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THE INTERPLAY BETWEEN ABLE ACCOUNTS AND SPECIAL NEEDS TRUSTS

Posted by: Begley Law Group

by Thomas D. Begley, Jr., Esquire, CELA An ABLE account is an account established for the benefit of an individual with disabilities. While most people point to the fact that the earnings on the ABLE account are tax free as the chief benefit of these accounts, I believe that a much more significant advantage is that the individual with disabilities or a family member can control the money in the account. The purpose of the ABLE Act is to permit people with disabilities to save money in and withdraw funds from their ABLE accounts to pay for disability-related expenses, in […]

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PARENTS’ ESTATE PLANNING FOR PERSONAL INJURY VICTIMS

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by Thomas D. Begley, Jr., CELA  Personal injury victims frequently receive means-tested public benefits. They often establish Self-Settled Special Needs Trusts (SSSNTs) to hold the personal injury settlement, so that the settlement does not interfere with public benefits eligibility. However, it is important that parents not leave these children with disabilities monies as part of their estate plan. Parents should consider establishing a Third Party Special Needs Trust (TPSNT) and changing the beneficiary designations on their life insurance, retirement accounts and annuities accordingly. The parents cannot leave money to the SSSNT that may have already been established. The reason is […]

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WHAT IS AN ABLE ACCOUNT AND HOW CAN IT HELP PROTECT YOUR SSI CHECK?

Posted by: Begley Law Group

An ABLE account is a new device available to the disability community that allows a disabled individual to have a limited bank account without risking eligibility for their means-tested public benefits. ABLE accounts can receive $15,000 per year from all sources, and are capped at the maximum account size of a 529 College Savings Plan, which is determined by State law. An ABLE account is similar to a Special Needs Trust (SNT) in that it is not a countable resource for purposes of Medicaid eligibility. For purposes of SSI eligibility, an ABLE account is not a countable resource unless the […]

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THE IMPACT OF FUNDRAISERS ON BENEFICIARIES WITH DISABILITIES

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by Thomas D. Begley, Jr., CELA   Crisis and Kindness In times of crisis, people often show just how caring humanity can be. Major humanitarian relief efforts respond to large-scale natural and unnatural disasters. Strangers donate time and money to individuals injured in tragic accidents. Often, the first instinct upon learning that someone is hurt is to give money. Unfortunately, unbeknownst to the donor, this kind and selfless act can have devastating ramifications for the injured individual and his or her family. If the injured individual or a family member is receiving means-tested government benefits, such as SSI or Medicaid, […]

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FUNDING SPECIAL NEEDS TRUSTS

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA Overview Estate planning attorneys are regularly called upon to draft trusts for their clients’ children with disabilities. Typically, these children are determined to be disabled by the Social Security Administration and are receiving SSI, Medicaid, or other means-tested public benefits. The goal of the parent in establishing the trust is to maintain public benefits for the child with disabilities while providing an inheritance to enrich the child’s life. The inheritance is to supplement, not supplant, public benefits. There is an old adage that there are two ways to screw up a Special Needs Trust: […]

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DIVORCE AND PUBLIC BENEFITS

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by Thomas D. Begley, Jr., CELA Many divorces involve families in which a spouse or child has disabilities. Family law attorneys should always ask if this is the situation. In many instances, the individuals with disabilities are receiving public benefits and many other that may be eligible for benefits but are not aware of their eligibility and have not applied. For many means-tested public benefits, such as Supplemental Security Income (SSI) and Medicaid, there is an asset test of $2,000 in addition to an income test. Assets transferred from a healthy spouse to a spouse with disabilities, through equitable distribution, […]

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Depletion Management

Posted by: Begley Law Group

By Thomas D. Begley, Jr., CELA When a personal injury victim settles a case and the plaintiff is receiving certain public benefits such as SSL Medicaid, Medicaid Waiver programs, SNAP (Food Stamps), Section 8 Housing, or any other means-tested program, a Special Needs Trust is required. To qualify for a Special Needs Trust, the plaintiff must be disabled. How Lonn Should the Trust Last? Once the trust is established, the next issue is. How long should the trust last? The answer to that question depends, in part on how large the settlement is. If the settlement is small, the trust […]

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Making Special Needs Trusts Last

Posted by: Begley Law Group

By Thomas D. Begley, Jr., CELA When a personal injury victim receives a settlement, one of the biggest post-settlement problems is making the money last. If the plaintiff is receiving means-tested public benefits, the monies must be put in a Special Needs Trust. How long do the beneficiary and other family members need that money to last? When the size of the settlement is significant, best practices would dictate that a three-step process be followed: Counseling Session. Step 1 is a counseling session with the person with disabilities, the family members, if appropriate, the trustee, the attorney drafting the Special […]

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DeCambre Reversed

Posted by: Begley Law Group

By Thomas D. Begley, Jr., CELA Section 8 of the Federal Housing Act of 1937 provides a rental assistance program for low-income families and individuals. HUD pays rental subsidies so eligible families can afford decent, safe and sanitary housing. The programs are generally administered by Public Housing Agencies (PHAs). Generally, the family pays 30% of its adjusted monthly income for rent. Household income must be within the applicable limit established by HUD. The limits are based on family size and locality. Family members must be U.S. citizens or eligible aliens. There are income limits. Income includes Social Security and Disability […]

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Using Self-Settled Special Needs Trusts in Medicaid Planning

Posted by: Begley Law Group

By Thomas D. Begley, Jr., CELA Trusts for disabled individuals who have not reached age 65 and are funded with assets of the disabled person are authorized under OBRA-93.(1)  The trust is for the benefit of disabled persons.  The person much be under 65 at the inception of the trust.  While the trust must be established and funded prior to the beneficiary attaining the age of 65, it may continue after 65.  If the trust is funded with a structured settlement prior to the beneficiary attaining the age of 65, the trust remains viable even though payments from the annuity […]

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Disability Annuity Special Needs Trusts

Posted by: Begley Law Group

By Thomas D. Begley, Jr., CELA One of the trusts used in Medicaid Planning is a Disability Annuity Special Needs Trust (“DASNT”). A previous Straight Word article discussed a Disability Annuity Trust (“DAT”). These trusts are designed so that an individual can establish a trust and transfer assets to the trust for the benefit of a disabled child of any age or a disabled individual under age 65 without incurring a Medicaid transfer of asset penalty. The problem with that trust is that the assets in the trust are considered available for public benefit purposes. Therefore, if  a DAT were […]

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ALTERNATIVES TO A THIRD PARTY SPECIAL NEEDS TRUST

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA There are a number of alternatives to a Third Party Special Needs Trusts. These include the following: Disinherit a Child. The problem with this strategy is that one cannot be certain that public benefits, as we know them today, will continue forever. Many public benefits have been cut back in recent years and there is no guarantee that current benefits will not be reduced as well. Many parents who have severely disabled children, whose needs are covered by public benefits, will consider disinheriting the children, but they should be made aware that current public […]

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ABLE ACCOUNT, THIRD PARTY SPECIAL NEEDS TRUST AND POOLED TRUST: COMPARE

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA Below is a chart comparing an ABLE Account with a Third-Party Special Needs Trust.     ABLE ACCOUNT THIRD PARTY SPECIAL NEEDS TRUST OR POOLED TRUST Onset of Disability Qualifying disability exists prior  to age 26   No requirement Age of Beneficiary   No requirement No requirement Who May Establish   Beneficiary, parent, guardian, agent Anyone except beneficiary Number of Accounts   One per beneficiary Unlimited Fees   Financial institution fees Attorney and trustee fees Contribution Limits $14,000 per year (federal gift tax limit); total capped at state limit for 529 college savings accounts; SSI payments suspended when assets total $100K   Unlimited Investment Options Investment strategies may be changed […]

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SEVEN PLANNING CONSIDERATIONS IN THE CONTEXT OF SELF-SETTLED SPECIAL NEEDS TRUST

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA Availability. Assets in a Self-Settled Special Needs Trust (“SSSNT”) are not considered available for Supplemental Security Income (“SSI”) or Medicaid eligibility purposes. The reason is that the trustee is given sole discretion with respect to distributions from the trust. The beneficiary cannot control distribution or revoke the trust. Special needs language should be included for guidance to the trustee with respect to distributions. Transfer of asset penalty. There is no transfer of asset penalty for SSI and Medicaid, because there is a statutory exemption under 42 U.S.C. § 1392b and 42 U.S.C. § 1396p(d)(4)(A). Payback. A […]

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WHAT IS A THIRD PARTY SPECIAL NEEDS TRUST?

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA A Third Party Special Needs Trust is usually used in a Medicaid context not for the benefit of the grantor of the trust, but for the beneficiary. The grantor of the trust is typically a parent, but could be grandparent, sibling, other relative or friend. The grantor uses the grantor’s assets to fund the trust. The assets of the beneficiary cannot be used to fund a Third Party Special Needs Trust. In order for the trust to be a Special Needs Trust, the beneficiary must be disabled. Disability is usually determined by the fact […]

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USING SELF-SETTLED SPECIAL NEEDS TRUSTS TO PROTECT PUBLIC BENEFITS

Posted by: Begley Law Group

Many public benefits available to persons with disabilities, such as Supplemental Security Income (SSI) and Medicaid, place limits on income and certain types of assets. Exceeding such limits can lead individuals to lose some or all of their benefits. Individuals receiving SSI are limited to $2,000 of assets. For many individuals, their Medicaid is linked to their SSI. Today there are many Medicaid Waiver Programs. In many states the asset limit for these waiver programs is also $2,000, but this varies from program-to-program and from state-to-state. Assets held in ABLE accounts do not affect SSI until the ABLE account reaches […]

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COMPARISON BETWEEN A DISABILITY ANNUITY TRUST AND A DISABILITY ANNUITY SPECIAL NEEDS TRUST

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA The chart below is a brief comparison between a Disability Annuity Trust (“DAT”) and a Disability Annuity Special Needs Trust (“DASNT”). Consideration              DAT          DASNT Typical Grantor Parent/Grandparent Parent/Grandparent Typical Trustee Family Member (Non-Beneficiary) Family Member (Non-Beneficiary) Assets Available Yes No SSDI/ Medicare Yes Yes SSI/Medicaid No Yes Transfer Penalty No No HEMS Standard Yes No SNT Standard No Yes  

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CONSIDERATIONS IN DRAFTING A DISABILITY ANNUITY SPECIAL NEEDS TRUST

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA There are four main issues to be considered in drafting any trust involving a potential Medicaid recipient. These include: Availability; Transfer of asset penalty; Payback provision; and Tax considerations, including income, gift and estate taxes. Let’s examine each of these issues in the context of a DASNT. Availability. The assets in the DASNT would not be available, because the trust would be designed to give the trustee complete discretion with respect to distributions. Standard Third-Party Special Needs Trust language would be used in designing the trust. The standard DAT language would also be included. […]

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Medicaid Planning with Disability Annuity

Posted by: Begley Law Group

By Thomas D. Begley, Jr., CELA The Concept A sole benefit of trust is a creature of HCFA Transmittal 64.’ These trusts have traditionally been used in crisis planning. They can be established for the benefit of disabled persons—a Disability Annuity Trust (“DAT”).2 The idea is that assets would be transferred to an irrevocable trust for the sole benefit of the disabled individual. The assets in the trust were then paid out to the beneficiary on an actuarially sound basis using the actuarial tables contained in HCFA Transmittal 64.;i However, some states, including New Jersey, maintain that despite the clear language in HCFA Transmittal 64, the language in the statute “sole benefit […]

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DISABILITY ANNUITY SPECIAL NEEDS TRUST

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA One of the trusts used in Medicaid Planning is a Disability Annuity Special Needs Trust (“DASNT”). A previous article discussed a Disability Annuity Trust (“DAT”). These trusts are designed so that an individual can establish a trust and transfer assets to the trust for the benefit of a disabled child of any age or a disabled individual under age 65 without incurring a Medicaid transfer of asset penalty. The problem with that trust is that the assets in the trust are considered available for public benefit purposes. Therefore, if a DAT were established for […]

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ESTABLISHING A DISABILITY ANNUITY TRUST FOR A BENEFICIARY RECEIVING SSDI OR SSI

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA A Disability Annuity Trust (“DAT”) can be established for a disabled child or any disabled individual.[1] However, in considering the use of a DAT for a disabled person, care must be taken to examine the other government benefits currently being received, or which may be received in the future by the person with disabilities. If the person with disabilities is receiving Supplemental Security Disability Income (“SSDI”), this is usually accompanied by Medicare. SSDI and Medicare are insurance-based programs, rather than means-based programs. Receipt of income from the DAT would not cause a loss of […]

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WHAT DOES “SOLE BENEFIT OF” MEAN WITH RESPECT TO A DISABILITY ANNUITY TRUST

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by Thomas D. Begley, Jr., CELA The key issue concerning trusts “for the sole benefit of” is availability. In a private letter, HCFA, now CMS, has taken the position that a trust established for the sole benefit of a community spouse under HCFA Transmittal 64 is an available resource.[1] HCFA maintained that there is a material difference between a standard annuity and an “annuitized” trust. HCFA states: a standard annuity can protect the funds used to purchase the annuity from being counted as resources in determining eligibility for Medicaid. However, there is a fundamental difference between a standard annuity and […]

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DISABILITY ANNUITY TRUSTS

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA The Concept. A sole benefit of trust is a creature of HCFA Transmittal 64.[1] These trusts have traditionally been used in crisis planning. They can be established for the benefit of disabled persons—a Disability Annuity Trust (“DAT”).[2] The idea is that assets would be transferred to an irrevocable trust for the sole benefit of the disabled individual. The assets in the trust were then paid out to the beneficiary on an actuarially sound basis using the actuarial tables contained in HCFA Transmittal 64.[3] However, some states, including New Jersey, maintain that despite the clear […]

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COMPARISON BETWEEN TRANSFERS TO INCOME ONLY TRUSTS AND TRANSFERS TO CHILDREN

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA The following chart compares the advantages and disadvantages of an outright transfer of assets and putting assets in an Income Only Trust.   Trusts v. Transfers Comparison Issue           Income Only Trusts      Children Look-Back 5 Years 5 Years Control None None Risk Avoidance Yes No Estate Recovery Maybe No Income Tax Parent Children Gift Tax Maybe Yes Step Up in Basis Yes No Principal Residence Exclus. Yes No  

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TRUSTS/MEDICAID CONSIDERATIONS

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA There are seven Trust that should be addressed in considering Medicaid. These are: Revocable Trusts, Income Only Trusts, Children’s Trusts, Disability Annuity Trusts, Disability Annuity Special Needs Trusts, Self-Settled Special Needs Trusts, and Third Party Special Needs Trusts. There are seven considerations in drafting trusts. These are: availability of trust assets, applicability of a Medicaid or SSI transfer penalty, Medicaid payback provisions, good and bad assets for funding trusts, tax considerations (including income, gift and estate), estate recovery, and elective share issues. This chart is designed to address each of those issues with each […]

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Parents Establishing a Self-Settled Special Needs Trust For A Child: What Can Go Wrong?

Posted by: Begley Law Group

[An article originally published in the Straight Word, March 2016.] By Thomas D. Begley, Jr., CELA A Self-Settled Special Needs Trust is funded with the assets of the individual trust beneficiary. These trusts usually involve funds received as a result of a personal injury, inheritance, alimony, or child support. Under federal law, 1 a Self­Settled Special Needs Trust may be established by a parent, grandparent, guardian or court. In cases involving an adult with capacity court involvement is often unnecessary, so it is convenient to have the trust established by a parent or grandparent. In some states, such as New […]

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SPECIAL NEEDS TRUST, POOLED TRUST OR ABLE ACCOUNT: WHAT IS MY BEST CHOICE?

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA New Jersey has now enacted the Achieving a Better Life Experience Act (“ABLE”). It is understood that by Fall this Act will be ready for implementation. The question will then remain: “What is the best option? Should the parent intending to set aside money for a child with disabilities establish an ABLE account or a Third Party Special Needs Trust?” Generally speaking, if the individual would be the beneficiary became disabled prior to attaining age 26, then an ABLE account might be considered, if the account will be small. There is very little point […]

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MILITARY PENSIONS AND DISABLED CHILDREN

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA Historically, a member of the military could arrange for a pension and provide a survivor’s benefit to a spouse or child. A problem arose where the child had a disability and was receiving means-tested public benefits such as Supplemental Security Income (“SSI”) or Medicaid.   If the child with disabilities receiving those benefits or other means-tested public benefits received the pension, they would lose the benefits. This is because any income received from any source reduces the SSI income dollar-for-dollar, and if the pension exceeded the amount of SSI income, SSI would be completely lost. […]

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PARENTS ESTABLISHING A SELF-SETTLED SPECIAL NEEDS TRUST FOR A CHILD: WHAT CAN GO WRONG?

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA In an important case arising in South Dakota, the parents of Stephany Draper established a Self-Settled Special Needs Trust into which Stephany’s personal injury settlement was to be deposited. Prior to that case, this had been a common procedure used all over the country. However, the Social Security Administration (SSA) contended that Stephany’s parents did not deposit any of their own money into the trust, but simply arranged for Stephany’s personal injury settlement funds to be deposited. Therefore, SSA held that since Stephany’s money was used to fund the trust, then Stephany was the […]

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SPECIAL NEEDS TRUSTS AND MEDICARE SET-ASIDE ARRANGEMENTS

Posted by: Begley Law Group

by Thomas D. Begley, Jr., Esquire, CELA Generally, Medicare Set-Aside Arrangement (MSA) funds are deposited in a custodial account with a professional trustee or given to the client to self-administer. For cases less than $100,000, giving the funds to the client to self-administer makes sense. CMS has issued a letter of instructions to be delivered to the client who would be administering his or her own custodial account. Even if a client misuses the money, the personal injury attorney should be off the hook with respect to a subsequent malpractice claim. If the MSA funds are self-administered by the client […]

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