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Presents Basics of Special Needs Planning By Michele Fuller and Kevin Urbatsch

Presents Basics of Special Needs Planning By Michele Fuller and Kevin Urbatsch. 8 th Annual ASNP National Conference March 27, 2014. Morning Agenda. Overview of Special Needs Planning Working with Persons with Disabilities and their Families

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Presents Basics of Special Needs Planning By Michele Fuller and Kevin Urbatsch

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  1. Presents Basics of Special Needs Planning By Michele Fuller and Kevin Urbatsch 8th Annual ASNP National ConferenceMarch 27, 2014

  2. 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

  3. Benefits of Planning • Provide Financial Security • Leverage Means Tested Public Benefits • Select Proper Team to Provide Lifetime Management • Plan for Appropriate Housing • Provide Ongoing System for Advocacy • Plan for Caregiving Needs • Coordinate Entire Extended Family's Planning • Protect Beneficiary from Predators • Preserve Assets for other Heirs

  4. 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

  5. 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

  6. 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 • NOTSSDI & Medicare

  7. 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

  8. 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

  9. Public Benefits Summary

  10. Types of Public Benefit Programs

  11. What SSI Provides

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. SSI BIG Exempt Assets • Principal residence • (20 CFR §416.1212) • Automobile (of any value) • (20 CFR §§416.1210(c))

  18. 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

  20. Types of SSI Income

  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

  22. SSI Unearned Income • Unearned income reduces the SSI monthly cash payment dollar-for-dollar, after taking the $20 "any-income" 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

  23. 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

  24. ISM Defined The only ten “food and shelter” items are: • 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

  25. 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.

  26. 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.

  27. 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

  28. Eligibility for Medicaid

  29. 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

  30. 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

  32. 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.

  33. 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

  35. Types of Special Needs Trusts

  36. 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

  37. 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).”

  38. Third Party SNT Requirements • POMS two additional requirements: • Beneficiary cannot have authority to revoke the trust; and • Beneficiary cannot direct the use of trust assets for his or her support and maintenance under the terms of the trust

  39. 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

  40. First-PartySpecial 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

  41. First Party SNTs • When are First Party SNTs used: • Personal Injury Award • Inheritance or Gift • Minor with a Disability Turns 18 • Adult Recently Disabled

  42. (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

  43. 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

  44. 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

  45. (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

  46. 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)

  47. 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

  48. 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

  49. Avoiding Common Mistakes During Special Needs Planning and Administration

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