0. Introduction to Special Needs Trusts and ABLE Accounts
Estate Planning for Disabled Beneficiaries
March 2017

1. Introduction: What is a Special Needs Trust and How Does it Relate to Government Benefits?

2. Definition of Special Needs Trust
A SNT is a type of trust created for an individual who is or who may become disabled and who is or may be the recipient of “means-tested” or “needs-based” government benefits.
The purpose of the SNT is to maximize the availability and continued eligibility for “means-tested” or “needs-based” government benefits.
Funds used to supplement income from “needs-based” government benefits and can provide for medical and personal needs not covered by benefits.
Confidential. Please see the disclosures at the end of this presentation. 2

3. Government Benefits

4. What are “means-tested” or “needs based” government benefits?
A disabled individual may be eligible for local, state and federal benefits based on disability. Likewise, a qualified elderly person may be entitled to long-term care services paid for by the government.
Some benefits like Social Security Disability Income (SSDI) and Medicare are government programs that are not dependent on financial need.
Other benefits like Supplemental Security Income (SSI), Medicaid, HUD housing and food assistance are a function of financial need and require that the recipient be basically “poor”.
Confidential. Please see the disclosures at the end of this presentation. 4

5. Government Income Program Government Health Care Coverage
Overview of Government Benefits
Government Income Program
Government Health Care Coverage
Social Security and Social Security Disability Income (SSDI) – eligible based on work history (or the work history of a family member)
Medicare - eligible based on work history (or the work history of a family member)
Supplemental Security Income (SSI)
– needs based
Medicaid – needs based
Confidential. Please see the disclosures at the end of this presentation. 5

6. Eligibility for Social Security Disability Income/Medicare (not based on financial need)
Entitled to SSDI if:
Under full retirement age;
Has at least 20 credits in the 40 quarter period ending with the quarter in which the individual became disabled and is fully insured.
Is disabled
Entitled to Medicare if:
65 or older and are entitled to regular Social Security;
65 or older who might otherwise be ineligible for regular Social Security but who privately purchases Medicare and pays monthly premium;
SSDI beneficiaries are entitled to Medicare Part A after 24 months of disability.
Confidential. Please see the disclosures at the end of this presentation. 6

7. Supplemental Security Income and Medicaid
(benefits based on financial need)
SSI – Purpose is to provide financial aid to the blind and disabled whose income and countable resources do not allow them to meet the costs of food and shelter.
Not based on employment record or relationship to insured worker.
Paid a flat monthly benefit (max amount for 2017 is $735 monthly)
May qualify for SSI and SSDI if SSDI is less than max SSI benefit.
SSI monthly payments very low. But SSI automatically qualifies beneficiary for Medicaid.
Confidential. Please see the disclosures at the end of this presentation. 7

8. Supplemental Security Income and Medicaid
(benefits based on financial need) continued
Medicaid Purpose – safety net to pay for necessary medical and long-term care for those eligible individuals whose income and countable resources do not allow them to meet costs of medical needs.
Income and Resource test to qualify for SSI and Medicaid are difficult to meet:
Generally income received in a month reduces the SSI payment dollar for dollar
Individual cannot have countable resources in excess of $2,000 ($3,000 if married) – cash, liquid assets, real or personal property
Non countable resources – personal residence (regardless of value); household goods and personal effects, one vehicle, life insurance, prepaid funeral costs
Confidential. Please see the disclosures at the end of this presentation. 8

9. Special Needs Trusts

10. Two Types of Special Needs Trusts
Third Party SNT – created and funded with money of someone other than the disabled beneficiary for the benefit of the disabled beneficiary.
First Party SNT – transfer of disabled person’s own assets to a trust for his/her own benefit.
Two main types of First Party SNTs
Under age 65 disability trust
Pooled asset trust
Confidential. Please see the disclosures at the end of this presentation. 10

11. Third Party SNTs
Typically funded through a will at death with funds from a parent or grandparent.
Third Party SNT may have other beneficiaries (e.g. income to the disabled child and other children as principal beneficiaries).
Regular will or estate plan can set up a SNT in the event a beneficiary becomes disabled.
Language of the trust needs to be restrictive. Trustee can only provide for needs not otherwise provided for by government benefits.
Does not have Medicaid payback requirement.
Assets not counted as a resource for SSI and Medicaid because not “available” to beneficiary.
Confidential. Please see the disclosures at the end of this presentation. 11

12. First Party Special Needs Trusts – Under 65 Disability Trust
Also called Self-Settled or Medicaid Payback Trust
As of Dec 13, 2016, can be set up by competent disabled individual
Prior to this a court or family member had to establish on behalf of beneficiary
For SSI and Medicaid, not counted as a resource and the transfer of the assets to the trust does not trigger a transfer of asset penalty.
Assets of the Disabled Individual
typically from a personal injury recovery or inheritance that would otherwise jeopardize Medicare and SSI eligibility. Does not trigger SSI transfer of asset penalty if under 65
Under the Age of 65
Must be established and funded by age of 65. (inheritance from Aunt Sally could cause an elderly disabled individual to become ineligible for government benefits)
Irrevocable
Sole Beneficiary
Medicaid Payback Provision
Confidential. Please see the disclosures at the end of this presentation.

13. First Party Special Needs Trust
– Pooled Trust
Purpose is to pool the assets of persons with disabilities for management and investment purposes.
Don’t have the ability to withdraw the funds once invested or control the distributions so not considered available funds for SSI and Medicaid.
Must be funded with the assets of the disabled individual and established and managed by a non profit. Can be created by the individual.
No age limit. Can establish after age 65 but transfer of assets penalty may apply depending on state.
Have to pay state back after death although most states allow the non profit to retain the funds.
Confidential. Please see the disclosures at the end of this presentation. 13

14. What can an SNT pay for?
SNTs can be used to pay for supplemental goods and services not covered by SSI and Medicaid:
Home Repair/Renovations (home is an exempt asset)
Clothing
Phone, internet, cable
Transportation (vehicles and related expenses such as insurance and gas)
Pre-paid funeral expenses
Education
Household furnishings/Electronics
Dental Care
Durable Medical Equipment
Care Management
Vacation Travel
Professional Fees/Attendants/Elective Surgery
Confidential. Please see the disclosures at the end of this presentation. 14

15. What can’t an SNT pay for?
Can’t pay for items covered by SSI or Medicaid (generally food, shelter and medical expenses):
Food (movies but not popcorn)
Mortgage (including insurance)
Property Taxes
Rent
Utilities (Gas, Water, Electric)
Payment for these services causes a dollar for dollar reduction in SSI
Cash or gift cards should never be paid directly to the beneficiary
Confidential. Please see the disclosures at the end of this presentation. 15

16. ABLE ACCOUNTS Achieving a Better Life Experience for Individuals with Disabilities

17. ABLE Account Overview
Passed in 2014 and can be set up by any person including disabled individual.
Similar to college 529 plans. Growth is income tax free and no taxes due on distribution if used for a “qualified disability expense”.
Less complex and less expensive than SNTs.
Available only to “eligible individuals”
Blindness or disabled under title II or XVI of the Social Security Act and blindness or disability occurred before the individual attained age 26
Age cap limits the use of ABLE accounts
Best planning tool for elderly clients with disabled grandchildren whose disability occurred before 26 or younger clients with disabled children whose disability occurred before 26
Amounts remaining in account at death subject to Medicaid payback.
Confidential. Please see the disclosures at the end of this presentation. 17

18. Some Benefits of ABLE Account
Easy to set up.
Less complex and less expensive establishment and management than trusts.
No taxes if distributions made for qualifying disability expenses and stay within contribution limits.
Can establish an account in any state and enroll in that state’s program. Don’t have to reside there.
Broader view of disability expenses including mortgage, real property taxes, rent, heating fuel, gas, electricity, water, sewer and garbage.
Confidential. Please see the disclosures at the end of this presentation. 18

19. Disadvantages to ABLE Accounts
Individual must be disabled by age 26.
Contribution caps can only contribute $14,000 a year total from all donors.
Can only contribute cash. Can’t put in securities or house.
A disabled beneficiary can only have one ABLE account.
Maximum account value to retain SSI is $100,000 (includes contributions and earnings). Can still retain Medicaid over $100,000.
Maximum account balance differs by state but around $310,000.
Distributions for nonqualified expenses are taxable.
Confidential. Please see the disclosures at the end of this presentation. 19

20. When Special Needs Planning may not be useful. . .
A person who is not disabled or who is disabled but likely to be gainfully employed in the near future and does not require Medicare or long term care.
A person who is capable of handling finances and receives non-means tested governmental benefits (SSDI and Medicare) in his or her own right or who may transition shortly to such benefits because the disability began before age 22 and the beneficiary’s parents are deceased, receiving SSDI or receiving social security.
Person with a very short life expectancy or who may not be able to benefit from supplemental needs.
Confidential. Please see the disclosures at the end of this presentation. 20

21. A Special Needs Trust may not be a good fit when . . . (continued)
Person whose inheritance or personal injury recovery is so large that means-tested governmental assistance is not needed or desired.
SNT may not meet the beneficiary’s or family’s expectations. Family may not want the “sole beneficiary” restriction on a Self Settled Trust or want to adhere to the distribution limitations.
Confidential. Please see the disclosures at the end of this presentation. 21

22. Conclusion
Special needs planning is a complex, multilayered area of law, regulation, policy and litigation.
Can use both ABLE accounts and SNT together.
Important to speak to and deal with a practitioner who specializes in estate planning and special needs trust law.
Confidential. Please see the disclosures at the end of this presentation. 22

23. Appendix and Disclosures

24. Investment Products: • Not FDIC Insured • Not a Bank Deposit
Disclosures
The views and opinions expressed in this presentation are those of the author and do not necessarily reflect the official policy or position of IBERIA Wealth Advisors. Views are as of the date above and are subject to change based on federal and state laws and guidelines. This presentation is not an offer or solicitation for business. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. This information does not constitute, and should not be construed as, investment, tax or legal advice or recommendations with respect to the topics covered.
Presentation is prepared by: IBERIA Wealth Advisors
Copyright © 2017, by IBERIA Wealth Advisors; All rights reserved.
Investment Products: • Not FDIC Insured • Not a Bank Deposit
• Not Insured By Any Federal Government Agency • No Bank Guarantee • May Lose Value
Confidential.