Archive for the ‘Special Needs Planning’ Category

Ask anyone with a Social Security disability determination for a quick description of the process and be prepared for something like: Agony. Or glacial. Or maddening.

There may be a glimmer of hope for some. On February 12 the Social Security Administration added to the list of conditions that will be considered under the compassionate allowance program, which is a fast track approach to making disability determinations. Among those conditions is early (young age) onset Alzheimer’s disease. More on that below.

Why This Might Be Important

Social Security disability determinations are important for a number of reasons. As most know, all those years of payroll taxes fund a mandatory federal retirement benefit called Social Security. Work enough, turn 62 or so, stop working and collect retirement benefits. But what of the younger worker who becomes disabled?

Social Security Disability Income benefits are essentially an advance payment of retirement benefits for the younger disabled (former) worker. The extra income is nice, but the added bonus is that two years after Social Security says the disability began the (former) worker also collects Medicare. (Why a two year wait? It’s a mystery.)

Medicare is the mandatory federal health insurance program that normally goes along with the Social Security retirement benefits. That can be a godsend for the disabled individual who is no doubt racking up medical bills and may have no other health insurance (remember, she hasn’t been working a few years).

A Social Security disability determination is also important for the younger disabled person who is truly destitute (she can’t work, she’s disabled, and she doesn’t have any significant work history). Supplemental Security Income is a small benefit with all sorts of strings attached. But it has one very important feature: The doors to Medicaid instantly swing open. Medicaid is the federal health insurance program for the poor disabled.

Getting One Is Another Matter!

Getting the determination is another matter and not for the faint hearted. Years of budget cuts and under staffing have taken a toll. Overworked and under trained caseworkers make erroneous decisions and often do not understand what they are doing.

Good administrative law judges (the ones who straighten out the decisions made by the overworked and under trained caseworkers) are overwhelmed. Getting on a judge’s docket can take months . . . up to a year.

A final decision can take years. The process is so complex that lawyers can actually make a living at it . . . why else are all those ads on TV?

Cutting Through The Mess . . . For Some

That is why the compassionate allowance program can make such a difference to someone with a listed condition. Social Security Administration has determined that the conditions shown are easy to prove with a simple records review. Experience has also shown that people suffering from the listed conditions always win . . . eventually . . . a determination.

So, the thinking goes, why not fast track those conditions. Early onset Alzheimers disease is now one of those conditions. A break for those with a heartbreaking condition.

For a full list of the listed conditions go to www.ssa.gov/compassionateallowances. There are 88 conditions listed. Someone lucky (or unlucky) enough to be on the list may be on the way to a speedy determination.

Coastal Senior is a monthly periodical covering the South Carolina and Georgia low country.  Bob Mason is its legal columnist.

Last month Legal Lines looked at the best way to leave assets to a disabled child. In that case, someone other than the disabled child is setting up a trust and funding it with assets that are not those of the disabled child. The typical situation is a parent setting up a trust under a will or perhaps immediately while the parent is alive.

What if a disabled person already has assets? Perhaps the disabled person has inherited property. Or maybe a settlement of a personal injury case has left the disabled person (temporarily) flush.

This could be a real problem. Such a person may have huge medical expenses. If a disabled individual on Medicaid comes into a “windfall”, such as a personal injury settlement or an inheritance, those assets will quickly disappear after the person has been tossed of Medicaid for having too many assets.

In many cases access to government entitlement benefits — whether Supplemental Security Income, state supplemental assistance programs, or Medicaid – is critical. How does one remain eligible for these valuable resources without first becoming impoverished?

The answer: By placing his or her property in another kind of special needs trust, a so-called “OBRA ‘93 Trust” or “payback” trust, the individual will remain eligible for many important benefits, including Medicaid. The catch is that upon the beneficiary’s death, the Medicaid benefits must be repaid, with only the balance passing to other family members.

During the individual’s lifetime, however, the difference between an OBRA ‘93 Trust and no trust can be the difference between having training and educational opportunities, a computer, music, regular outings and a vacation, and living a life of poverty or dependency.

The requirements of an OBRA ‘93 Trust are simple. It must be established for the lifetime benefit of someone under age 65 who is disabled or blind. It must also provide for pay-back of Medicaid benefits paid by the state. In addition, only parents, grandparents, courts, or “guardians”, not the disabled individual directly, may establish a pay-back trust.

When deciding to establish an OBRA ‘93 trust, the disabled beneficiary’s specific needs and the effect of the trust on the individual’s benefits must be taken into account. Also, in the context of a personal injury settlement, many common settlement options (such as annuities) may render an OBRA ’93 trust impossible. Because of this, early planning is a must when damages for a personal injury are involved.

Administration can be difficult. Also, for people with no parents, grandparents, or guardians available to establish a trust, these trusts may be unavailable. In that case, a community or pooled trust may be the answer. They work very much like pay-back trusts, but are administered by non-profit community-based trustees and are “pooled” with the trusts of other disabled beneficiaries. When the beneficiary dies, the assets either “pay-back” Medicaid or can be retained in the trust to provide for other beneficiaries in the community.

This is an exceedingly complex area of the law. I’ve tried to simplify it. Whatever you do, get good advice!

Coastal Senior is a monthly periodical covering the South Carolina and Georgia low country.  Bob Mason is its legal columnist.

An old rule says “Never say never”. Let’s break that rule. The parents of a disabled child should never disinherit that child simply because she is disabled. Never.

There is a better way.

Parents of a disabled child want to ensure that the child will receive adequate financial protection while at the same time providing equitably for other family members. Maybe a parent is worrying about her own nursing home care but wants to insure her assets can be used for her disabled child.

An inheritance left directly to a disabled child will soon be gone.

Sadly, many parents (with inadequate or no advice) simply leave everything to the “non-disabled” children with the hope those children will “look after” their disabled sibling. Not good. Unfortunately, greed, divorce, lawsuits or carelessness can throw this plan awry.

A “special needs trust” might be a great alternative. The trust holds the assets for “supplemental needs” only, and should not affect the disabled individual’s eligibility for entitlement benefits or be accessible to the individual’s creditors, including the government.

The idea is to supplement, not reduce or replace, entitlement benefits that may be available to the disabled individual. If no benefits are available, the trust assets stand ready to help. If the available benefits do not provide adequately for the beneficiary’s needs, the trust assets will fill in that gap.

Even if the available benefits adequately cover material needs, the trust assets may be used to enrich the beneficiary’s quality of life without jeopardizing the much-needed benefits. Finally, to the extent that the assets are not used during the beneficiary’s lifetime, they may pass to other family members.

If the disabled child is receiving benefits such as Supplemental Security Income or Medicaid, the trust will need to be submitted for approval to ensure that the trust meets the many rules that apply. After all, the goal is to maintain benefit eligibility without having the trust assets “count”.

A parent may set up such a trust one of two ways. First, a trust may be established at anytime while the parent is alive. The drawback, of course, is that the parent may be tying up assets that he may want to keep available for his own support in case he needs them. Also, the parent may not want to contend with submitting the trust for approval and may not want to deal with people like me (lawyers). For a parent about to go into a nursing home and on to Medicaid himself, however, such a trust can be a great planning technique.

Second, a parent can insert such a trust into the terms of his last will and testament. He can avoid the hassles listed above and let the executor, named trustee and his child’s guardian worry about the details later. These trusts can be tricky. Make sure you get expert help.

Drop in next month to read about a similar type of trust a disabled person can set up directly with her own funds.