Presents
Basics of Special Needs Planning
By
Michele Fuller and Kevin Urbatsch
8th Annual ASNP National Conference
March 27, 2014
Morning Agenda
Overview of Special Needs Planning
Working with Persons with Disabilities and their Families
Basics of Public Benefits for Persons with Disabilities
(SSI, Medicaid, SSDI, Medicare)
Different Types of SNTs
(Third Party SNTs, (d)(4)(A) SNT, Pooled SNT)
Avoiding Common Mistakes During Special Needs Planning
and Administration
Benefits of Planning
1. Provide Financial Security
5. Provide Ongoing System for
Advocacy
2. Leverage Means Tested
Public Benefits
6. Plan for Caregiving Needs
3. Select Proper Team to
Provide Lifetime
Management
7. Coordinate Entire Extended
Family's Planning
8. Protect Beneficiary from
Predators
4. Plan for Appropriate
Housing
9. Preserve Assets for other
Heirs
3
Number of Persons with Disabilities
•Dramatic rise over next 30 years
•Aging baby boomer generation
•Combat related disabilities
•New category: voluntary disability?
•Autism
•Aging with disabilities
• The Future of Planning for Persons with Special Needs: What
Challenges Will Arise, NAELA Journal Vol 9, No. 2, Fall
2013, by Kevin Urbatsch and Michele Fuller
Number of Persons with Disabilities
• Currently 1:7 currently disabled
• Aging baby boomers
• Population over 65 predicted to double by 2030
• However, number of aged with disabilities
dropping due to medical advances
• Largest increase: those under 65
• Asthma
• Autism
• Childhood obesity
Do All Persons with Disabilities
Require Special Planning?
Only those individuals who meet the definition of disability and
must maintain eligibility for needs-based programs require
planning
• SSI & Medicaid
• NOT SSDI & Medicare
Working with People with Disabilities
• Common Issue: not including the person with a
disability in the planning
• Capacity issues
• Often relies on others (Family, Friends and
Community)
• Can be difficult, especially with severe mental
illness – patience and a thick skin are a must
• Remember People First Language
Working with the Family
•
Research the condition so you can address the
issues that arise (e.g. Prader-Willi Syndrome –
Issues w/food)
•
Making sure the decision-maker is in room
•
Understand and be able to discuss the
acronyms (IEP, SSI, SNT)
•
Being able to provide referrals to applicable
resources like charities or support groups
Public Benefits Summary
Types of Public Benefit Programs
Needs Based
Public Benefits
Entitlement
Public Benefits
Other Benefit
Programs
SSI
SSDI
Section 8
Medicaid
Medicare
Veteran
Benefits
Expanded
Medicaid
What SSI Provides
SSI provides a monthly cash grant for food and
shelter to disabled, blind, or the aged (65 or older)
Some States supplement
this amount. (e.g.,
In 2014, the SSI federal
maximum payment is
California provides a
$156.40/month
$721 for an individual
supplement in 2014
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 Non-Financial Requirements
• Citizen or lawful resident
• Not be a fugitive felon, in prison, violating parole
• Not be outside the U.S. for more than one month
• Must apply for all other benefits for which you are
eligible
• If an alien, meet special requirements
SSI Eligibility
Person Must Meet Two Additional Tests:
• Medically Disabled (physically or mentally)
under SSI’s Definition or Elderly (65+), plus
• Poor
• Resource Test – measured only one time
each month
• Income Test – total any income received any
time of the month
Disability Defined
• “Disability” for an adult is defined as the inability to engage in any
“substantial gainful activity” (SGA) due to any medically
determinable physical or mental impairment, or combination of
impairments, that has lasted or can be expected to last for a
continuous period of at least 12 months, or result in death
• “Disability” for a minor is defined as a medically determinable
physical or mental impairment or combination of impairments
that causes marked and severe functional limitations, and that can
be expected to cause death or that has lasted or can be expected to
last for a continuous period of not less than 12 months
SSI Resource Test
“Countable resource” limits for SSI:
• $2,000 for an eligible individual
• $3,000 for an eligible couple
• Measured on a month-by-month
basis on first day of each month
• Snapshot Test
SSI BIG Exempt Assets
• Principal residence
• (20 CFR §416.1212)
• Automobile (of any value)
• (20 CFR §§416.1210(c))
SSI Other Exempt Assets
• Household items (20 CFR §§416.1210(b), 416.1216(a);
• Personal effects (20 CFR §§416.1210(b), 416.1216(b));
• Musical instruments (20 CFR §§416.1210(b), 416.1216(b));
• Burial insurance (20 CFR §§416.1230, 416.1231(b)(8));
• Irrevocable burial trusts; burial funds (20 CFR §416.1230, 416.1231(b)(8));
• Burial plots, vaults, and crypts (20 CFR §416.1231(a)); and
• Life insurance policies with cash value less than $1500, All term life
insurance (20 CFR §416.1230)
19
Types of SSI Income
Unearned
Income
Earned Income
Consists of wages, royalties,
net earnings from self
employment, and any
honoraria received for
services rendered.
Includes gifts, payments from
annuities, and pensions, alimony
and support payments,
dividends, interest, rents, awards
and payments from other
benefits programs.
Reduces benefits one dollar
for every two dollars earned
after the first $65 earned
monthly.
Reduces benefits
dollar-for-dollar after the first
$20.00
20
Types of SSI Income
In-Kind Support
& Maintenance
Deemed Income
Actual receipt of food,
clothing, or shelter, or
something that can be
used to get one of these.
Someone else’s income.
(Same household; duty to
support)
Reduces benefits dollar
for dollar up to a
maximum of 1/3 the
benefit.
Reduces benefits
dollar-for-dollar after the
first $20.00
21
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 "anyincome" exemption
The effect of Unearned Income is much greater than
Earned Income
• Example: Parent gives child SSI recipient $585 cash gift.
Child will lose $565 of his monthly SSI check
SSI In-Kind Support and
Maintenance (ISM)
Depending on living arrangements, SSI
reduction is subject to either the
• Value of the one-third reduction (VTR) or
• Presumed maximum value rule (PMV)
•
Clothing used to be considered ISM but no longer is,
see POMS SI 00835.400
ISM Defined
The only ten “food and shelter” items are:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Food
Mortgage (including property ins. required by lender)
Real property taxes (less any tax rebate/credit)
Rent
Heating fuel
Gas
Electricity
Water
Sewer
Garbage removal
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 irrefutable 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 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
Eligibility for Medicaid
1634
States
• Alabama, Arizona, Arkansas, California, Colorado, Delaware, Georgia, Florida,
Kentucky, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan,
Mississippi, Montana, New Jersey, New Mexico, New York, North Carolina,
Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas,
Vermont, Washington, West Virginia, Wisconsin, Wyoming and Washington, D.C.
SSI
Criteria
States
• Alaska, Idaho, Kansas, Nebraska, Oregon, and Utah
209b
States
• Connecticut, Hawaii, Illinois, Indiana, Minnesota,
Missouri, New Hampshire, North Dakota, Ohio,
Oklahoma, and Virginia
Eligibility for Medicaid
•1634 States
▫ SSI rules apply and $1 of SSI eligibility means automatic Medicaid
eligibility
•SSI Criteria States
▫ States elect to provide Medicaid for all SSI recipients, but only if the
recipient completes a separate application for Medicaid Program
•209b States
▫ Most restrictive allows States to authorize Medicaid criteria which are
more restrictive than SSI criteria, so long as criteria chosen are not
more restrictive than the State's approved Medicaid plan in Jan. 1972
ACA (Private Insurance)
Expanded Medicaid
• ACA – Private Health Insurance
• Government Subsidized Private Health Care for Income
Levels of 139 to 400% of Federal Poverty Limit
• Ends at Age 65
• May Not Provide Full Coverage
• Expanded Medicaid
• Free Medicaid without Asset Test – Less Than 138% of FPL
• Ends at Age 65
• Not Every State Has Adopted It
31
Social Security Disability
Insurance (SSDI)
Basic Eligibility Criteria

40 SSA work credits, 20 of which must have been earned
in the last 10 years

Number of credits required is based on age, and when the
individual becomes disabled.


In 2014, an individual gains 1 credit for each $1,200
of wages. Therefore, earnings of $4,800 equal 4
credits

Paid Social Security taxes on earnings
After Two Years – Qualify for Medicare
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 amount of the monthly check is roughly
• 50 percent of the parent's monthly cash payment at
retirement, and
• 75 percent at death.
Medicare Basics
Part A – Hospital Insurance
• Covers most of a stay in the hospital, plus some
follow-up costs
Part B – Medical Insurance
• Covers some of the costs of doctors and
outpatient care
Part D – Prescription Drugs
• Pays some of the cost of prescription drugs
34
Different Types of
Special Needs Trusts
Types of Special Needs Trusts
Source of
Funds
Who
Establishes
Trustee
Third Party
Anyone except
beneficiary
Anyone except
beneficiary
Grantor’s
wishes
Grantor’s wishes
Third Party
Pooled Trust
Anyone except
beneficiary
Anyone except
beneficiary
Non-profit
Grantor’s wishes
First Party
(d)(4)(A)
Beneficiary with
a disability’s
funds before
age 65
Parent,
Grandparent,
Guardian, Court
Grantor’s
wishes
Medicaid payback;
then remainder
beneficiaries
First Party
(d)(4)(C)
Pooled Trust
Beneficiary with
a disability’s
funds – may be
funding penalty
after age 65
Beneficiary,
Parent,
Grandparent,
Guardian, Court
Non-profit
Non-profit Trustee;
or, Medicaid
payback; then
remainder
beneficiaries
36
Distribution
Upon Death
Third-Party Special Needs Trust
Third-party trust main requirements:
• Beneficiary (or spouse) did not create the trust
• Trust does not hold Beneficiary’s (or spouse’s)
assets
• Beneficiary is not Trustee
• Trustee has sufficient discretion to withhold
distributions
Third-Party SNT
Requirements
For SSI purposes, SSA defines a third party trust as
"a trust established by someone other than the
beneficiary as grantor.“
It defines a grantor as
"the individual who provides the trust principal (or
corpus).”
Third Party SNT
Requirements
POMS two additional requirements:
1. Beneficiary cannot have authority to revoke
the trust; and
2. Beneficiary cannot direct the use of trust
assets for his or her support and
maintenance under the terms of the trust
Third-Party SNTs
•
No payback requirements
• Grantor can leave any remaining funds to whomever
he or she wants
•
Revocable during life of grantor
•
If for a spouse, must be established by will (not
revocable trust)
•
More drafting flexibility so long as correct distribution
standard is used
First-Party Special Needs Trusts
Disabled individual’s own funds are placed into
the trust.
Established by statute:
• (d)(4)(A) – Payback Trust
• (d)(4)(C) – Pooled Trust
First Party SNTs
When are First Party SNTs used:
• Personal Injury Award
• Inheritance or Gift
• Minor with a Disability Turns 18
• Adult Recently Disabled
(d)(4)(A) SNT Requirements
Authorized by 42 U.S.C. §1396p(d)(4)(A) and has the
following characteristics:
• Irrevocable
• Established by parent, grandparent, legal guardian, or court
• For the sole benefit of a person with a disability who is under
the age of 65
• Provide that on the death of the beneficiary, the trustee must
repay Medicaid for all benefits received by the beneficiary
during his or her lifetime to the extent that funds remain in the
trust at the beneficiary's death
PRO’s - (d)(4)(A) SNT
• Control
• Choice of Trustee
• Choice of Investment Options
• More easily accepting of non-liquid assets like real
estate
• More personalized attention
CON’s - (d)(4)(A) SNT
Limited to under age 65
Control
• Choice of Trustee may be inappropriate
• Investments could be too aggressive; result in a loss of principal
Cannot be executed by an individual with capacity
• Often results in Probate Court involvement to establish trust and
possible court supervision; bond
• Very costly to maintain; No cap on fees
Poor drafting or administration
(d)(4)(C) Pooled SNT
Requirements
• Irrevocable
• Established and managed by a non-profit association.
• Separate account is maintained for each beneficiary; pooled
for purposes of investment and management
• Established by the individual, parent, grandparent, legal
guardian, or by a court.
• Residual funds after death are retained by the trust or repaid to
the State for medical assistance paid on behalf of the
beneficiary
Typical Components
Pooled Trust
• Master Trust Agreement
• Joinder Agreement
• Information Sheet / Questionnaire
• Legal Advice Waiver
• Fee Notice
• Funds Request Form
• Account Statements (at least annually)
PRO’s - Pooled Trust
• Can be executed by an individual with capacity
• No Court supervision required
• Professional Administration
• Often fees are capped
• Perfect for small settlements
• Choice of paying back state or leaving to charity
• Easier and can be lower cost to establish
CON’s – Pooled Trust
• Beneficiary has little control
• Fees can be large
• Investment options may be limited or information may
not be accessible
• Not always accepting of non-liquid assets; depends on
the Trustee
• Distribution may be by committee or only at certain
times
Avoiding Common Mistakes
During Special Needs
Planning and Administration
SNT Issues Ripe for
Mistakes
• Stricter Enforcement by Public Agencies
• Section 8 Housing - Distributions affect benefit
• Medicare Set-Aside Arrangements
Failing To Keep Informed About Changes
In Law Concerning SNTs
• Special Needs Attorney Organization
• Academy of Special Needs Planners (ASNP)
• National Academy of Elder Law Attorneys
(NAELA)
• Nonprofit Associations Assisting Persons with
Disabilities
• Government Agencies Assisting Persons with
Disabilities
Failing To Determine Which Person
The Attorney Represents
Common scenarios include:
• Family member brings in person with a
disability who has marginal or no capacity
• Personal injury attorney brings case to
attorney to set up special needs trust
• Attorney establishes special needs trust for PI
Attorney/Beneficiary then represents trustee
Confusing the Public Benefit Programs
Needs-Based Public Benefits:
• Supplemental Security Income (SSI)
• Medicaid
Entitlement Public Benefits:
• Social Security Disability Income (SSDI)
• Social Security – CDB
• Medicare
Other benefit programs
• Section 8
• Veteran Benefits
• SNAP
• Waiver Services
Confusing Different Types
of SNTs
First Party Special Needs Trusts
• (d)(4)(A) SNT or Payback SNT
• Pooled SNT or (d)(4)(C) SNT
• Miller Trusts or (d)(4)(B) trust
Third Party Special Needs Trust
Improper Third Party Planning
Improper Third Party SNT Planning
• For spouse, must be done through will
One Dimensional Third Party Planning (it’s
not just about public benefits)
• Advocacy and care giving
• Multiple beneficiaries
• Coordination with family members
• Memorandum of intent
Poor Distribution Standard
• Too broad (e.g., distribution for SNT
beneficiary’s support, maintenance or
mandatory distribution) will reduce or
eliminate needs-based public benefits
• Too narrow will unnecessarily restrict trustee’s
ability to make distributions (e.g., distribution
that will not reduce SNT beneficiary’s public
benefits in any way)
Poor SNT Management Team
Trustee
• Bank or Private Professional Fiduciary
Trust Advisory Committee
• Family members and friends, may also include
professional benefits counselor to make sure
distributions do not interfere with public benefits
Trust Protector
• Modify trust for changes in law or to remove and
replace trustee for any reason
Not Preparing a Financial Plan
Common gaps in financial planning
•Premature death or disability of parent
•Inadequate savings to meet lifetime goals
•Not taking advantage of benefit programs
•Failing to review and monitor financial plan
Fails to Set Up Process for
Distribution
• Number One complaint is that SNT trustee fails
to timely respond to distribution requests
• Best practice is to require that all disbursement
requests come in writing
• Have form that can be scanned and emailed or
faxed
• Trustee needs system for accepting/denying
requests
Complying with “Sole Benefit
Rule”
• POMS require that First party SNTs be for the “sole benefit”
as defined
Consider a trust established for the sole benefit of an individual
if the trust benefits no one but that individual, whether at the
time the trust is established or at any time for the remainder of
the individual's life. POMS SI 01120.201F.2.a
“Sole Benefit”- But for how long?
Consider the following disbursements or distributions to be for the sole
benefit of the trust beneficiary:
• Payments to a third party that result in the receipt of goods or services by
the trust beneficiary;
• Payment of third party travel expenses which are necessary in order for
the trust beneficiary to obtain medical treatment; and
• Payment of third party travel expenses to visit a trust beneficiary who
resides in an institution, nursing home, or other long-term care facility
(e.g., group homes and assisted living facilities) or other supported living
arrangement in which a non-family member or entity is being paid to
provide or oversee the individual’s living arrangement. The travel must be
for the purpose of ensuring the safety and/or medical well-being of the
individual.
• POMS SI 01120.201F.2.b.
Distributing Cash/ Allowance/
Gift Card To Beneficiary
• Distributing more than $20 cash a month directly
to beneficiary – unearned income reduces SSI
(dollar for dollar)
• Gift Cards okay but only if
1. cannot be used for food or shelter and
2. legal prohibition against resale
Otherwise treated as unearned income, nearly
impossible to meet
Refusing To Make Appropriate
Distributions To A SNT Beneficiary
•
•
•
•
•
•
•
•
Purchase of Exempt Resources
Payment of Food and Shelter
Payment for Services
Payment of Medical Expenses
Vacations
Payment of Appropriate Credit Card Charges
Clothing
Home Furnishings, etc. etc. etc.
Not Maintaining Good Records
• How long?
• One SSA Agency sought 25 years of trust records
• If records are inadequate all doubts and
presumptions made that Trustee did something
inappropriate
First Party SNT Termination –
Payback Provision
 May pay
 Reasonable fees for administration of trust
 Taxes
 Then must pay all State Medicaid agencies
 Not allowed prior to payback
 Funeral Expenses (prepay for funeral)
 Preexisting debts
Thank You