Molly Dear Abshire Wright Abshire, Attorneys Bellaire, Texas

1. Molly Dear AbshireWright Abshire, Attorneys Bellaire, Texas Planning for Public BenefitsSkills Training for Estate PlannersNew York Law SchoolNew York, New YorkJuly 8-13, 2012

2. Demographics • 20% of U.S. population is disabled at any given time. • 10% of U.S. population is severely disabled and relies on benefit programs to provide for basic needs. • Need for planning for public benefits is growing.

3. Role of Public Benefits Attorney • Evaluates funding options for financing LTC • Assists in qualification for public benefits • Counsels regarding available programs • Preserves existing public benefits • Advises regarding estate planning documents and prepares same

4. Estate Planning Documents for Disabled Individuals If capacity: • Financial Power of Attorney • Medical Directives • Will and/or Trust If no capacity: • Guardianship/Conservatorship

5. Three Ways to Finance Long-Term Care • Private pay • Long-term care insurance • Public benefits • Medicare • Medicaid • VA Benefits

6. Medicaid vs. Long-Term Care Insurance • Most people feel they will never need LTC • When the need arises many cannot qualify for LTC insurance & premiums may be cost-prohibitive • Many mistakenly believe that Medicare will cover LTC needs • Long-Term Care Partnership Programs • Not counted as income to the Medicaid recipient • Benefits paid = assets can exclude

7. Common Causes of Medicaid Eligibility • Rising costs of care for disabled individuals • Unavoidable Impoverishment • Protection of the “Community Spouse” • Private insurance exhausted • Uninsurability

8. Public Benefits Only Covers Basic Needs • Many personal needs left uncovered • Clothing • Dental care • Transporation • Trust planning can help close the gap

9. Ethical Issues in Planning for Public Benefits • Identify the client • Avoiding fraud • Diligent representation • Malpractice for failing to preserve public benefits • Client capacity and gifting • Medicaid planning by non-attorneys

10. The Affordable Care Act (Health Care Reform) • Enacted March 23, 2010, fully implemented by Fall of 2014 • Expansion of Medicaid benefits to qualified lower income retirees, effective in 2014, states may opt out. • Federal High Risk Insurance Program

11. Social Security Disability Insurance • Monthly cash assistance program • For qualified individuals who are disabled before age 65 • Worked appropriate number of quarters • Must meet disability criteria • Non-means tested benefit

12. Medicare • Federal Health Insurance Program • 80/20 plan • For eligible individuals 65+ and SSDI beneficiaries after 24 months • Lifetime limits • No LTC • Non-means tested benefit

13. Four Parts of Medicare • Part A = in-patient services, home health, hospice and limited SNF • Part B = doctor charges • Part C = Medicare Advantage HMO • Part D = voluntary drug plan

14. Medigap Insurance • Medicare has deductibles, co-pays and premiums • Without Medigap, not 100% insured • Choice of provider, but government regulated • Open enrollment period

15. Military and Civil Service Survivor Benefits • For adult children with disabilities • Provides 55% of base pay divided by eligible children • TRICARE health coverage • Non-means tested benefit

16. Disability Compensation Two Types: • Service Connected Disability Compensation – injury, illness or aggravation of a pre-existing condition during active duty, non-means tested benefit • Non-Service-Connected Disability Pension – low income disability payments, means-tested benefit

17. Service Connected Disability Compensation • Disability contracted during active duty (no wartime requirements) • Veteran must not have been discharged dishonorably • Injury must not be the result of misconduct • Once disability is determined, a rating must be assigned

18. Non-Service Connected Disability Pension • Disability does not have to be service connected • Don’t have to be retired military • No requirement for combat • Must meet income and net worth requirements

19. Supplemental Security Income • Federal cash assistance program • $698/month individual • $1,048/month couple • Provides minimum level of income for individuals with disabilities • Means-tested benefit

20. Supplemental Security Income, cont. To be eligible person must be: • Age 65 or older or blind or disabled, • U.S. Citizen or qualified alien, and • Not a resident of public institute.

21. SSI Eligibility • Income limitation • Resource limitation • <$2k for single individual in countable resources • Excluded resources = home, car, prepaid funeral and household goods

22. In-Kind Support and Maintenance • ISM = food & shelter • Lesser of $ for $ reduction or 1/3 reduction of SSI • Example: 1/3 reduction = [$698 x 1/3 = $292.67 + $20 disregarded income = $252.67]

23. Medicaid • Joint federal and state funded program for medical services • Means-tested benefit • States administer Medicaid 3 different ways: • 209b states • SSI states • 1634 states

24. 209b States • Example: Connecticut • Use at least one eligibility criteria more restrictive than SSI program

25. SSI States • Example: Alaska • If eligible for $1 of SSI, then eligible for Medicaid • States determine eligibility

26. 1634 States • Example: New York & Texas • Use SSI eligibility, if eligible for $1 of SSI, then eligible for Medicaid • SSA determines eligibility

27. Medicaid Services • Hospital – in-patient & out-patient • Physician services • Physical therapy • RX • SNF • Home and community • Community supported living arrangements • Personal care services • Case management services • Emergency care

28. Medicare Cost-Sharing Programs • For low-income Medicare beneficiaries • Vary according to income, Medicaid states and institutional status • May pay deductibles, premiums and co-pays of Medicare

29. Medicaid Long-Term Care Programs • Nursing Home Medicaid • Waiver Programs • Community Based Services • Personal Care Services

30. Three Prongs of Eligibility Criteria for LTC Medicaid • Categorical Requirements • US Citizen/lawful alien • 65 years of age or older, blind or disabled • Medical necessity • Medicaid facility, Medicaid bed • Income Test • Resource Test

31. Transfer of Asset Penalty • Cannot give assets away and qualify for means-tested public benefits • 5 year look back period for all states • Penalty rules vary by state • Disclaimer not okay

32. Purpose and Nature of Transfer Penalties for Means-Tested Benefits • If there were no restrictions, many individuals would become eligible for Medicaid by giving their assets away • The federal statute requires states to penalize transfers for less than fair market value • In Texas, the transfer penalty affects payments for institutional facility services and eligibility for home and community based waiver programs

33. Medicaid Estate Recovery Program (“MERP”) • Pursuant to OBRA ‘93 • States required to recoup funds expended on Medicaid recipients at death • MERP often affects homestead

34. Housing Choice Voucher Program (“Section 8”) • Federal housing subsidy • Means-tested governmental benefit • SNT not considered an asset for eligibility purposes

35. Low-Income Disability Payments Eligibility for Veterans • Meet a needs based test determining inadequate income for adequate care • Suffer from a permanent and total disability (100%) rating • Veteran must not have been discharged dishonorably • Must not be the result of misconduct • Served at least ninety consecutive days, with at least one day during wartime

36. Low-Income Disability Payments Eligibility for Veterans • Veterans with low incomes who are over age 65 are considered disabled • Unreimbursed medical expenses may reduce countable income

37. Low-Income Disability Payments Surviving Spouse of a Veteran • A surviving spouse is entitled to a lower pension, VA calls a “death benefit” • The Veteran must have met the previous requirements • The surviving spouse has not remarried • And, meets the requirements for the level of compensation

38. Low-Income Disability Eligibility Computation of Net Worth • The estate of the Veteran must be insufficient to support the Veteran • The net worth is the fair market value of all real and personal property • Except for the homestead and value of personal items within the homestead

39. Low-Income Disability Eligibility Computation of Net Worth • Case by Case analysis • No set amount or limit • Based on actuarial life expectancy and shortfall • $80,000 fallacy

40. Interaction of Low Income Disability Payments and Medicaid • Many elderly Vets and spouses may qualify • Allows elderly Vets to afford care at home or assisted living • Could be used to pay for care during Medicaid Penalty Period • Monthly cash assistance • Means-tested benefit • Beware of penalty period

41. Special Monthly Payments • Aid and Attendance – for Veterans who are unable to perform activities of daily living without assistance • Housebound Allowances – for Veterans who are permanently housebound and who meet the requirements for non-service connected disability pension

42. VA Health Care System • Largest healthcare network in the country • Service requirements • Financial eligibility requirements • Enrollment – 10-10EZ • Priority/ Status Groups

43. Benefits – Basic Package • Preventative Care Services • Ambulatory (out-patient) Diagnostic and Treatment • Hospital (in-patient) Diagnostic and Treatment • Medication and Supplies • Federal & State Veterans’ Nursing Homes

44. Supplemental Needs Trusts (“SNTs”) • Most common tool to protect resources • May be • Self-settled • Third-party settled • They supplement (but do not supplant) public benefits.

45. Who Needs a SNT? • Individuals who are disabled and need public benefits. • Family members of a disabled person who needs to maintain public benefits.

46. SNTs to Supplement NOT Supplant SUPPLANTING • Food • Shelter • Medical items or services paid by Medicaid SUPPLEMENTING • Medical needs not covered by Medicaid • Social needs • Recreational needs • Educational expenses

47. Self-Settled Trusts 2 types: • Special Needs Trust [(d)(4)(A)] • Pooled Special Needs Trust [(d)(4)(C)]

48. Self-Settled SNT (d)(4)(A) • 65 y.o. beneficiary’s own money • Corporate trustee • Payback provision • Settlor = parent, grandparent, guardian or court • Irrevocable

49. Self-Pooled SNT (d)(4)(C) • Beneficiary’s own money • Shared corporate trustee/ administered by non-profit • Payback provision • Irrevocable

50. Third-Party Settled Trusts • Testamentary or Inter-Vivos • Funded with third party funds • Not a resource, unless client can revoke the trust or direct use of its assets for his own support and maintenance • Distributions to/for client can be countable income (unless for medical/social purposes)