Faculty
Patricia E. Kefalas Dudek
Patricia E. Kefalas Dudek & Associates
30445 Northwestern Hwy, Suite 250
Farmington Hills, MI 48334
(248) 254-3462
Email: pdudek@pekdadvocacy.com
Website: www.pekdadvocacy.com
Special Needs Trust
in a Nutshell
2
Who Can Be the Beneficiary?
 A Special Needs Trust is a special kind of trust that holds title to
property for the benefit of a child or adult who has a disability.
 The Special Needs Trust can be used to provide for the needs of a
disabled person to supplement benefits received from various
governmental assistance programs.
 A trust can hold cash, personal property, or real property, or can be
the beneficiary of life insurance proceeds.
 Special needs trust are often created for those who lack the capacity
to handle their own financial affairs. They can be especially helpful
for people with mental or physical disabilities who would lose public
benefits.
3
What is a “Special Need”?
 Special needs refers to things which are not considered basic needs,
but assist in supporting the person when such items uncovered are
not being provided by any public agency.
 Special needs can include (but are not limited to):
1.Automobile/Van
2.Accounting services
3.Acupuncture/ Acupressure
4.Alterations or mending to clothing (i.e. shoe repair)
5.Appliances (i.e. TV, DVD, stereo, microwave, stove,
refrigerator, washer/dryer, etc.
For full list of: Permissible Distributions
**Please notify us if you think of some common examples not on this list**
4
Types of Special Needs Trust:
Self-Settled & Third-Party
 Parents (or other family members) of a disabled child can establish a
Special Needs Trust as part of their general estate plan. You can
route the child's share of the estate into this trust and not worry
that your child will be prevented from receiving benefits when you
are not there to care for him/her.
 Types of Self-Settled Special Needs Trust
 Self-Settled – D4A Trust
 Pooled Trust – D4C Trust
 Some states have - Miller Trust
 Two common types of Third Party Trust
 Testamentary Special Needs Trust
 Stand-Alone Trust
5
Self-Settled or First Party Trust
 As the name implies, a self-settled trust is set up using the person
with a disability’s own assets.
 For example, a person with a disability who receives an inheritance
or has some other property that disqualifies him for public benefits
might have the property transferred in to a self-settled trust for his
own use.
 Of course, a self-settled trust established to obtain SSI/ Medicaid
must meet stringent requirements.
 First, it must be irrevocable. That means the settlor cannot
cancel or amend it.
 The trust must be established by a parent, grandparent, legal
guardian or a court.
 Notwithstanding the term “self-settled”, the beneficiary cannot
establish the trust for himself. Quite often seeking the appointment
of a guardian who can establish the trust becomes
necessary. Finally, the trust must contain a Medicaid “payback”
provision or be a Pooled Trust.
6
Pooled Trust
 What is a Pooled Trust?
 A pooled trust is a trust established and administered by a non-
profit organization. A separate account is established for each
beneficiary of the trust, but for the purposes of investment and
management of funds, the trust pools these accounts.
 For self-settled, or (d)(4)(C) pooled trusts, each subaccount is
established by the person with a disability, a parent,
grandparent, guardian, or a court, and the trust is funded with
the assets of the person with a disability. The trust provides
that, upon the death of the disabled beneficiary, if there are
funds remaining in the beneficiary's subaccount, the trust must
pay to the state an amount up to the total amount of Medicaid
assistance provided to the beneficiary, to the extent that the
funds are not retained by the trust. The pooled trust is
irrevocable to avoid being treated as a resource.
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Pooled Trust
(cont.)
 When is a (d)(4)(c) Pooled Trust used?
 Persons with disabilities who receive public benefits, including
Supplemental Security Income (SSI) and Medicaid, and then receive
an inheritance, divorce settlement, or personal injury settlement or
award. The receipt of these funds may make this person ineligible for
public benefits. The client could purchase exempt resources, and then
reapply for benefits. The person with a disability would then be
ineligible for public benefits until these funds are spent down. The
person could give the funds away, however, the gifts would result in a
period of ineligibility for SSI and Medicaid long-term care benefits.
 If under 65 years of age, then the person can transfer the funds to a
d(4)(A) Special Needs Trust (SNT). A fourth alternative is to transfer
the funds to a d(4)(C) ("Pooled Trust") subaccount.
Full article: What is a Pooled Trust, and When Should You Use One?
8
Pooled Trust
(cont.)
 Coordination of trust with public services
 To achieve a goal for the beneficiary, like staying out of a nursing
home is a key reason for use of the trust.
 Pooled trust work for people over 65 where D4A trust can’t be used
for people over 65.
 There is a little-known way for some people in certain states to
receive home care through Medicaid, without requiring them to
impoverish themselves first.
 Here’s how it works: a federal law established in 1993 allows disabled
people to put their monthly income or assets — above the amounts
Medicaid allows them to keep — into a special type of pooled trust.
They can then use the money in the trust to pay for their monthly
bills like rent, cable television, phone bill, etc. Medicaid, meanwhile,
pays for the home services.
Full article: What’s a Pooled Trust? A Way to Avoid the Nursing Home
9
Pooled Accounts Trust
 Established and managed by non-profit charity
 Created and funded by individual with a disability or




parent / family members
Remainder goes to charity upon person’s death for
the benefit of people with disabilities, can include family
members
Benefit to people with small / midsize estates and/or
small families
Money is used for “special needs during lifetime
Protects Medicaid and SSI eligibility; No ability to pay
beyond benefits
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Pooled Accounts Trust
 Entire amount can be used during lifetime of person with a
disability.
 Any remaining at death can be used to help other people with
disabilities.
Pooled Accounts Trust
Springhill Housing Corporation, Inc.
Special Needs Trust # 1
$5,000
Special Needs Trust # 4
Future transfer from parents
will or trust and life insurance
Special Needs Trust # 2
$10,000 each year, gift
from grandparents
Special Needs Trust # 5
$20,000 back SSDI
benefits
Special Needs Trust # 3
$500,000 Personal Injury
Settlement
Special Needs Trust # 6-House
$50,000-grandmother on
Medicaid
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Over 65 & Pooled Trust
Until relatively recently there was no prohibition from CMS against
establishing pooled trust sub-accounts in behalf of disabled persons
over the age of 65 who had assets (either their own, or assets resulting
from a PI settlement or from other third party sources) in excess of the
$2000 asset limit. Such funds can then be used for the benefit of the
disabled person to purchase goods and services not covered by
Medicaid that may be necessary to assure a decent quality of life for
that person. From 1993 through early 2008, CMS did not at any time
propose regulations or offer any policy statement or other subregulatory guidance suggesting that such transfers were impermissible
under federal law. In this regard, disabled persons over 65 were in a
similar position to those 65 and under, who are unquestionably
permitted to set up special needs trusts or pooled trust sub-accounts,
and to benefit from supplemental needs trusts established by third
parties.
To view full article: Transfers to Pooled Trust Sub-accounts By Persons Over 65 under Medicaid
Statute
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Over 65 & Pooled Trust
Establishing pooled trust sub accounts for the benefit of disabled
persons over 65 is explicitly contemplated and permitted by the
federal Medicaid statute’s provisions pertaining to pooled trusts, which
were enacted in 1993 as part of the Omnibus Budget Reconciliation
Act, Pub.L. 103-66, 107 Stat. 312 (August 10, 1993) (hereinafter, OBRA
‘93) Congress has explicitly established three distinct exceptions to the
general rule that assets in a first-party funded trust are available for
purposes of Medical Assistance eligibility, one of which is a transfer to
a pooled trust sub-account. Federal law discusses three types of trusts
the assets of which are considered excluded, if the trusts are properly
established and administered. These are the Special Needs Trust, the
Miller Trust, and the Pooled Trust.
To view full article: Transfers to Pooled Trust Sub-accounts By Persons Over 65 under
Medicaid Statute
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Directory of Pooled Trust
Medicaid and SSI law permit "(d)(4)(C)" or "pooled trusts" for beneficiaries
with special needs. Such trusts pool the resources of many beneficiaries,
and those resources are managed by a non-profit association. Unlike
individual disability trusts, which may be created only for those under age
65, pooled trusts may be for beneficiaries of any age and may be created by
the beneficiary herself.
Click here for the Directory of Pooled Trust Around the U.S.
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Testamentary Special Needs Trust
 Established at the death of the person establishing the trust
pursuant to their trust or will
 Are not immediately accessible until the share belonging to
the special needs trust is transferred into the special needs
trust;
 Is a sub trust created within the scope of the broader
revocable living trust or will
 Can work for spouses in a nursing home
15
Stand-Alone Third-Party
Special Needs Trust
 Established while the stand-alone Grantor is alive
 Can receive assets from multiple persons wishing to provide for the
well-being of the person with special needs (parents, grandparents,
siblings, etc.)
 When the Grantor dies, or perhaps becomes disabled, the assets
remain immediately accessible to assist the person with disabilities
from the date the trust is established
 Is a single purpose trust
 Can remain empty until funded for Medicaid planning or upon death
of Grantor
16
Third Party Special Needs Trust
 Third party Special Needs Trust can be created within a pooled trust as
well
 In order to protect vulnerable family members, counsel will properly
suggest a custom drafted third-party special needs trust as part of a
complete estate plan. Most third party trusts are created either by
execution of a custom drafted document, or through use of a third party
joinder agreement with a pooled trust
 Works really well for families with multiple generations of Medicaid longterm support users or with genetic disabilities (Huntington’s; Fragile X,
etc.)
Full article: The Third-Party Pooled Trust: an alternative planning tool to help avoid the biggest
mistakes in special needs planning
17
Coordinating Special Needs Trust
with Government Benefits
18
Funding a Special Needs Trust:
How Much is Enough?
 The Grantor will want to ensure that the person with special needs
will remain financially secure even when you are no longer there to
provide financial back up. Given the significant, ongoing expenses
involved in the loved ones long-term support and uncertainty about
what needs may arise or what public benefits may be available,
determining how much a special needs trust (SNT) should hold is no
small feat.
19
Funding a Special Needs Trust:
How Much is Enough?
 Fortunately, help in calculating your special needs goal is available
from special needs calculators, which are accessible free of charge
on the Internet.
 Here are two such calculators:
 MetDesk Special Needs Calculator:
http://www.metlifeiseasier.com/metdesk(Available on the
Special Needs Answers site at:
http://www.specialneedsanswers.com/resources/calculators.as
p)
 Merrill Lynch Special Needs Calculator:
www.totalmerrill.com/specialneeds . (Click Special Needs
Calculator under "Tools and Resources".)
20
Funding a Special Needs Trust:
How Much is Enough?
 The first step in determining the amount to protect in an SNT is
considering your goals and expectations for your child's future.
 If you haven't yet created a Memorandum of Intent, also called a
Letter of Intent or a Life Plan, this is the time to draft such a
document. It should address factors such as your child's medical
condition, legal advocacy needs, ability to work and desired living
arrangements, all of which will drive the special needs calculations.
 This really allows for details on how to coordinate public benefits
with the private resources
 Look at samples: important to address private health insurance,
uncovered Medicaid, dental specifically.
21
Letter of Intent
 A Letter of Intent is one of the most important documents a parent
can complete for the child’s future care-givers
 This is not a stand-alone document; it should be incorporated into
an estate planning process
 Can be used when caring for parents or grandparents as well
 The Letter of Intent should provide the trustee with guidance as to
what “special needs” the beneficiary has or will have and define the
quality of life as quality means different things to different people
 The Letter of Intent should be frequently updated as the
beneficiary’s needs change
22
Sample Letters of Intent
 http://www.pekdadvocacy.com/firm-news/client-
intake/attachment/letter-of-intent-informationregarding-child/
 http://www.pekdadvocacy.com/documents/pattispublica
tions/Representing/Att7.pdf
 http://www.pekdadvocacy.com/documents/pattispublica
tions/Representing/Att8.pdf
23
Letter Of Intent
Be Specific!
Education
Housing with Person
Directed Supports
Transportation
Medical Care
and Equipment
Real Employment
Quality of Life
Social, travel, recreation, etc.
24
Coordination of Public Benefits
with SNTs
How It Works
Housing
Roommate
Special Needs Trust
Beneficiary
Family Community
Support Services
CMH
Support Services (Waiver)
Dept. of Community Healthformerly FIA
Adult Home Help Services
Food Stamps
25
Key Affordable Care Provisions
and their Effect in SNT’s
26
The Affordable Care Act (ACA)
 The Affordable Care Act (ACA) is the most important legislation
affecting special needs planning since 1993 when Congress enacted
42 USC §1396p(d) that authorized special needs trusts (SNTs). Much
of the ACA is focused on protecting the rights of people with
chronic, long-term physical or cognitive conditions. In this article, we
will discuss the important features of the ACA to allow the special
needs practitioner to provide proper advice to their clients and how
the ACA will affect existing special needs plans.
Excerpt from: How the Affordable Care Act Affects Special Needs Planning
By: Kevin Urbatsch, Esq. & Michelle Fuller, Esq
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Access to Health Care
 Under the provisions of the ACA, many of the barriers to private health
care for persons with disabilities will disappear. The biggest change is
that a pre-existing condition will no longer deny an individual access to
private health care. The ACA also makes private health care more
attractive because it removes the lifetime limits on health insurance that
made private plans unattractive to many persons with profound
disabilities. An added benefit of the ACA is that it requires private health
care coverage for children (up to age 26) on a parent’s plan even if that
child has moved away, is disabled, gone to school, or married. Also, the
ACA caps the amount of money that a person will have to pay out-ofpocket each year on premiums and deductibles. For example, if the
person in California earns less than $17,235 a year, the annual out-ofpocket limit he or she has to pay is $2,250. Otherwise, the general ACA
annual out-of-pocket limit for an individual is $6,250 per year.
Excerpt from: How the Affordable Care Act Affects Special Needs Planning
By: Kevin Urbatsch, Esq. & Michelle Fuller, Esq
28
Access to Health Care
 There is a mandate that all persons in the United States be covered
by health care. Because so many persons with disabilities have
limited income, the ACA provides ways to pay premiums at a
reduced cost. If the person with a disability has income, he or she
can pay a reduced premium even if they earn up to 400 percent of
the federal poverty limit (FPL) ($45,960 for individual in 2013). For
example, for the year 2014 in California, a person earning less than
$17,235 a year will pay between $19 to $57 a month for a premium
based on their actual income.
Excerpt from: How the Affordable Care Act Affects Special Needs Planning
By: Kevin Urbatsch, Esq. & Michelle Fuller, Esq
29
Expanded Access to Medicaid
 For those persons with disabilities who have little to no income,
access to Medicaid (for people between the ages of 19 to 65) will be
expanded to include individuals with incomes up to 133 percent of
the FPL (plus an automatic 5 percent income disregard) ($15,586 for
individual in 2013). There is no resource limitation for this new
expanded Medicaid program. Thus, for new people qualifying for
Medicaid, they can have more than the $2,000 in resources and still
qualify for Medicaid if their income is below 138 percent of the FPL.
It is important to note that this new expanded program does not
apply to persons currently receiving Medicaid, for those over age 65
applying for long-term care nursing home care, and some other
restrictions. Further, not every state has agreed to participate in
Medicaid expansion, so it is important to see if your state has
agreed to implement expanded Medicaid.
Excerpt from: How the Affordable Care Act Affects Special Needs Planning
By: Kevin Urbatsch, Esq. & Michelle Fuller, Esq
30
Expanded Access to Medicaid
 There are several important health care benefits generally not covered
by the ACA and private health care that are important to persons with
disabilities. Two of the most important (and expensive) benefits that the
ACA will not cover include payment for long-term skilled nursing care
and payments for in-home care giving services. Thus, for clients with
disabilities who require nursing home level care or who require
caregivers in order to remain independent in the community will likely
still need Medicaid to assist them with their ongoing care. In some
states, Medicaid provides unique services for the developmentally
disabled that specialize in support for independent living and other
related services. Thus, it is important for the practitioner to determine
what health care-related services for persons with disabilities are
covered by Medicaid (but not through private health care) in
determining whether a client should give up his or her governmentpaid-for health care.
Excerpt from: How the Affordable Care Act Affects Special Needs Planning
By: Kevin Urbatsch, Esq. & Michelle Fuller, Esq
31
Key Provisions in ACA
 The Affordable Care Act has set new standards, called essential
health benefits, outlining what health insurance companies must
now cover. But there's a catch: Insurance firms can still pick and
choose to some degree which specific therapies they'll cover within
some categories of benefit. And the way insurers interpret the rules
could turn out to be a big deal for people with disabilities who need
ongoing therapy to improve their day-to-day lives.
 The new rules for what health insurance companies have to cover
may still change. Federal regulators plan to review them as the
health law rolls out and could make changes in 2016.
Excerpt from: Obamacare Presents Complex Choices For People with Disabilities
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Essential Benefit Package
The ACA links the essential health benefits package to limits on costsharing. So health plans that are required to provide essential health
benefits will also be required to limit the amount consumers will have to
pay out-of-pocket. Specifically, health plans will be prohibited from
requiring consumers to pay annual cost-sharing that is greater than the
limits for high deductible plans linked to health savings accounts. Currently,
those limits are $5,950 per year for individuals and $11,900 per year for
families. In addition, small group plans must limit deductibles to $2,000 for
individual coverage and $4,000 for family coverage. As with all health plans
under the ACA, there is no cost-sharing for certain preventive health
services recommended by the United States Preventive Services Task
Force.
To view full article: Essential Benefits
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Essential Benefit Covered Under
the ACA
Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance use disorder services
 Prescription drugs
Rehabilitative and habilitative services and devices
Laboratory services
Preventive and wellness services
Chronic disease management
Pediatric services, including oral and vision care
34
What are the cost-sharing rules for
the essential health benefits?
The ACA links the essential health benefits package to limits on costsharing. So health plans that are required to provide essential health
benefits will also be required to limit the amount consumers will
have to pay out-of-pocket. Specifically, health plans will be
prohibited from requiring consumers to pay annual cost-sharing that
is greater than the limits for high deductible plans linked to health
savings accounts. Currently, those limits are $5,950 per year for
individuals and $11,900 per year for families. In addition, small
group plans must limit deductibles to $2,000 for individual coverage
and $4,000 for family coverage. As with all health plans under the
ACA, there is no cost-sharing for certain preventive health services
recommended by the United States Preventive Services Task Force.
To view full article: Essential Benefits
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Are your employees ready for
consumer-driven health care?
 If you’re an employer, it’s likely that your workers have been reluctant to
educate themselves about their choices in light of upcoming changes to
the health care scene, such as the implementation of state and federal
exchanges under the Patient Protection and Affordable Care Act (ACA).
That may be because they’re waiting for you to make the first move.
 According to results from the recently released 2013 Aflac
WorkForces Report, 75% of workers surveyed said that they thought their
employers would educate them about changes to their health care
coverage as a result of the ACA;s health care reform provisions, but only
13% of employers said that educating employees about health care
reform was important to their organization.
36
According to results reported by Aflac, 53% of employers have
implemented a high-deductible health plan (HDHP) in the last three
years, and Aflac says this is a growing trend. The survey also shows
that, despite the shift toward HDHPs and defined contribution
health care plans by employers, along with the upcoming
implementation of state and federal exchanges, 55% of workers
said they had done nothing to prepare for possible changes to the
health care system.
Sited from Wolters Kulwer Law & Business
To view full article: Consumer-Driven Health Care
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Mental Health Parity
In 2008, Congress passed the Paul Wellstone and Pete Domenici
Mental Health Parity and Addiction Equity Act taking a great step
forward in the decade-plus fight to end insurance discrimination
against those seeking treatment for mental health and substance use
disorders. This law requires health insurance to cover both mental and
physical health equally. Under this law, insurance companies can no
longer arbitrarily limit the number of hospital days or outpatient
treatment sessions, or assign higher co-payments or deductibles for
those in need of psychological services.
To view full article: Mental Health Parity
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Mental Health Parity
The 2008 act closes several of the loopholes left by the 1996 Mental
Health Parity Act and extends equal coverage to all aspects of health
insurance plans, including day and visit limits, dollar limits,
coinsurance, co-payments, deductibles and out-of-pocket maximums.
It preserves existing state parity and consumer protection laws while
extending protection of mental health services to 82 million Americans
not protected by state laws. The bill also ensures mental health
coverage for both in network and out-of-network services.
To view full article: Mental Health Parity
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Could a Trustee of SNT Determine
to go Without Insurance?
 What happens if I don’t sign up for Obamacare?
 You won’t have health insurance. You’ll be responsible for every
from the flu shots to major surgery.
 I thought I could just sign up when I need it?
 Not exactly. The law requires insurance companies to cover
people with pre-existing conditions, but you still have to sign up
during the enrollment period. That will be from October 1,
2013 to March 31, 2014.
 Serious problems in Michigan with delayed Medicaid Expansion
and states with no Medicaid expansion
40
Could a Trustee of SNT Determine
to go Without Insurance?
cont.)
 So what if I get sick after March 31, 2013?
 You’ll have to wait until the next enrolment period, which begins
October 1, 2014. Until your new coverage kicks in January 1,
2015, you’ll have to pay for any medical costs.
 What if I lose my insurance during the year?
 You can sign up them. Outside of the regular enrollment period,
people can sign up for insurance when they have a major lifechanging event (i.e. getting married, changing jobs, having a
baby, or moving to a new state)
41
Could a Trustee of SNT Determine
to go Without Insurance?
(cont.)
 Are there any penalties for not signing up?
 Yes, if you don’t sign up for insurance, you’ll pay a fine when you
do you taxes in 2015. The fine will be $95.00 or 1% of your
annual income, whichever is higher. And in future years, it will
be even higher.
 What if I refuse to pay the fine?
 The IRS will take the money out of any refund you would receive
on your federal income tax. It is not allowed to put you in jail or
seize your property for failing to pay the fine, however.
42
Could a Trustee of SNT Determine
to go Without Insurance?
(cont.)
 When do I have to sign up?
 Technically speaking, you need to have insurance on January 1,
2014. However, the enrollment period lasts until March 31,
2014 and you may be able to sign up later in the year if you have
a major life event.
 What if I am uninsured for part of the year?
 You won’t pay the full fine. The amount is prorated, so you
would just pay for the number of months you were uninsured.
Also, gaps of less than three (3) months in a given year aren’t
counted.
43
Could a Trustee of SNT Determine
to go Without Insurance?
(cont.)
 Are there any other exceptions?
 Yes, but they are limited. Certain religious groups, such as the
Amish, and federally recognized Indian tribes don’t have to sign
up. You can also get exemption if you have a lower income,
especially if your state rejected the Medicaid expansion.
 Medicare or Medicaid is enough! (Either only Part A Or Parts A
& B)
To view full article: Obamacare
44
What if I have Medicare?
 Medicare isn’t part of the Health Insurance Marketplace, so you
don’t need to do anything. If you have Medicare, you are considered
covered.
 The Marketplace won’t affect your Medicare choices, and your
benefits won’t be changing. No matter how you get Medicare,
whether through Original Medicare or a Medicare Advantage Plan,
you’ll still have the same benefits and security you have now. You
won’t have to make any changes.
 Medicare’s Open Enrollment Period (October 15-December 7)
hasn’t changed.
To view full article: Donut Hole
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ACA Provisions
(cont.)
 Expanded Medicare benefits for preventive care, drug
coverage
 Medicare benefits have expanded under the health care law–
things like free preventive benefits, cancer screenings, and an
annual wellness visit.
 You can also save money if you’re in the prescription drug
“donut hole” with discounts on brand-name prescription drugs.
To view full article: Donut Hole
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Closing the Donut Hole
The Patient Protection and Affordable Care Act and accompanying
health care reform legislation added important improvements to
Medicare prescription drug coverage. The health reform law helps
cover expenses for people falling into the "donut hole" coverage gap
beginning in 2010, and the hole in coverage is eliminated altogether by
2020. The law also provides for additional assistance for low-income
beneficiaries.
To view full article: Closing the Donut Hole
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Closing the Donut Hole
 The new law provides assistance to help seniors bridge this donut hole.
 50 percent rebate on brand-name drugs in 2012. A 50 percent rebate will




be applied at the pharmacy for brand name medications.
14 percent rebate on generic drugs in 2012. A 14 percent rebate will be
applied at the pharmacy for generic medications.
Closure of the donut hole by 2020 for brand-name and generic drugs. The
co-payments required for brand-name and generic drugs will be phased
down to the standard 25 percent by 2020, eliminating the donut hole. For
brand-name drugs, manufacturers will increase their discounts each year to
negate the coverage gap. Beginning in 2011, co-payments required by Part D
law for generic drugs will be reduced by seven percentage points each year
until the coverage gap is eliminated for these drugs as well.
Immediate assistance for seniors. A typical senior that fell into the donut
hole saved $250 in 2010, over $600 in 2011, and will save over $3,000 by
2020.
Provides catastrophic coverage sooner to protect seniors. The legislation
will help seniors get out of the donut hole sooner beginning in 2014. The
dollar amount of the catastrophic threshold, where seniors' co-payments are
dropped to 5 percent of drug costs, will be more slowly increased from year
to year at this point.
To view full article: Closing the Donut Hole
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Closing the Donut Hole
Assistance for Low-Income People
 The health reform legislation also provides improves eligibility and
coverage for low-income Medicare beneficiaries:
 Co-payments are eliminated for many beneficiaries receiving
home- and community-based services who are eligible for
both Medicare and Medicaid.
 The new law will reduce the number of low-income
beneficiaries that are required to change plans each year to
maintain zero premiums.
 It allows widows and widowers to more easily retain their lowincome eligibility.
 Outreach programs are enhanced to ensure that more
beneficiaries who are eligible for a Low-Income Subsidy are able
to enroll.
To view full article: Closing the Donut Hole
49
Other ACA Provisions to Watch
1. Medicaid Managed Long Term Services and Supports
2. State Demonstrations to Integrate Care for Dual Eligible Individuals
and other Medicare-Medicaid Coordination Initiatives
3. Other Long Term Services and Support Include
A. Balancing Incentive Program
B. Medicaid State Plan Amendments under 1915(i)
C. Community First Choice Option under 1915 (k)
D. Medicaid Health Homes
Click here for full site
50
Other ACA Provisions to Watch
(cont.)
 Medicaid Managed Long Term Services and Supports
 Refers to the delivery of long term services and supports through
capitated Medicaid managed care programs.
 Increasing numbers of States are using MLTSS as a strategy for
expanding home- and community-based services, promoting
community inclusion, ensuring quality and increasing efficiency.
 MLTSS offers States a broad and flexible set of program design
options, and may be used as an overarching structure to promote
initiatives such as Money Follows the Person, participant-directed
services, the Balancing Incentive Program, etc.
 Do you know what your state is doing?
Click here for full site
51
Other ACA Provisions to Watch
(cont.)
 State Demonstrations to Integrate Care for Dual Eligible Individuals and
other Medicare-Medicaid Coordination Initiatives
 Under the State Demonstrations to Integrate Care for Dual Eligible
Individuals, fifteen states across the country have been selected to
design new approaches to better coordinate care for dual eligible
individuals.
 CMS will provide funding and technical assistance to states to
develop person-centered approaches to coordinate care across
primary, acute, behavioral health and long-term supports and
services for dual eligible individuals. The goal is to identify and
validate delivery system and payment coordination models that can
be tested and replicated in other states.
 CMS is also making technical assistance available to all states
interested in improving services for dual eligible individuals.
Click here for full site
52
Other ACA Provisions to Watch
(cont.)
 Other Long Term Services and Support Include
 Balancing Incentive Program
 Authorizes grants to States to increase access to non-
institutional long-term services and supports (LTSS) as of
October 1, 2011.
 This program will help States transform their long-term
care systems by:
 Lowering costs through improved systems
performance & efficiency
 Creating tools to help consumers with care planning &
assessment
 Improving quality measurement & oversight
Click here for full site
53
Other ACA Provisions to Watch
(cont.)
 States with approved applications – New Hampshire,
Maryland, Iowa, Mississippi, Missouri, Georgia, Texas,
Indiana, Connecticut, Arkansas, New York, New Jersey,
Louisiana, Ohio, Maine, Illinois
 States with structural change work plans – New
Hampshire, Maryland, Missouri, Georgia, Texas,
Mississippi, Indiana, Iowa
Click here for full site
54
Other ACA Provisions to Watch
(cont.)
 Other Long Term Services and Support Include
 Expanded Medicaid State Plan Amendments under 1915(i)
 Allows states to offer HCBS under a Medicaid state plan to
individuals who are Medicaid-eligible
 It limits eligibility to individuals with incomes up to 150 percent
of poverty who, but for the program services, would need an
institutional level of care
Click here for full site
55
Other ACA Provisions to Watch
(cont.)
 Other Long Term Services and Support Include
 Community First Choice Option under 1915 (k)
 Lets States provide home and community-based attendant
services to Medicaid enrollees with disabilities under their State
Plan
 This option became available on October 1, 2011 and provides a
6 % increase in Federal matching payments to States for
expenditures related to this option
 Community First Choice was established under the Affordable
Care Act of 2010
Click here for full site
56
Other ACA Provisions to Watch
(cont.)
 Other Long Term Services and Support Include
 Medicaid Health Homes
 Benefit for states to establish Health Homes to coordinate care
for people with Medicaid who have chronic conditions by
adding Section 1945 of the Social Security Act.
 Health Homes are for people with Medicaid who:
 Have 2 or more chronic conditions
 Have one chronic condition and are at risk for a second
 Have one serious and persistent mental health condition
 States can target health home services geographically
 States can not exclude people with both Medicaid and
Medicare from health home services
 Anyone have a client in this program? Appears very, very
limited!!
Click here for full site
57
Warning - ACA Provision
 Some special needs trust are employers
 By October 1, 2013, employers who are subject to the Fair Labor
Standards Act (FLSA) must produce and distribute notices to
employees about the health insurance exchanges (also known as
marketplaces) that will become effective in January 2014 (see FLSA
Sec. 18B).
 These notices were originally required to be distributed by March 1,
2013. However, in January 2013, the Department of Labor (DOL)
delayed this requirement until it had time to issue further guidance.
On May 8, 2013, the DOL’s Employee Benefits Security
Administration (EBSA) issued Technical Release 2013-02, which
specifies that these notices must now be provided by the first of
October
For full article: Health Reform Talk
58
The LTC Commission
Establishment
 The American Taxpayer Relief Act (the so-called "fiscal-cliff" law)
repealed the CLASS Act and established a Long-Term Care
Commission to advise Congress on how long-term care can be better
provided and financed for the nation's older adults and people with
disabilities, now and in the future.
 The bi-partisan commission consists of 15 appointees appointed by
Democratic and Republican Congressional leadership and the White
House.
59
The LTC Commission Objective
 Charged by statute to report with a "plan for the establishment,
implementation, and financing of a comprehensive, coordinated, and
high-quality system that ensures the availability of long-term services
and supports for individuals in need."
 Within 6 months of the appointment of Commissioners (by
September 12, 2013) they must vote on a comprehensive and
detailed report based on the long-term care plan that contains any
recommendations or proposals for legislative or administrative
action as the Commission deems appropriate.
For more information: Long-Term Care Commission Website
60
State Insurance Exchanges as
Asset Builders
61
State Implementation of Health
Insurance Exchanges
According to the Center on Budget and Policy Priorities as of June 14, 2013
States choosing to establish a State-based Exchange (SBE) were required to
submit their exchange proposals to HHS by December 14, 2012 while
those considering a Partnership Exchange had until February 15, 2013. As
of December 17, 2012, seventeen states and the District of Columbia have
declared their intention to establish a State-based Exchange (SBE), and an
additional six states are pursuing a State Partnership Exchange. All twentyfour State-based and Partnership Exchanges have been conditionally
approved by HHS. Twenty-seven states have declined the opportunity to
operate an SBE or State Partnership Exchange, and instead will default to a
Federally-facilitated Exchange (FFE) (Figure 1).
62
Figure 1 – Status of 2014 Exchange
Implementation
63
HHS issues proposed regulations on
financial integrity, oversight standards
for Exchanges
The Department of Health and Human Services (HHS) has issued proposed
regulations on a number of policies related to the implementation of the
Patient Protection and Affordable Care Act (ACA), including provisions
regarding Affordable Insurance Exchanges, also known as Health Insurance
Marketplaces. Much of the proposed rule focuses on program integrity
regarding state Exchanges, issuers offering coverage in the Federallyfacilitated Exchanges (FFE), advance payments of the premium tax credit
and cost-sharing reductions, and premium stabilization programs.
64
HHS issues proposed regulations on
financial integrity, oversight standards
for Exchanges
(cont)
The rule also proposes establishing standards for HHS-approved enrollee
satisfaction survey vendors, standards for the handling of consumer
complaints by issuers in the Exchange, and other provisions meant to
ensure smooth operation of the Exchanges, protect consumers, and give
flexibility to states.
• To see the actual rule that was published on June 19, 2013:
Federal Register
65
Access to Health Insurance
Promotes Asset Building
One of the major problems that the Affordable Care Act tries to
solve is the high rate of uninsured Americans. In 2011 the Census
Bureau reported that 48.6 million Americans were uninsured. Being
uninsured us a major financial burden for those who require medical
care. Without health insurance, out-of-pocket health care cost are
too high for most people to afford. According to the 2010 U.S.
Census, in 2009 the average cost of a hospital stay was $10,379.
Worse yet, hospitals generally charge uninsured individuals higher
prices than the prices they have negotiated with insurance
companies. When individuals are unable to pay such high costs,
their cases are sent to collection agencies, thereby diminishing their
credit scores and further hampering asset building. All of this
evidence points to having health insurance as being essential for
attaining financial stability and economic mobility.
Harris, Karen K., and Alexander I. Hoffman. "The Affordable Care Act: An Effective Asset-Building Policy." Clearinghouse REVIEW Journal of
Poverty Law and Policy (2013): 492-500. Print.
66
Access to Health Insurance
Promotes Asset Building
(cont.)
 The Affordable Care Act (ACA) provides that all states must open
Medicaid eligibility to any adult earning below 33 percent of the federal
poverty level.
 A second provision created health insurance exchanges.
 These health insurance exchanges are new marketplaces for buying
private health insurance by paying premiums based on income.
Harris, Karen K., and Alexander I. Hoffman. "The Affordable Care Act: An Effective Asset-Building Policy." Clearinghouse REVIEW Journal of
Poverty Law and Policy (2013): 492-500. Print.
67
Access to Health Insurance
Promotes Asset Building
(cont.)
Originally the Act required states to set up such exchanges or face
elimination of federal funding for their Medicaid programs. However, the
U.S. Supreme Court’s decision on the constitutionality of the Act held that
threatening to withhold federal Medicaid funding was unconstitutional. As
a result, states not may decide whether to establish exchanges. So far
twenty-five states have indicated that they will not establish them and will
rely instead on a federally created exchange.
**Keep in mind that pooled trust promote asset building**
Harris, Karen K., and Alexander I. Hoffman. "The Affordable Care Act: An Effective Asset-Building Policy." Clearinghouse REVIEW Journal of
Poverty Law and Policy (2013): 492-500. Print.
68
Access to Health Insurance
Promotes Asset Building
(cont.)
The Act requires that exchanges give people private insurance plan options
that would be categorized into four levels of quality: platinum, gold, silver,
and bronze. Tax credits would be granted to people who earn below 400
percent of the federal poverty level and choose to purchase insurance
through the exchange system.
Harris, Karen K., and Alexander I. Hoffman. "The Affordable Care Act: An Effective Asset-Building Policy." Clearinghouse REVIEW Journal of
Poverty Law and Policy (2013): 492-500. Print.
69
Access to Health Insurance
Promotes Asset Building
(cont.)
The final institutional change aimed at increasing health insurance access
is the prohibition against coverage denials due to preexisting conditions.
This practice of selecting only healthy risk-pool enrollees and denying
coverage to those with preexisting conditions was pervasive because it is in
health insurance companies’ best interest to avoid covering the sick,
Under the ACA insurance companies are required to cover all people who
apply for coverage even if they are potentially expensive enrollees. In
order to ensure that this provision does not significantly, negatively affect
insurance companies’ bottom line, the Act also includes the individual
mandate, we discussed earlier.
Harris, Karen K., and Alexander I. Hoffman. "The Affordable Care Act: An Effective Asset-Building Policy." Clearinghouse REVIEW Journal of
Poverty Law and Policy (2013): 492-500. Print.
70
Promoting Health and Well-Being
Promotes Asset Building
The ACA not only promotes wellness by expanding access to health care
and health insurance but also contains provisions that directly promote
health outcomes and well-being. These provisions can also be viewed as
promoting asset building since research shows that people who are
healthier tend to be more financially stable and have more assets than
those who are less healthy, just like a pooled trust does.
Harris, Karen K., and Alexander I. Hoffman. "The Affordable Care Act: An Effective Asset-Building Policy." Clearinghouse REVIEW Journal of
Poverty Law and Policy (2013): 492-500. Print.
71
Reducing Medical Bankruptcies
and Debt Promotes Asset Building
Before the ACA was passed, annual or lifetime benefit limits were
pervasive insurance company practices. Once a person’s annual or lifetime
benefit limit was reached, the enrollee would be responsible for all health
costs incurred. The Act’s provisions help protect consumers’ assets by
making sure that deductibles and out-of-pocket costs are capped. Pooled
trust allow consumers to save for these expenses.
Harris, Karen K., and Alexander I. Hoffman. "The Affordable Care Act: An Effective Asset-Building Policy." Clearinghouse REVIEW Journal of
Poverty Law and Policy (2013): 492-500. Print.
72
Reducing Medical Bankruptcies
and Debt Promotes Asset Building
First, the ACA bars deductibles form exceeding $2,000 for individuals are
$4,000 for families. Individuals and small businesses that use the exchange
system will have cost-sharing maximums laid out based on the level of
insurance plans: bronze plan enrollees pay no more that 40 percent out-ofpocket, silver plan enrollees pay no more than 30 percent out-of-pocket,
gold plan enrollees pay no more than 20 percent out-of-pocket, and
platinum plan enrollees pay no more than 10 percent out-of-pocket
expenses. Out-of-pocket maximums are also capped. Out-of pocket limits
are based on the Internal Revenue Service's limits on health savings
account contributions.
Harris, Karen K., and Alexander I. Hoffman. "The Affordable Care Act: An Effective Asset-Building Policy." Clearinghouse REVIEW Journal of
Poverty Law and Policy (2013): 492-500. Print.
73
Tax Break May Apply for
Beneficiary Under the ACA
 If SNT purchase insurance for the Beneficiary this income tax break may
apply for the beneficiary
 There are two kinds of financial help for people planning to enroll in the
online health insurance marketplaces that will open this fall. One could
put people at risk of having to pay some of the money back, while the
other won't.
 That's one big difference between tax credits and subsidies, both of
which are intended to help people with lower incomes pay for health
insurance through the new health care law.
Andrews, Michelle. "News." Tax Break Can Help with Health Coverage, But There's a Catch. NPR, 10
July 2013. Web. 12 July 2013.
74
Tax Break May Apply for
Beneficiary Under the ACA
(cont.)
 People with incomes between 100 and 400 percent of the federal
poverty level ($11,490 to $45,960 for individuals in 2013) may be eligible
for tax credits to reduce the cost of their monthly health insurance
premiums.
 In addition, people with incomes between 100 and 250 percent of the
poverty level ($11,490 to $28,725) may qualify for cost-sharing subsidies
that will bring down their deductibles, copayments and coinsurance. The
subsidies also reduce the maximum amount they can be required to pay
out of pocket annually for medical care.
Andrews, Michelle. "News." Tax Break Can Help with Health Coverage, But There's a Catch. NPR, 10
July 2013. Web. 12 July 2013.
75
Tax Break May Apply for
Beneficiary Under the ACA
(cont.)
 Instead of waiting until tax time to claim the credit for the premiums on
their return, people can apply to get it in advance, based on their
estimated income for 2014. In that case, the state health exchange, or
marketplace, will estimate the tax credit and send it directly to the
insurer.
 But there's a catch. When April 15 rolls around, the Internal Revenue
Service will reconcile the amount of the advance payments sent to the
insurer with the taxpayer's actual income. If a person's income is higher
than the estimate, the taxpayer will have to repay the difference.
 But there's some good news, too. If a person's income is lower than
estimated, the taxpayer will get a credit.
Andrews, Michelle. "News." Tax Break Can Help with Health Coverage, But There's a Catch. NPR, 10 July 2013.
Web. 12 July 2013.
76
Tax Break May Apply for
Beneficiary Under the ACA
(cont.)
 People who quality for the cost-sharing subsidies won't face the same
financial risk. The federal subsidies, which reduce consumers' out-ofpocket costs, will be paid directly to insurers. They could cover
thousands of dollars of costs, depending on a person's health care
usage.
 But with the subsidies, if a person's income changes during the year, he
or she won't be responsible for any extra costs.
 "It's not a reconcilable tax credit, so consumers aren't on the hook if
their income changes," says Christine Monahan, a senior health policy
analyst at Georgetown Health Policy Institute's Center on Health
Insurance Reforms.
 So check out both options for cheaper premiums, but be well aware of
the differences.
Andrews, Michelle. "News." Tax Break Can Help with Health Coverage, But There's a Catch. NPR, 10 July 2013.
Web. 12 July 2013.
77
Alternatives to Special Needs Trust
78
Alternatives to Self-Settled Special
Needs Trust
 The four alternatives to establishing an individual self-settled special
needs trust are to spend down, by paying bills or purchasing exempt
assets, to transfer assets, to simply accept the money, or to utilize a
pooled trust
 Spend down - Under a lifetime personal service contract, the person
with a disability would contract with a third party for in-kind support
and maintenance for life in exchange for a lump sum payment.
 Transfer to Assets - If the person with a disability is receiving SSI
and/or Medicaid transfer penalties apply. The penalty is a period of
ineligibility for SSI and/or Medicaid. The SSI penalty is calculated by
dividing the amount transferred by the maximum SSI payment. This
is usually in the neighborhood of $600. There is a maximum period
of ineligibility of three years.
Begley, Jr., Thomas. "News." Four Alternatives to Self-Settled Special Needs Trusts. Begley Law Group,
Unknown date. Web. 9 September 2013.
79
Alternatives to Self-Settled Special
Needs Trust
 Accept the Money - An alternative for a person receiving SSD and
Medicare would be to simply accept the money, because it would
have no affect on their public benefits. Another alternative would
be to accept the funds and transfer them to a third party who would
then establish a support trust for the benefit of the person with a
disability.
 Pooled Trust - A final alternative to an individual self-settled
special needs trust is a pooled trust. All or a portion of the
settlement can be deposited into a pooled trust to protect the
beneficiary’s public benefits.
Begley, Jr., Thomas. "News." Four Alternatives to Self-Settled Special Needs Trusts. Begley Law Group,
Unknown date. Web. 9 September 2013.
80
rd
3
Alternative to
Party Trust Spendthrift Trust
 Many families have members who just can’t handle money, and that is
not always related to a disability. That is the function of the Spendthrift
Trust. Parents fund this trust with the trustee appointed as the person to
manage the funds for the family member who can’t manage money. The
trustee trickles money out to the beneficiary on an ongoing basis, it can
be much more flexible than a special needs trust.
 The trustee can still purchase assets that benefit the spendthrift. The
entire intent of this type of trust is to protect the nest egg from financial
mismanagement and provide ongoing support for the beneficiary.
However, because the beneficiary may not need means tested benefits
(either because they are no longer disabled, or their medical and
support needs are adequately covered by the purchase of an insurance
policy, the Trustee can provide for assistant with basic needs, and even
at times if appropriate provide small amounts of cash to the beneficiary.
81
Alternative to 3rd Party Trust Spendthrift Trust
This option maybe a realistic alternative to special needs trusts. Just keep
in mind, it will not work for 1st party money and it will not work for folks
that due to the changing nature of the disability may need Medicaid long
term care benefits in the future. If that is at all a possibility I would still
suggest using a special needs trust. If needs based benefits do not be come
an issue then the SNT can be administered more like a spendthrift trust.
This type of instruction should be addressed in the letter of Intent which
was mentioned earlier.
82
Tax Change for the SNTs
(3.8% Tax on Undistributed
Income)
83
Will You or Your SNT Be Affected
in 2013?
When Congress passed the President’s health care reform initiative in
March of 2010, the legislation came in two separate bills. First came the
Patient Protection and Affordable Care Act (PPACA), followed by the Health
Care and Education Reconciliation Act (HCERA) several days later. One
focus of the HCERA was to implement the tax provisions designed to pay
for healthcare reform. Several cases are pending in various federal courts
challenging the constitutionality of the PPACA, but even if the courts
eventually were to declare the PPACA to be unconstitutional, the noninsurance tax provisions in the HCERA will apply to taxpayers, including the
disabled beneficiaries of special needs trusts (SNTs) and/or SNTs
themselves. Like most taxes, the financial impact of the new tax in the
HCERA can be minimized with proper planning. What follows is a very brief
overview of the new tax, some general planning opportunities, and a brief
discussion on how the tax will apply to SNTs.
Full article: The New Medicare Surtax: Will You or Your Special Needs Trust Be Affected in 2013?
Begley, Jr., Thomas. "News." The New Medicare Surtax: Will You or Your Special Needs Trust Be Affected in
2013?. Begley Law Group, Unknown date. Web. 9 September 2013.
84
Tax Hikes Hit Trust Hard
(cont.)
 Folks with trusts, and that includes widows and the disabled, not just the
ultra-wealthy, have been hit with a double tax whammy this year.
 First the 3.8% Obamacare tax that applies to net investment income
kicked in Jan. 1.
 Then, the American Taxpayer Relief Act was signed into law on Jan. 2,
imposing income and capital gains tax hikes on trusts akin to those on
the wealthiest taxpayers. The top income tax rate is now 39.6%, up from
35%, and the top capital gains rate is now 20%, up from 15%.
 The kicker: these taxes hit a trust on any income it does not distribute
over just $11,950, far less than the $400,000/$450,000 ATRA and
$200,000/$250,000 Obamacare thresholds for individuals.
Full article: Tax Hikes Hit Trust Hard, Beneficiaries Pull Money Out
Ebeling, Ashlea. "Tax Hikes Hit Trusts Hard, Beneficiaries Pull Money Out." Forbes. Forbes Magazine, 09
Jan. 2013. Web. 09 Sept. 2013.
85
Tax Hikes Hit Trust Hard
(cont.)
 Most trusts (non-grantor trusts) pay tax on capital gains and
accumulated income that stays in the trust, while the beneficiaries pay
tax on income that is distributed to them. So trusts—even relatively
small ones—will be hit with the 23.8% capital gains rate (the 20% rate
plus the 3.8% Obamacare tax), even if the beneficiary himself would be
squarely in 15% capital gains territory.
 Many trust beneficiaries are ultra-wealthy and can easily bear the extra
tax, but many middle-class folks have set up trusts for basic estate
planning as well as non-tax reasons, and they’ll be swept into the higher
tax regime too.
Full article: Tax Hikes Hit Trust Hard, Beneficiaries Pull Money Out
Ebeling, Ashlea. "Tax Hikes Hit Trusts Hard, Beneficiaries Pull Money Out." Forbes. Forbes Magazine, 09
Jan. 2013. Web. 09 Sept. 2013.
86
Tax Hikes Hit Trust Hard
(cont.)
 The income tax hikes call for more advanced and time-sensitive
planning. For many trusts it’s left to the trustee’s discretion whether or
not to distribute income to any or some of the beneficiaries, and there’s
always been a tension between leaving money in the trust to grow for
future generations and paying out to current beneficiaries today.
 The Internal Revenue Service allows a 65-day grace period (through
March 6, 2013 this year) to take distributable net income out of the trust
and treat it as distributed in 2012. Given the new high rates, it may
make sense to accelerate income distributions to the extent there is
undistributed income in the trust.
 For high-income beneficiaries who have an immediate need for the
money, making the distribution in the window would lock in the 2012
individual tax rates, saving 4.6%, or more because the healthcare tax
does not apply in 2012
Full article: Tax Hikes Hit Trust Hard, Beneficiaries Pull Money Out
Ebeling, Ashlea. "Tax Hikes Hit Trusts Hard, Beneficiaries Pull Money Out." Forbes. Forbes Magazine, 09 Jan.
2013. Web. 09 Sept. 2013.
87
Tax Hikes Hit Trust Hard
(cont.)
 Some families might even decide to dissolve existing trusts. A widow in
her 80s who is living off a $1 million trust left by her late husband
doesn’t need it for estate planning purposes any more.
 Before you rip up a trust, consider whether it’s needed to shield you
from state estate and inheritance taxes, for adult children who aren’t
great with money or may have a disability, or for protection from
divorcing spouses and other creditors.
 And what if you’re thinking of setting up a new trust? Make sure you
have flexibility written in.
Full article: Tax Hikes Hit Trust Hard, Beneficiaries Pull Money Out
Ebeling, Ashlea. "Tax Hikes Hit Trusts Hard, Beneficiaries Pull Money Out." Forbes. Forbes Magazine, 09
Jan. 2013. Web. 09 Sept. 2013.
88
Knowing a Little about how SNTs
are Taxed Can Be Helpful
 Trust do have returns and deductions
 The IRS gives taxable trusts a $600 deduction. If a trust fund is small
enough, keep the interest income less than $600 per year in order
to avoid having to file a trust tax return.
 Trust payout avoid trust tax
 Trusts generally get an income tax deduction for all of the money
which they distribute to a beneficiary or pay for the beneficiary's
treatment, support or needs.
 Try tax-free trust assets
 Income received by a trust from investing in a tax-free source keeps
its "character" and is tax-free to the beneficiary when it is spent for
their needs.
89
Knowing a Little about how SNTs
are Taxed Can Be Helpful
 Watch the year end and plan ahead
 Spend down all trust income by December 31st each year. Currently,
Trusts pay about a 38% federal tax on income that the trust
accumulates and does not spend on behalf of a beneficiary. Your
state income tax can increase this burden.
 It helps to prepay taxes
 The trust can make estimated income tax deposits on Form ES1040
and transfer the benefit of those income tax prepayments to your
beneficiary.
90
Knowing a Little about how SNTs
are Taxed Can Be Helpful
 A Double deduction
 Congress did add a special provision to the tax code for qualified
disability trusts. It is found in section 642 and can be helpful to a
SNT trust provided the trust is not a “Grantor" trust.
 Have the trust hire a helper
 A trust may pay employees on behalf of the special needs
beneficiary, including an accountant!!
91
Additional Resources
92
 Special Needs Planning and the Affordable Health Care Act
8th Annual ASNP National Conference
 Presented by: David Lilliesand, Attorney
Ann Koerner, Health Care Advocate
Scott MacDonal, Financial Advisor
 The Affordable Care Act
2013 National Aging & Law Institute
 Presented by: David Lilliesand, Attorney
Scott Solkoff, Attorney
 The Affordable Care Act’s Impact on Medicaid Eligibility, Enrollment, and
Benefits for People with Disabilities
 By: MaryBeth Musumeci, The Kaiser Family Foundation
*****To open the additional resources - Right click on the title and click open
hyperlink****
93
94