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Lisa Nachmias Davis,
Attorney at Law



Davis O'Sullivan
& Priest LLC
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203-776-4400
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Content on Page updated on January 7, 2015

PLANNING FOR THOSE WITH SPECIAL NEEDS
JUMP to list of articles     JUMP down to my UPDATED pre-blog "blog"!      JUMP to helpful links

Tip:  Read the MANY useful articles in the Voice, publication of the Special Needs Alliance - you can also subscribe to receive it by email.

A family member's special needs may place an enormous financial and emotional strain on the individual and his or her family. 

A person whose needs arise out of a disability occurring during adulthood needs access to all available entitlement benefits--whether Social Security disability or Supplemental Security Income, state supplemental assistance programs, Medicare and Medicaid (Title XIX), property tax exemptions or income tax deductions--and must plan for his or her family at the same time.  A person with a mental illness arising during young adulthood may face special financial hardship, as government benefits do not adequately meet these needs.  The parents of a child whose needs arise out of a developmental disability may be especially concerned that after they are gone their child will still be protected as they have protected the child during their lifetimes.  In each case, the family will want to balance the desire to meet the special needs of one family member while still treating the rest of the family fairly. 

What are the answers to these problems?

Assistance in obtaining all available entitlement benefits. 

Estate planning with "special needs trusts," better titled "third party" or "supplemental needs trusts," to benefit the disabled person without affecting entitlements or depleting family resources for non-disabled family members.

Assistance in other types of special needs trusts, "payback" trusts, that can be established with an individual's own assets (or under ABLE legislation, that may be more practical than special needs trusts), but which pay the State back at death for medical assistance received during lifetime.

Involvement in settlement negotiations or damage litigation of lawsuits arising from a disabling injury, to ensure that entitlements are preserved and taxes saved before the ink has dried. 

Guidance through court procedures such as the Connecticut probate court proceedings for conservatorships  and for appointment of guardians of mentally retarded persons. 

Help locating private and non-profit sources of assistance including determining appropriate insurance -- supplemental insurance or "Obamacare" insurance under the Affordable Care Act. 

Planning for disabled individuals and their families requires a thorough knowledge of the law of entitlements (Social Security Disability, SSI, and state programs, as well as Medicaid and Medicare) and newly evolving insurance laws, as well as more traditional familiarity with tax law, the law of trusts, estates and probate, conservatorships and guardianships, and real estate law. A typical plan for an individual with a disabled family member might require drafting a Will and/or trust agreement, durable powers of attorney, living will and related documents, and designations of conservator in the event of future incapacity (for the individual) and "standby guardian" (for a developmentally disabled family member). Quite often, the plan will involve a "third party" supplemental needs trust for the family member with special needs, and then coordinating the plan to direct all payments for that individual's benefit through the trust. If the amount is small, other options might be an "ABLE" account or a pooled trust account.  The plan will generally require evaluating the effect on Title XIX eligibility of planned gifts to family members and rights under Social Security or Medicare. Finally, when planning has not been done, and the estate passes directly to an individual with needs-based entitlements, it may be necessary to establish a so-called "OBRA '93" or "payback" special needs trust, ABLE account or pooled trust, in orer to enhance the quality of life of the disabled person, while maintaining eligibility for benefits. Or it may not be necessary -- it will be important to be sure, since the trust options have restrictions that should not be undertaken lightly.  The disabled client and his or her family must be sure that his or her attorney is knowledgeable in all of these areas and does not apply a one-size-fits-all solution.

"Blog" of News Items (begun before they invented blogs)

The ABLE Act, good or bad?  Recent legislation, the Achieving a Better Life Experience Act, authorizes states to set up ABLE plans -- similar to 529 plans -- that will not be counted as assets for needs-based benefit plans, will not incur income taxes, and -- more importantly -- distributions from which (for "qualified disability expenses," including housing) will not affect needs-based benefit plans.  Drawbacks are many:  Only one account per person; Person must be severely disabled before age 26; the state must set up the plan and designate a custodian; no more than $14,000 per year total contributions; no more than $100,000 can be excluded as an asset; only certain distributions won't affect benefits; and on death, what remains passes to the State to the extent of Medicaid benefits received by the individual.  Read the excellent articles by my colleague and co-author Robert Fleming:  The ABLE ACT, Part I and Part II, and subscribe to stay tuned for more. 

Trusts and IRAs:  Just wrote a new article explaining the arcane rules that apply when you want to name a trust as beneficiary of your IRA or retirement plan, "Naming a Special Needs Trust as Beneficiary of your IRA or Retirement Plan"  (published in the August, 2014 edition of the Voice, the newsletter of the Special Needs Alliance)

HUSKY D (Connecticut term) is low-income Medicaid -- based only on "tax" income ("MAGI") for those aged 19-64 who aren't on Medicare -- this form of Medicaid has no asset test and eff. 1/1/14, no estate recovery -- no payback at death for benefits received during lifetime.  Husky D covers all the same things as "regular" Medicaid including vision and dental care. However, a person on Husky D during his or her first 24 months of Social Security Disability (before Medicare is available) will face a rude shock when Medicare kicks in. True, Medicare is not needs-based or income-tested at all -- that's great.  Also true -- Medicare savings plans (QMB, SLIMB, ALIMB) are based solely on MAGI income as well, with no asset test; those with higher income can purchase a Medicare supplemental policy. The PROBLEM  is that Medicare and the MSPs are not as comprehensive as Husky (Medicaid). In order to be eligible for Husky C (the Medicaid that is available to someone not eligible for the other Husky programs including Husky D), individuals are limited to $1,600 of "counted assets" and have a "spend down" or deductible if income exceeds certain low thresholds.   In effect, the newly disabled will have 24 months to plan what to do with any assets they have or may receive, or whether they will put up with Medicre and QMB and pay privately for dental, vision, and any special waiver services that are only there for those on Husky C.

(REVISED) Will there be "estate recovery"?  Under Medicaid rules, when a person receives Mediciad benefits OVER AGE 55, or at any age for care in a skilled nursing facility, the State will file a claim for reimbursement against that person's estate. The State of Connecticut implemented low-income adult Medicaid as early as 2010.  Although recent legislation prohibits "estate recovery" for those receiving Husky D eff. 1/1/14, if you benefited from Husky D prior to 2014, and were over 55, remember that your home and other assets will have to repay the State when you die. (Unless exceptions apply:  no recovery if you are survived by a spouse or minor or disabled child.)   This problem could also arise for grandparents caring for grandchildren who receive Husky A if the grandparent also receives benefits.

Check out NAMI's useful "Special Needs Estate Planning System" introduction to special needs trusts, with a host of useful pointers for those planning to establish a trust for a loved one.  Walk through it (and consider a donation to NAMI).

(REVISED) QMB and other Medicare Savings Plans, pros and cons.  "QMB" is a benefit for low-income individuals who receive Medicare.  An individual receives Medicare after 24 months of eligibility for Social Security Disability Income (SSDI) (or sooner, with some disabilities).  However, Medicare has many gaps and deductibles and the "Part B" (doctor) coverage premium costs $105/month or more.  People who dont' sign up for Medicare when eligible can also face higher premiums.  All Medicare Savings Plans take care of the Medicare premiums.  QMB is a "Medicare Savings Plan" that pays the Medicare B premium (even Medicare A, if applicable) and ALSO pays the copays and deductibles for care from health care providers that participate in Medicaid.  Those eligible for any of the Medicare Savings Plans are automatically  eligible for the Low-Income Subsidy for Medicare Part D (the prescription drug benefit under Medicare) -- which means no premium is paid for the standard prescription drug plan coverage, copays are small or nonexistent, and the "doughnut hole" in coverage -- where some Medicare Part D members must pay up to $3,000 or more for drugs -- does not exist.  As early as October 1, 2009, there was  no asset test for any Medicare Savings Plan  (in Connecticut) and no estate recovery -- no obligation to repay benefits -- from the recipient's estate at death.  In Connecticut, any single person receiving Medicare who has income of $2,053.03 or less (2014 figures) is eligible for QMB, and someone with as much as $2,393.58 can get the ALIMB Medicare Savings Plan.  Check for updates on the figures at www.CTElderLaw.org or the DSS siteThe point is -- if an individual has Medicare, and lives in the community, (s)he may not need to worry about complying with the strict income and asset limits of the Medicaid program in order to get medical care and almost all prescriptions covered.   No more need to worry about the "spend-down" -- no more need to worry about staying under $1,600 per month.  You apply for QMB with a super-simple form:  click HERE (PDF file, fillable).  If you are already on Medicaid and eligible for QMB or another Medicare Savings Plan, your case worker should automatically include that benefit, but doesn't always do it.  For the list of "benchmark" Part D (prescription) plans, click HERE to get the PDF file (may not be up to date). TthThe point is: even if you "lose Medicaid" or get told you have a huge spenddown, if you have QMB and live in the community, you may not care that much.  Caution:  doctors CAN discriminate and decide not to accept you if they don't participate in Medicaid or even if they do but don't want to accept what the QMB pays.  The problem is that if you have QMB they are not allowed to charge more than the Medicaid rate, which for specialists will be a LOT less than the Medicare rate letalone the private rate.  ASK YOUR DOCTOR FIRST if they can still treat you if you get QMB.  If not, you may instead find it worthwhile to pay for supplemental coverage and put up with the $105 premium.

Tax info in article written for the Special Needs Alliance newsletter,the VoiceI was fortunate to be asked to join the Special Needs Alliance four years ago, in 2006 - a national network of attorneys who work with special needs trusts and help disabled individuals and their families.  A couple of years ago, as a contributor to Exceptional Parent magazine on behalf of the Special Needs Alliance, I was finally able to summarize my thoughts on the difficult issues of choosing a trustee for a special needs trust and taking care that you really understand what you are signing, in my article Absolute Discretion: Understanding the Trustee Provisions in Your Child's Special Needs Trust. My partner Shawn O'Sullivan and I wrote a concise summary on the way these trusts are taxed, "Taxes and Special Needs Trusts." Sign up to receive the Voice on the Alliance's website. 

A COURT DECISION, Corcoran, explains how trust language can cause the trust beneficiary to lose government benefits.  This decision relies in part on a STATE LAW that has now been in effect for a few years.  The short summary:  if a trust is for someone's "support" then no matter what else the trust says, the trust will be treated as available and affect benefits.  If it doesn't say "support"and the beneficiary has no right to require the Trustee to use the funds for support or medical expenses, and the trust is not established by the beneficiary or spouse, it should not affect benefits, and can remain in place to improve the beneficiary's quality of life as discussed in my article,"How Should the Family of a Disabled Individual Design an Estate Plan?  Part I.

BAD NEWS FOR THOSE ON STATE SUPPParkhurst v. Department of Social Services is a BAD CASE for someone living in a group home or "residential care home" or otherwise receiving State Supplement benefits.  The decision says that if someone sets up an "OBRA '93" payback trust -- described in my article Part II. -- funding of the trust is a TRANSFER under the state supp. program and will cause a potential loss of benefits if you are already a recipient or apply within 2 years; and at the same time the trust is an AVAILABLE ASSET that may cause loss of benefits if the trust assets still remain.  This means that if you have an accident and bring a lawsuit, you may not get much benefit out of the proceeds unless the proceeds are substantial. 

DANGER:  STATE LAWS VARY WIDELY.  Before planning for a family member who lives outside Connecticut, you MUST consult a local attorney familiar with the intricacies of benefits law and trust law in that state.  What is perfect for a trust in Connecticut can be deadly in New Jersey, or Ohio.  Do not try this at home.  You can find an attorney familiar with this are of law on the website for the National Academy of Elder Law Attorneys, naela.com.  Many elder law attorneys also practice in the area of special needs trusts.

How To Help Someone on SSI.  Did you know that when someone is receiving SSI or Medicaid, a family member can often pay for items and expenses DIRECTLY without affecting benefits?  And that a family member can even pay for FOOD or SHELTER (for example, rent) and the SSI benefit will only go down by 1/3 of the maximum SSI benefit + $20?  For example, if the maximum were $733, that would be only $244.33.  Obviously $244.33 is still $244.33, but if the rent is $800, what makes more sense?  If the person doesn't get SSI but Social Security Disability instead, then it won't affect the Social Security Disability payment by one cent, and almost certainly the payment isn't going to affect Medicaid eligibility either. So the $800 paid to the landlord won't change a thing about the individual's benefits.  By contrast, if the family member gives the person $800 in cash, (s)he will lose ALL SSI and affect Medicaid too. Moral:  CASH HELP IS BAD.  PAYMENTS "IN KIND" ARE GOOD.
 --->  CAUTION:  These statements are generally true but may not be true in any given state; payments may also affect eligibility for benefits other than SSI or Medicaid, so when in doubt, TALK TO THE CASEWORKER. 

Announcement from the Social Security Administration:  "New Tool Helps People Complete Disability Form:  When an adult applies for disability benefits, we complete a Disability Report (SSA-3368).  The form helps us obtain information about an applicant's condition, and is the key to obtaining medical records.  Now you can get tips right over the Internet on how to best complete the 3368.  Just click on any section of the form and you'll get a "plain language" explanation of what we're looking for, why we need the information, and how your answers help us decide if you can get disability benefits.  This new tool is your key to having the Disability Report completed before your appointment.  To take a look, visit http://www.ssa.gov/disabilityformhelp/." 

 Connecticut's "Working While Disabled" Medicaid Program.  Also known as "SO-5," this sub-category of the Mediciad program in Connecticut started in 2000 and provides another alternative (besides QMB, for SSDI recipients) to help avoid the annoying "spenddown" problem.  Under SO-5, individuals with a "disabling condition" may continue to qualify for Medicaid if they are working, even with (a) income up to $75,000 per year and (b) countable assets of up to $10,000.  However, at higher levels of income they will contribute to the cost of care by paying a premium computed as 10% of income (including spousal income) exceeding 200% of the federal poverty limit.  Even self-employed individuals may qualify if they earn enough to pay self-employment tax-- $450/year. 

For further information on entitlement programs available to the disabled, send email to davis@sharinglaw.net, or write to me at the address shown.  I can only provide general information, and will not provide advice about a particular case without a formal engagement. Writing to me does not create an attorney-client relationship.

Sites and resources of interest -- click to read more.

A list of important cases, many of them relating to Supplemental Needs Trusts.

List of articles referred to on this page:

DISCLAIMER:  THIS INFORMATION IS NOT PROVIDED AS  LEGAL ADVICE AND CREATES NO ATTORNEY-CLIENT RELATIONSHIP.  NO ENDORSEMENT IS INTENDED BY ANY REFERENCES HEREIN.  PLEASE CONSULT YOUR OWN LEGAL AND FINANCIAL ADVISORS BEFORE TAKING ANY ACTION. 

I can only provide general information, and will not provide advice about a particular case without a formal engagement. Writing to me does not create an attorney-client relationship.
 

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Lisa Nachmias Davis
Davis O'Sullivan & Priest LLC
Attorneys at Law
129 Church Street, Suite 805
New Haven, CT 06510
Phone: 203-776-4400
Fax: 203-774-1060 or 776-4411
davis@sharinglaw.net