Estate Planning | Probate | Business | Corporate | Guardianship | Asset Protection

Marc J. Soss, Esq.


(941) 928-0310 | mjs@fl-estateplanning.com

Questions:


What if the adult child is already receiving SSI benefits?
An adult child already receiving SSI benefits should still check to see if benefits may be payable on a parent's earnings record. Higher benefits might be payable, and entitlement to Medicare may be possible.

What if the adult child is already receiving disability benefits on his or her own record?
An adult child already receiving disability benefits should still check to see if benefits may be payable on a parent's earnings record. It is possible for an individual disabled since childhood to attain insured status on his or her own record and be entitled to higher benefits on a parent's record.

What if the parent never worked?
No benefits would be payable on the record of a parent who never worked. 

----------------------------------------------------------------------------------


A Special Needs Trust may be created under the terms of another individual’s (parent, family member, friend, etc.) Last Will & Testament or Revocable Trust or a "self-settled" trust by the disabled individual (depending on the program for which he/she seeks benefits).  A self-settled trust comes in two forms: (i) a "payback" or "(d)(4)(A)" trust, and (ii) "pooled" or "(d)(4)(C)" trust. 

A "payback" trust is created with the assets of a disabled individual by his/her parent, grandparent or legal guardian or by a court. The trust must also provide that at the beneficiary's death any remaining trust assets will be first utilized to reimburse the state for Medicaid paid on his/her behalf.

A “pooled” trust is a consolidation of funds from multiple special needs individuals into one trust account.  At the beneficiary's death, so long as the funds are retained in the trust for the benefit of other disabled beneficiaries, no funds will need to be repaid for Medicaid expenses incurred.  

No funds may be paid from the Special Needs Trust directly to a beneficiary.  If that were to occur, the trust beneficiary would lose a dollar of SSI benefits for every dollar paid to him directly. In addition, trust payments to the beneficiary for food, clothing or housing are considered "in kind" income and SSI benefits will be cut by one dollar for every dollar of value of such "in kind" income. 


SPECIAL NEEDS TRUSTS & PLANNING


Special Needs Trusts | Supplemental Needs | Public Benefits

A Special Needs Trust (also known as a “Supplemental Needs Trusts”) provides a means for assuring that an individual with special needs has access to financial resources without limiting their qualification for government assistance, such as social security income, Medicaid benefits, subsidized housing and other need-based benefits. These trusts provide the caretaker (parent, family member, etc.) of the individual (adult or child) with special needs essential expenses, such as travel or vacation, entertainment, training programs, educational material, etc. Most SNTs are funded via gifts from their parents, life insurance proceeds or inheritances. Care must be taken if the trust is to be funded with assets personally owned by the special needs individual (as is the case with personal injury settlements). The typical plan provides for a testamentary trust whereby, upon the death of the caretaker, a trustee is appointed to hold the assets of the Special Needs Trust for the benefit of the special needs individual, paying special attention not to make available them  disqualified for governmental benefits and programs.


Critical Provisions: The terms of a Special Needs Trust should provide the trustee with discretion to make distributions of income and/or principal that are deemed necessary or advisable for the satisfaction of the beneficiary’s “special non-support needs” (those necessary to sustain the beneficiary’s good health, safety, and welfare) when, in the discretion of the trustee, those requisites are not being otherwise provided by a public agency, office, or department, or are not otherwise being provided by other sources of income available to the beneficiary. It is advisable to include a non-exclusive list of what special non-support needs may consist of, such as: sophisticated medical or dental or diagnostic work or treatment for which funds are otherwise unavailable, including plastic surgery or other non-necessary medical procedures; private rehabilitative training; dental care; and recreation and transportation. It is imperative, however, to specify that payment for such special non-support needs can only supplement governmental or private assistance or benefits programs and cannot replace them. This is key to ensuring the assets of the Special Needs Trust never serve to disqualify the beneficiary’s eligibility for the governmental assistance he or she may be receiving. Other crucial language in a Special Needs Trust includes empowering the trustee to take whatever administrative or judicial steps may be necessary to continue the public assistance program eligibility of the beneficiary (including terminating the trust), as well as specifying that the beneficiary may not appoint or assign the trust’s assets away, and that the assets are not available to the beneficiary except in the trustee’s discretion.


Selecting the Trustee: When determining who (individual or entity) should be appointed as the trustee and their successor of the Special Needs Trust the appropriate choice will depending each particular family’s situation a: (i) trusted family member or friend; (ii) bank or other corporate trustee; (iii) committee of individuals; or (iv) pooled account trust administrator.


Tax Benefits for Families with Special Needs Children: Tax benefits include: Deductions for expenses associated with sending a special needs child to a school or institution with a special curriculum for mentally disabled individuals. Deductible expenses include: lodging, meals, transportation, incidental education costs provided by the institution, costs of supervision, care, treatment, and training. Deductions for expenses associated with tutoring by a specially trained teacher, such as for therapeutic and behavioral support services. Deductions for medical conferences and seminars, including both transportation and conference fees. Deductions for medical travel and transportation. Deductions for unreimbursed medical expenses, to the extent the taxpayer itemizes the deductions and expenses exceed 7.5% of the taxpayer’s AGI.


Other Considerations: The caretaker should draft a letter ("Letter of Intent") outlining the special need child's individual needs. This letter can be given to the trustee of the special needs trust at the time of your death. This document gives family members and others the benefit of your knowledge about your child’s capabilities, needs and interests. The information should include the child's medical history, required medications, medical service providers, social contacts, skills and hobbies. Once completed, you can update the letter as necessary should the child’s needs change or should your goals for your child change. A typical letter of intent will include: · Biographical information · Financial details · Medical history and needs · Social contacts · Any negative influences you would like to guard against · Personality traits · Skills, hobbies and physical abilities · Goals your child is working toward. This little bit of forethought and planning can make your disabled child’s future potentially much brighter.


Public Benefits: 


Social Security Disability is an entitlement and available to an individual who meets the test for disability under Social Security regulations and either (a) has worked and contributed to Social Security or (b) was disabled from childhood and qualifies for Social Security Disability based upon the Social Security contributions of his/her retired or deceased parent. The disabled individual can have assets worth thousands of dollars and still qualify for this entitlement. Two years after first receiving Social Security Disability, the individual is entitled to Medicare coverage even if he/she is under age 65.


Supplemental Security Income (SSI) is a need-based program. The individual must meet the same requirements for disability under the Social Security regulations and, in addition, have very limited assets and income. He/she can own certain assets, considered exempt assets for SSI purposes, and still qualify for SSI. The most important of the exempt assets is the home. The purpose of SSI is to cover food and shelter. The general rule for the trustee of the Special Needs Trust is ''never pay out of the trust for the beneficiary's food and shelter and never give the beneficiary cash or anything easily convertible to cash.'' Deviation from this general rule is possible, but only by careful planning and implementation with the advice of counsel. 


Medicare and Medicaid: An SSI recipient is categorically entitled to Medicaid. Medicaid pays for most medical expenses not covered for the individual by Medicare and Supplemental Health Insurance. For many disabled individuals, Medicaid provides the only safety net.


Trust Fund Utilization: Items to be purchased: 1. Irrevocable Burial Trust: This is available through most funeral homes and mortuaries. An irrevocable burial reserve is not considered exorbitant if it exceeds the average local cost by no more than 25 percent. 2. Burial Plot: Which may include space for any members of immediate family as long as it includes the potential recipient. Furnishings and Necessities: 1. Prepayment of cable TV for one year in advance. 2. Special shoes, arch supports, elastic hose, incontinence supplies, extra pair(s) of glasses, hearing aids, hearing aid batteries, gel pad for chair or bed to prevent bedsores, egg-crate mattress. 3. Durable medical equipment: wheelchair, deluxe walkers, geri-chair, alternate pressure pump mattresses to prevent bedsores. 4. Blankets, bedspreads, knick knacks, hobby items, framed photos, pictures, plants, rocking chair (if facility has space and will permit). 5. TV, radio, combination VCR/DVD, audio tape recorder and books on audio tapes, telephone with variable volume and large print numbers and auto dial or a speaker phone. 6. Club or hobby memberships and magazines. Services: 1. Home care or other companion services to provide care or companionship and visitation in the facility or at home. 2. Massage therapists. 3. Psychologists, psychiatrists, counselors, therapists, and dental care. 4. Skilled care for which Medicare will not pay because the patient cannot be rehabilitated. The initial assessment should be partly covered by Medicare and if client will benefit in any way (i.e., reduction in deterioration, increased motivation to get well), occupational, speech, music or physical therapists can treat patient on private-pay basis. 5. Fresh flower delivery – especially for holidays. 6. Alternative medical care: acupuncture, hypnosis and relaxation therapies. Miscellaneous: 1. Trips and travel: Hire a wheelchair van or limousine to transport wheelchair-bound clients. If client is too frail to travel or even make local trips, send for old friends or relatives and pay for their trip to visit the beneficiary. 2. Pet care: If a client gave up a pet upon entering the nursing home and someone adopted the animal, pay for animal supplies, veterinarian bills, and hire the ''foster parent'' to bring the animal on visits. 3. Birthday Party. Residents at continuing care facilities can throw themselves and the other residents a birthday party and the resident will be the guest of honor – special foods, entertainment are permitted. Inheritance: It is important that any inheritance designated for the special needs child be directed into his or her special needs trust. This applies to funds inherited from any family member or third party. If the inheritance is distributed directly to the special needs child they will lose eligibility for government benefits until the funds have been exhausted. The trustee will then be required to reapply for government benefits and start the process all over again.


Special Needs Trust Tips: Don't disinherit the child with special needs. Carefully Consider the division of assets among the children. Understand the differences among Medicare, Medicaid, Supplemental Social Security Income (SSI), and Social Security Disability Income (SSDI). Choose the trustee of the SNT carefully. Parents should prepare a letter of intent to assist the trustee of the SNT. Include contingent special needs provisions in clients' estate planning documents. Include special language in a parent's revocable living trust. Include special language in a parent's general durable power of attorney. Parents should review all of their assets and beneficiary designations. Consider life insurance as a funding method for the SNT. Retirement plan assets may not work well. Coordinate other relatives' estate planning documents with the parents' third-party SNT. Don't forget the estate plan of the child with a disability and of any unmarried sibling of the child. What if the parent requires or may soon need nursing home Medicaid? Obtain a court order directing that child support be paid to a self-settled first-party SNT.


Special Needs Children May Receive Medicaid Coverage for Home Care If a special needs child applies for Medicaid and is living at home, some or all of his or her family members' income and assets will adversely impact the child’s eligibility for benefits. In contrast, if a special needs child requires care in an institutional or hospital setting, Medicaid will only count the child's income and assets for eligibility. A special needs child who requires an institutional level of care that can be provided at home, instead of in a hospital or other institution, may be eligible for the “Katie Beckett Medicaid Waiver program.” Under the program, if a child with special needs requires an institutional level of care that can be provided at home, and is otherwise eligible for Medicaid, they can qualify for coverage based only on his or her income and assets. The only limitation is that the cost of the Medicaid beneficiary's in-home care cannot exceed the cost of their care in an institutional setting.