assets, investment management and trust administration, and (iii)
working with the client’s legal and tax advisors in the implementation of an estate plan.
GENERAL GUIDE TO BENEFITS
SOCIAL SECURITY BENEFITS
SSI AND
(SS VS. SSI VS. SSDI)
MEDICAID
SSDI AND
MEDICARE
ADULT VS.
MINOR (DEEMING ISSUES)
INCOME AND ASSET LIMITATIONS
MEDICAID WAIVERS (MEDICAID AND APD TIERS)
MEDICALLY NEEDY PROGRAM
INSTITUTIONALIZED CARE
LOOK
(SHARE OF COST)
PROGRAM (INCOME/ASSETS)
BACK PERIOD FOR QUALIFICATION OF MEDICAID
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TOOLS USED IN MEDICAID PLANNING
SPECIAL NEEDS TRUSTS
1.
2.
Omnibus Reconciliation Act of 1993 - Passed on August 10, 1993. It
amended the Social Security Act 42.U.S.C. Sec. 1396p to permit
specialized trusts for disabled individuals.
A. (d)(4)(A) trusts (FSNT) - under age 65 individual;
B. (d)(4)(B) trusts – Miller (Qualified Income) Trusts; and,
C. (d)(4)(C) trusts - any age; managed by a not for
profit (pooled trust).
Purpose - To permit a disabled person without a prior estate
plan (or if so to possibly amend a trust to comport with the law)
to place his/her assets in trust in order to qualify for government
based entitlements. Otherwise, there is a lengthy look back
period (Deficit Reduction Act of 2005 changes look back period
and date of eligibility) that will disqualify unless spent down to
the Medicaid limitations.
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SPECIAL NEEDS TRUST : UNIQUE PROVISIONS
A.
Irrevocable trust (unless TSNT);
B.
Creator of trust for FSNT - parent, grandparent, guardian,court
or if a pooled trust, the person with the disability (joinder
agreement); Differentiate a TSNT;
C.
Definition of disability - defined under 42 U.S.C. 1382 and
1614(a)(3) - an individual shall be considered disabled if he or
she is unable to engage in any substantial or gainful activity by
reason of a medically determinable physical or mental
impairment which can be expected to result in death or last for a
continuous period of not less than twelve months;
D.
If a minor - look at whether the child as an adult with
the same disability, would prevent gainful employment;
E.
Pooled nature of funds vs. individual accounts;
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SPECIAL NEEDS TRUST : UNIQUE PROVISIONS (continued)
F.
Payback provision - upon the individual’s death, the state’s
Medicaid agency that paid for services is reimbursed prior to
disbursement to heirs (multiple states/funeral issue) unless a
pooled trust (retention by charity) or TSNT; Under the new
POMS, one cannot limit the time period to the term of the trust;
G.
Tax provision – FSNT treated as a grantor trust (usually has
a limited power of appointment); TSNT may be treated as
a grantor trust or a complex trust;
H.
Trust to benefit individual beneficiary only (sole benefit rule)
emphasized in the new POMS for the FSNT;
I.
Payment restrictions during lifetime (food/shelter rules/gift
cards/POMS); Payment restrictions after death (new POMS);
J.
No creditor protection (FSNT); and,
L.
Types of assets - residential property, vehicle (liability issues),
cash securities, annuity (issues after 65), life insurance proceeds.
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CLIENT SCENARIO #1
Suzie Smith walks into your office and states that her father, age 60, just
had a stroke. The father is mentally competent, although he has difficulty
speaking. She further explains that he has approximately $300,000 to
$500,000 in assets and it is unclear at this time as to whether he will be
able to live at home. She wants to know what you can do, if anything, to
maximize his assets.
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CLIENT SCENARIO #1 - ANALYSIS
OPTION #1 - Spend down assets to $2,000
A.
Nursing home (NH) analysis
NH private room cost: $200.00 per day
Semi-private NH rate: $180.00 per day
NH public aid rate (semi-private): $100.00 per day
Prescription cost: $500.00 per month (Issue: Medicare Part D)
How long would the money last?
4 to 6.9 years / $71,700 per year (semi-private room)
B.
Place at home with 24 hour care
$150.00 for private care or $4500 per month
$500.00 per month for medications (Issue: Medicare Part D)
$500.00 additional monthly expenses
How long will the money last?
4 to 7.5 years / $5,500 per month or $66,000 per year
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CLIENT SCENARIO #1 - ANALYSIS (continued)
OPTION #2 - Transfer funds to Children/ Personal Services Contract
Transfer funds to children and have a contract with the children to
pay for the parent privately for the period of ineligibility. Personal
Services Contract for personal care based on reasonable
compensation and Medicaid Actuarial Tables.
OPTION #3 – Transfer funds to Annuity
New rules under the Deficit Reduction Act of 2005 require pay
back provision.
OPTION #4 - Utilize Individual or Pooled Special Needs Trust
Nursing home placement: Reduce nursing home expense from
$71,700 to $29,700 while Medicaid pays the nursing home expense
and prescription coverage. Supplement needs of client from trust.
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HOW TO REDUCE COSTS BY USING A
POOLED SPECIAL NEEDS TRUST
Original nursing home cost:
Medicaid payment:
Amount paid from trust:
$5,475.00 per month
$3,000.00 per month
$2,475.00 per month
Original prescription cost:
Medicaid payment:
Amount paid from trust:
$ 500.00 per month
$ 500.00 per month
$
0.00 per month
Original cost $5,975.00 per month - $71,700.00 per year
New cost $2,475.00 per month - $29,700.00 per year
Note: Funds will now last 10 to 17 years vs. 4 to 7 years.
Note: Mr. Smith could enter a Pooled Trust via a joinder agreement.
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MAXIMIZE BENEFITS/ QUALITY OF LIFE
Original Care Cost:
Medicaid Waiver:
Amount paid from trust:
$4,500.00 per month
$3,000.00 per month
$1,500.00 per month
Original prescription cost:
Medicaid payment:
Amount paid from trust:
$ 500.00 per month
$ 500.00 per month
$
0.00 per month
Other Monthly Costs:
$500.00 per month
Original cost $5,500.00 per month - $66,000 per year
New cost $2,000.00 per month - $24,000 per year
Note: Funds will now last 12 to 20 years vs. 4 to 7.5 years.
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CLIENT SCENARIO #2
Suzie and Dan Smith walk into your office and state that their daughter,
who is 17 years old was diagnosed with autism a couple of years ago.
They explain that she and her husband heard about the Developmental
Disability Waivers a few years ago and she remains on the waiting list.
They want to plan for when she turns 18 for health insurance, Social
Security Disability, and waiver services and also for what will happen on
their death. They further state that their parents want to leave money for
her and are wondering how to do that without disqualifying her from
benefits. What will happen if they do no planning? What if they plan, but
the grandparents do nothing? What is the solution?
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CLIENT SCENARIO #2 - ANALYSIS
I. Definition of Developmental Disability – Autism – FL. Stat. 393;
II. Create Life Care Plan;
III. Determine Parents Needs for Estate Planning Tools;
IV. Primary Benefits – SSI/SSDI/MEDICAID/MEDICARE/ICP;
V. Health Insurance – Private Insurance coupled with Medicaid or
Medicare;
VI. Establish Revocable Trusts with Third Party Trust Provision for Child
with Disability;
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CLIENT SCENARIO #2 - ANALYSIS (continued)
VII. Establish Stand Alone Third Party SNT for Others to Donate to Avoid
Outright Distribution and Need for First Party SNT. In Florida, There is No
Payback for a Third Party SNT. First Party SNT will have Payback
Requirement to State Medicaid that provided services (issues of portability);
VIII. Make Sure Information is Shared with Grandparents for Appropriate
Beneficiary Designations;
IX. Permissible Disbursements from SNT;
X. Appointment of Trustee (Co-Trustee);
XI. Need for Provisions with Trust Advisory Committee and/or Trust
Protector; and,
XII. Alternatives – Pooled Trust for Small Sums.
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CLIENT SCENARIO #3
The client, age 8, was in a severe car accident at the age of 3 and is a
quadriplegic, on a ventilator, but is not impaired cognitively. He is going
to receive a settlement in the amount of 6 million dollars and his parents
are going to receive $100,000 that they are going to use to pay back their
debts. The guardian ad litem in the guardianship proceeding to approve
the settlement is recommending a full structure for the settlement. The
family lives in a small home that is not accessible. They also have two
other teenage children.
The child has 24 hour nursing (shift care)
provided via Medicaid. The father works and the child is receiving $30 a
month in SSI benefits. The father is also looking at obtaining private
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CLIENT SCENARIO #3 (CONTINUED)
health insurance. This is the first meeting with the family.
ANALYSIS:
I. Review of Life Care Plan;
II. Discussion of Life Care Plan in Conjunction with Structured;
Settlement Proposal (Pros and Cons);
III. Parents Settlement Portion;
IV. Confirmation of Benefits;
V. Review of Document – Terms; and,
VI. Determine Need for Expenses From Trust - (Issue of 1/3rd Reduction).
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DRAFT LANGUAGE/ISSUES
“Trustee
shall not pay for food or shelter items.”
“Trustee
shall determine and apply for the government benefits on behalf
of the beneficiary.”
“Trustee
shall act at the direction of the outside Trust Advisory
Committee and is bound by that decision.”
“Trustee shall not pay
anything from the trust that will reduce, diminish
or alter a government benefit.”
“Trustee
shall arrange and pay for a pre-paid burial plan for the disabled
beneficiary.”
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DRAFT LANGUAGE/ISSUES
Allow
for disbursements by Trustee to be pursuant to the Programs
Operations Manual (“POMS”) of Social Security (which Medicaid follows
in the State of Florida).
Permit
the trustee to make distributions for items that may reduce or even
eliminate government benefits if in the best interest of the disabled
beneficiary (1/3rd reduction rule). Add a paragraph that if this authority
made the trust a countable resource or countable income that this authority
would be deemed null and void.
Use
outside Trust Advisory Committee, but do not permit them to direct
the trustee or bind the trustee.
Use
permissive instead of mandatory language.
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ADMINISTRATIVE NIGHTMARES
EXPECTATIONS
– SOLE BENEFIT RULE
A. Vacation – Can’t the Whole Family Go?
B. Family Caregivers – How to Determine? (Hobbs
Controversy)
C. House Expenses – My Family will Live There and the
Trust will Pay All Expenses, Right?
D. Funeral Plan – I Don’t Want to Talk About It!
BENEFITS
ISSUES
A. Type – I think I get SSDI.
B. I Don’t Want to Qualify for Government Benefits!
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RESOURCES ON THE WEB
WWW.SSA.GOV
WWW.CAREMANAGER.ORG
WWW.SPECIALNEEDSALLIANCE.COM
WWW.ADVOCACYCENTER.COM
WWW.MEDICAREADVOCACY.ORG
WWW.DISABILITYRESOURCES.ORG
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SUNTRUST DISCLOSURES
__________________________________________________________________
SunTrust Bank and its affiliates and the directors, officers, employees and agents of SunTrust Bank and its
affiliates (collectively, “SunTrust”) are not permitted to give legal or tax advice. While SunTrust can assist clients
in the areas of estate and financial planning, only an attorney can draft legal documents, provide legal services and
give legal advice. Clients of SunTrust should consult with their legal and tax advisors prior to entering into any
financial transaction or estate plan. Because it cannot provide legal services or give legal advice, SunTrust’s
services or advice relating to “estate planning” are limited to (i) financial planning, multi-generational wealth
planning, investment strategy, (ii) management of trust assets, investment management and trust administration,
and (iii) working with the client’s legal and tax advisors in the implementation of an estate plan.
These materials are educational in nature. The implications and risks of a transaction may be different from
individual to individual based upon past estate, gift and income tax strategies employed and each individual’s
unique financial and familial circumstances and risk tolerances.
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