Transcript Why Special Needs Planning is a Great Area of Practice

Academy of Special Needs Planners
Presents:
Public Benefits, Trust Drafting and Implementation
Sponsored by:
Introduction to Special Needs Planning
Harry S. Margolis
September 15, 2010
Why Special Needs Planning
is a Great Area of Practice
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
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
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
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
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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
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
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
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
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
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 Trustee
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
A Combination: Potentially the best of both
worlds.
Traps for the Unwary
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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
Academy of Special Needs Planners
Presents:
Public Benefits, Trust Drafting and Implementation
Sponsored by:
Harry S. Margolis
Margolis & Bloom, LLP
Boston, Dedham, Framingham & Woburn
[email protected]
www.margolis.com