Presents Introduction to Special Needs Planning With Harry S. Margolis Sponsored by:

1. January 7, 2014 Presents Introduction to Special Needs PlanningWithHarry S. Margolis Sponsored by:

2. 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

3. Effect of Affordable Care Act • Fewer people will need Medicaid because there is no more pre-existing condition exclusion • Fewer people will need to maintain SSI eligibility in order to get Medicaid

4. Public Benefits • Available Programs: • Medicaid • Medicare • Supplemental Security Income (SSI) • Social Security Disability Income (SSDI) • Housing • Veteran Benefits

5. Public BenefitsMedicaid • 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

6. Public BenefitsMedicare • No financial restrictions • Eligible after receiving SSDI for 2 years • Not as comprehensive as Medicaid • But more doctors accept reimbursement • Co-payments and deductibles

7. Public BenefitsSupplemental Security Income • Restrictive • $2,000 limit on countable assets • Federal benefit level ($721 a month in 2014) plus state supplement • Dollar-for-dollar income offset (after $20 disregard) • In-kind income • Upper limit on reduction for housing and food • In kind support and maintenance (ISM) – 1/3 of $721 plus $20 - $260 (in 2014)

8. Public BenefitsSocial Security Disability Income • 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

9. Public BenefitsHousing • 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

10. Veteran Benefits • Veterans with disabilities may receive benefits for: • Service Connected Disabilities • Non-Service Connected Disabilities • Income and Resource limitations apply • SNTs – (d) (4) (A) and (C) – not currently recognized by the Veteran’s Administration, but no transfer penalty (for the moment)

11. Trusts as Primary Planning Tool • Management • Structure • Asset protection • Eligibility for benefits

12. 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

13. Trusts • Structure: • Succession of trustees • Trustee oversight • Care committee • Trust protector • Succession of beneficiaries • Power of appointment

14. Asset Protection • Predators • Creditors • Poor decision-making • Alternative of relying on siblings

15. 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

16. (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

17. (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 to state for Medicaid expenditures made

18. (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

19. Third-Party Trusts • By parents and grandparents • Discretionary vs. more limited • Trend towards more discretionary, less limited • Intent language • Revocable vs. irrevocable

20. Third-Party Trust Funding • Usually at death • May include contributions from others (grandparents, aunts, uncles) • Life insurance • Retirement plans • How much? • Revocable or irrevocable?

21. Letter of Intent • Guides trustees • Provides in depth information about beneficiary likes and dislikes, medical information, parents’ hopes for child • Updating necessary • Often seems to fall by the wayside

22. 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

23. Choice of Trustee:The Family • The Bad: • Poor investments • Poor reporting • Difficulty following SSI rules • Education burden

24. Choice of Trustee:The Family • The Good: • Knows the beneficiary’s needs • Knows service providers • Care • Continuity

25. 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

26. 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

27. Choice of Trustee • A Combination: Potentially the best of both worlds.

28. Traps for the Unwary • 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

29. 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?

30. Advocacy and Monitoring Care • Who will take over from parents? • Parents are primary advocates and care providers • Who will take their place? • Other family members • Professional care managers • Guardian • Attorneys • Trustees • Coordinating care

31. 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

32. Introduction to Special Needs Planning • Harry S. Margolis • Margolis & Bloom, LLP • Boston, Dedham, Framingham & Woburn • hsm@margolis.com • www.margolis.com

33. Support (866) 296-5509 support@specialneedsplanners.com