Introduction to Special Needs Planning Harry S. Margolis September 15, 2010

1. Academy of Special Needs Planners Presents:Public Benefits, Trust Drafting and ImplementationSponsored by: Introduction to Special Needs Planning Harry S. Margolis September 15, 2010

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

4. 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

5. 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

6. Public BenefitsSupplemental Security Income • Restrictive • $2,000 limit on countable assets • Federal benefit level plus state supplement • Dollar-for-dollar income offset (after $20 disregard) • In-kind income • Upper limit on reduction for housing and food

7. 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

8. 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

9. Veteran Benefits • Veterans with disabilities may receive benefits for: • Service Connected Disabilities • Non-Service Connected Disabilities • Income and Resource limitations apply • SNTs not currently recognized by the Veteran’s Administration

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

11. 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

12. Trusts Structure: • Succession of trustees • Trustee oversight • Care committee • Trust protector • Succession of beneficiaries • Power of appointment • See ASNP Model Trust

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

14. 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

15. (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

16. (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 of state for Medicaid expenditures made

17. (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

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

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

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

21. 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

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

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

24. 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

25. 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

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

27. 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

28. 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?

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

30. Who will take over from parents?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

31. Academy of Special Needs Planners Presents:Public Benefits, Trust Drafting and Implementation Sponsored by: Harry S. Margolis Margolis & Bloom, LLP Boston, Dedham, Framingham & Woburn hsm@margolis.com www.margolis.com