1. Presents Introduction to Special Needs Planning With Harry S. Margolis Sponsored by: January 7, 2014

2. Why Special Needs Planning is a Great Area of Practice Growing Need: More individuals with special needs Better medical care Longevity Needs recognized Make a real difference in clients’ lives: Public benefits Asset protection Structure for care and financial management Relieving burden on siblings

3. Effect of Affordable Care Act Fewer people will need Medicaid because there is no more pre-existing condition exclusion Fewer people will need to maintain SSI eligibility in order to get Medicaid

4. Public Benefits Available Programs: Medicaid Medicare Supplemental Security Income (SSI) Social Security Disability Income (SSDI) Housing Veteran Benefits

5. Public Benefits Medicaid Often vital Coverage can be more extensive than Medicare or private insurance Often provides supplemental benefits, such as personal care attendants Eligibility and benefits differ among states In many states tied to SSI

6. Public Benefits Medicare No financial restrictions Eligible after receiving SSDI for 2 years Not as comprehensive as Medicaid But more doctors accept reimbursement Co-payments and deductibles

7. Public Benefits Supplemental Security Income Restrictive $2,000 limit on countable assets Federal benefit level ($721 a month in 2014) plus state supplement Dollar-for-dollar income offset (after $20 disregard) In-kind income Upper limit on reduction for housing and food In kind support and maintenance (ISM) – 1/3 of $721 plus $20 - $260 (in 2014)

8. Public Benefits Social Security Disability Income Not based on financial eligibility Benefit based on beneficiary’s work record or that of parent If based on parent’s work record, child must have been disabled before age 22, and parent must either be receiving SS benefits or be deceased Benefit may be more or less than SSI benefit Can change from SSI to SSDI when parent retires Easier to manage than SSI

9. Public Benefits Housing Section 8 most prominent Other state and federal programs, so ask Section 8 has tough rules on treating recurring payments as income But applied differently by different agencies

10. Veteran Benefits Veterans with disabilities may receive benefits for: Service Connected Disabilities Non-Service Connected Disabilities Income and Resource limitations apply SNTs – (d) (4) (A) and (C) – not currently recognized by the Veteran’s Administration, but no transfer penalty (for the moment)

11. Trusts as Primary Planning Tool Management Structure Asset protection Eligibility for benefits

12. Trusts Management: Trustee or trustees manage trust property for benefit of beneficiary or beneficiaries Held to a fiduciary standard Trust lays out ground rules for how funds are managed and distributed

13. Trusts Structure: Succession of trustees Trustee oversight Care committee Trust protector Succession of beneficiaries Power of appointment

14. Asset Protection Predators Creditors Poor decision-making Alternative of relying on siblings

15. Public Benefits Trust funds not counted (if properly drafted and administered) Self-funded vs. third-party trusts Self-funded: must fall under a statutory exception Third-party: must be discretionary, not support

16. (d)(4)(A) or Payback Trusts Presumption that self-settled trusts are available assets Just as they may be reached by creditors Exception under 42 USC §1396p(d)(4)(A) For both Medicaid and SSI

17. (d)(4)(A) or Payback Trusts Sole beneficiary Must be disabled and under age 65 (when the trust is funded) Trust created by parent, grandparent, court or guardian For SSI, must be “seeded” – $20 At beneficiary’s death, must provide for reimbursement to state for Medicaid expenditures made

18. (d)(4)(C) or Pooled Trusts Exception under 42 USC §1396p(d)(4)(C) For both Medicaid and SSI Trust must be managed by not-for-profit organization Must be disabled and, depending on the state, under age 65 (when the trust is funded) Trust created by parent, grandparent, court, guardian, or beneficiary At beneficiary’s death, must provide for reimbursement of state for Medicaid expenditures made, unless remaining in the pooled trust See www.specialneedsanswers.com for comprehensive listing of pooled trustswww.specialneedsanswers.com

19. Third-Party Trusts By parents and grandparents Discretionary vs. more limited Trend towards more discretionary, less limited Intent language Revocable vs. irrevocable

20. Third-Party Trust Funding Usually at death May include contributions from others (grandparents, aunts, uncles) Life insurance Retirement plans How much? Revocable or irrevocable?

21. Letter of Intent Guides trustees Provides in depth information about beneficiary likes and dislikes, medical information, parents’ hopes for child Updating necessary Often seems to fall by the wayside

22. Personal Injury Cases Generally self-settled trusts Disabled prior to injury? To structure or not to structure? Still need SNT Last minute nature of cases Dealing with PI attorneys

23. Choice of Trustee: The Family The Bad: Poor investments Poor reporting Difficulty following SSI rules Education burden

24. Choice of Trustee: The Family The Good: Knows the beneficiary’s needs Knows service providers Care Continuity

25. Choice of Trustee: Professional Trustees The Bad: Don’t know beneficiary Don’t know benefit rules Arbitrary Lack of control Trust officers changing Banks changing

26. Choice of Trustee: Professional Trustee The Good: Investment acumen Ability to say “no” Proper accounting Proper tax reporting No conflict of interest Ability to set up accounts properly

27. Choice of Trustee A Combination: Potentially the best of both worlds.

28. Traps for the Unwary Distributing more than $20 directly to the beneficiary in a calendar month Commingling the beneficiary’s funds with the trust funds, with the trustee’s own money or between trusts Poor record-keeping Leaving disabled individual as beneficiary of IRAs and life insurance policies Savings bonds Failure to notify state and federal agencies

29. House Ownership by Trust To be avoided, if possible Not a countable asset for SSI or Medicaid But subject to estate recovery and bad management So SNTs often own houses What if parents and other siblings live in house? Co-ownership? Rent? Ancillary beneficiaries?

30. Advocacy and Monitoring Care Who will take over from parents? Parents are primary advocates and care providers Who will take their place? Other family members Professional care managers Guardian Attorneys Trustees Coordinating care

31. Trust Protectors May be written into the trust or may be informal Care provider Advocate Family members Special needs attorney Financial advisor Specialist in special need, e.g., social worker, physical therapist, psychologist, etc. Care manager

32. Introduction to Special Needs Planning Harry S. Margolis Margolis & Bloom, LLP Boston, Dedham, Framingham & Woburn hsm@margolis.com www.margolis.com

33. Support (866) 296-5509 support@specialneedsplanners.com