Chapter 8 - Estate Planning for Special Needs Families

Question 1

Durable Power of Attorney

Answer 1

Directs an agent to act on behalf of an incapacitated principal. Power stays active even if a person becomes incapacitated (POA doesn’t.)

Question 2

Living Will

Answer 2

Important things that people want after life wishes to be done. Healthcare choices, Living situation.

Question 3

Letter of Intent

Answer 3

Not legal document. Where they want to live.

Question 4

Residential Care

Answer 4

Where they prefer to live. Adult foster…

Question 5

Government Benefits

Answer 5

Medicaid - needs-based, eligibility based on resource test.
Supplemental Social Security - needs-based, eligibility based on resource test.
Social Security Disability Income - not needs-based.

Question 6

How is a Disability Defined by SSA?

Answer 6

• Same as SSI and SS for 18+.
• Disability must be determined by a medical professional that is mental or physical which results in no gainful activity and can be expected death or last for a continuous period, not less than 12 months.
• Under 18? Must be medically determined mental or physical and will end in death or has lasted and will last for longer than 12 months.

Question 7

Supplemental Security Income (SSI)

Answer 7

• Financially needy, elderly, blind, and disabled (can receive up to $783 monthly.)
• Resource limit (or how much they can make per month). $2,000 for single and $3,000 per couple.
• Parental income deemed available for children under 18 living with parents.
• People who qualify for SSI will automatically receive Medicaid. (apply when kids are 18)

Question 8

Items Excluded from Resource Test (not counted as assets)

Answer 8

• Principal Residence.
• Funds from the sale of the home if those are reinvested in a new home in a timely manner.
• One vehicle
• Burial plots or spaces held for indiv. spouse or family.
• Certain prepaid burial contracts
• Household goods and personal items.

Question 9

SSI Threshold (What is not counted as income for SSI Program)

Answer 9

• First $20 in monthly income
• First $65 of 1/2 of earnings over $65 received in a month.
• SNAP, Food Stamps
• Income tax refunds
• Small amounts of income are received irregularly or infrequently.
• Grants, scholarships, or gifts used for tuition / educational expenses…
• Food or shelter based on need provided by nonprofit agencies.

Question 10

Medicare vs. Medicaid

Answer 10

Medicaid - needs-based admin… by state, generally available for individuals that are eligible for SSI. Medicaid pays for nursing homes, certain extended and catastrophic illnesses.
Medicare - 65+ (if you are eligible for SSDI you will become eligible for medicare)

Question 11

Ineffective (DO NOT DO THIS) for getting Govt. Benefits

Answer 11

• Do not transfer resources out of disabled persons name. (Medicaid and SSI lookback (36-60 months) 5 yrs
• Gifting to the indivi with a disability. (will result in disqualification from Medicaid and SSI, unless gifts are made into an UGMA account.

Question 12

Effective ways to getting Govt. Benefits

Answer 12

• Special Needs Trust
• UGMA/UTMA Accts
• ABLE Accts. (income grows tax-free and funds can be used for qualified disability expenses. Funds are not counted as resources.)

Question 13

Special Needs Trust

Answer 13

• Set aside for special needs care without disqualifying the individual from govt. benefits. (Distributions can only be made for expenses not already covered by govt. benefits (supplemental benefits)). Hobbies, personal care, quality of life expenses.
• Distributions for food, medical costs , shelter are not permitted under the trust document

Question 14

1ST Party (Special Needs Trust)

Answer 14

• Created by Guardian, family member, or beneficiary with capacity using the disabled individual’s assets.
• Holds “disqualifying assets” of bene in special needs (can be funded by damages)
• Payback trust (Medicaid reimbursements) are required to pay back Medicaid when the bene dies with the remaining trust funds. (if any money remains it can be bequeathed by the bene.)
• Beneficiary must be under 65
• Distributions are counted as RESOURCES….

Question 15

THIRD-PARTY (Special Needs Trust)

Answer 15

• Created by Donor using the donor’s assets.
• Designed as a part of the donor’s estate plan to receive gifts that can help the family member with special needs with the donor is still alive and manage an inheritance for the person with special needs when the donor dies.
• No Medicaid payback requirement
• Donor may bequeath remaining trust funds
• Often funded with ILIT

Question 16

THIRD-PARTY (continued SNT ILIT)

Answer 16

• Funded with Insurance covering life or lives of parent of the bene with special needs.
• Supplemental benefits lang. (does not supplant public benefits)
• Benefits indivi. with disability during lifetime and others at death (remainder)
• Trust provision to preserve trust assets for remainder bene (prevents state from forcing distributions to the invid. with special needs during their lifetime so as to no disqualify the bene for public benefits). Does not force DIST.
• Avoid Crummey powers
• Assets that do have Crummey are available resources for jeopardizing SSI and Medicaid.
• A lapsing Crummey power would be treated as income to the extent of withdrawal powers for that month held - potentially jeopardizing SSI and Medicaid.
• Provide Crummey powers to other bene not having SSI and Medicaid issues.

Question 17

Pooled Trust

Answer 17

• Run by non-profit
• Holds “disqualifying assets” of bene with special needs (can be funded with damages…lawsuit)
• Benefit of multiple individuals with special needs.
• When a bene dies, trust funds remain in the trust for the bene. of other benes.
• No Medicaid payback
• Managed by experts.

Question 18

ABLE ($300k max) Acct vs. SNTs

Answer 18

• ABLE is flexible, less complex, and less costly.
• ABLE acct owners have discretion over accts $$$: SNT trustees manage funds to trust terms.
• ABLE acct doesn’t require the payment of fees to maintain the acct., unlike a trustee fee.
• ABLE accts complement a SNT, but they don’t replace them. (Although it depends on the needs for the client)