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Special Needs Trusts and the ABLE Account: Evaluating the OptionsPresented by:
Amelia Crotwell, Certified Elder Law Attorney
Elder Law of East Tennessee
Goals:
Explain the connection between Medicaid or means-tested benefits and excess income/resources.
Describe the challenges to negotiating this relationship and the use of Special Needs Trusts.
Communicate the benefits of ABLE Act and contrast with Special Needs Trusts.
Means-Tested Benefits
Means-Tested Benefits require that the recipient meet certain income and resource limits to qualify.
Some benefits also require that recipients meet the SSA definition of disability.
Medicaid/TennCare
SSI
Temporary Assistance to Needy Families (TANF)
Qualified Medicare Beneficiaries (QMBs)
Section 8 Housing
Food Stamps
Cover Kids or Children’s Health Insurance Program (CHIP)
Veteran’s Benefits
SSA Definition of Disability
An individual is considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than 12 months.
TennCare and Waiver Programs Medicaid – health care for persons who are aged, blind or disabled
SSI – cash benefit from the Social Security Administration for persons who are aged, blind or disabled (automatically eligible for M’caid)
TANF – cash assistance to parents who have fallen on hard times (automatically eligible for M’caid)
QMB – state M’caid program pays Medicare premium and helps with medical and drug costs
TennCare and Waiver Programs, Continued Section 8 – rent subsidy via voucher or reduced rent in a public housing
complex
SNAP – food and nutrition assistance
CHIP – low or no cost health insurance
Veteran’s Benefits - Low Income Pension, Special Compensation, Housebound Benefits, or Aid and Attendance
Medicare Savings Programs
Qualified Medicare Beneficiary (QMB)
Specified Low-Income Medicare Beneficiary (SLMB)
Qualifying Individual (QI)
Qualified Disabled and Working Individuals (QDWI)
Extra Help (Low Income Subsidy)
Excess Income and Resources When a person qualifies for a
means-tested benefit, receipt of excess resources can cause them to lose the benefit.
It is critical to know the available options for safeguarding these funds for the benefit recipient’s wellbeing and quality of life.
Know the Options
Special Needs Trusts
3rd Party
d4a
d4c
Savings Account
ABLE Account
What is a Special Needs Trust? Two Kinds of Trusts:
Self-Settled Third Party
Distribution Guidelines make a trust a SNT.
Self-Settled
Assets to fund the trust belong to the person with a disability
Payback provision required
Irrevocable
d4a and d4c
No transfer penalty for grantor
When to Use:
Inheritance
Settlement
Any large sum received by the person with a disability
d4a Special Needs Trust Established by Parent, Grandparent, Conservator, or Court
Irrevocable
Inter Vivos
One Lifetime Beneficiary
Under Age 65 and Definition of Disability
Payback Provision
d4c Special Needs Trust Established by Parent, Grandparent, Conservator, Court, or the Person with
a Disability
Irrevocable
Inter Vivos
One Lifetime Beneficiary
Any Age and Definition of Disability
Payback Provision
Trustee must be a non-profit and a separate account must be maintained for each beneficiary
Third-Party Assets to fund the trust belong to a third party (e.g. parent)
No payback requirement
Revocable or irrevocable
Potential transfer penalties if third-party grantor requires benefits
When to Use:
Parents with child receiving benefits
Spousal supplemental needs
3rd Party Special Needs Trust Assets of a Third Party
Typically the Parent of a Child
Beneficiary of Any Age
No Payback Provision Requirement
Revocable or Irrevocable
Estate Planning:
List a contingent beneficiary
Part of Last Will for spouse or child
Trustees and Distribution Guidelines Who should be appointed as
trustee? Independent trustee preferred Family member and independent
as co-trustees Trust advisor can assist if a trustee
needs to be replaced or removed
Distributions should not be made directly to beneficiary
Avoid distributions for food and shelter (SSI recipients)
ABLE Account “Achieving a Better Life Experience” Account
Disabled before Age 26
Distributions controlled by DIDD/State of TN Contractors
Payback Provision
Can be transferred to another family member disabled before age 26
Limits $14k/year; Total $100k
May be available January 1, 2016
Status Update on Federal Regulations and Tennessee Availability
Case Studies
Let’s review handouts together.
Case Study: 3rd Party SNT
Wanda and Harry are the parents of Alicia, Joe, and Brock.
Alicia receives SSI, TC and Waiver.
Wanda and Harry have a home worth 100k and bank accounts and investments worth $200k and and Harry has an IRA of 300k.
Joe and Brock do not have special needs.
Wanda and Harry suggest that they will disinherit Alicia and give all their assets to Joe and Brock so Joe and Brock can “take care of” Sis.
Case Study: d4a SNT
Gary is 50 years old
Gary is on the DIDD Statewide Waiver and receives SSI and TC.
His Aunt Aida, his closest living relative, just died leaving him a home worth $400,000, an investment account worth $300,000 and her car, a Mazda Miata $15,000.
Aunt Aida did no planning.
Case Study: d4c SNT
Becky is 35.
She is disabled as a result of a car accident at age 28.
She receives SSDI, SSI, Medicare, TennCare, food stamps, and lives in Section 8 housing.
Her father died and left her a small life insurance policy worth $50,000.
She has no family to help her manage the money.
Case Study: ABLE Account Bronwyn is 45 and was born with a
disability.
She gets SSI and DIDD waiver services. She gets TennCare too.
She works in a sheltered workshop and sometimes earns up to $500 per month in income.
Bronwyn’s parents and grandparents sometimes like to make gifts of cash to her for special trips and things.
She can’t find enough ways to spend her money and she likes to save.
Her brother, Pierce, also has a disability and also receives SSI.
Thank you!
Contact us:Elder Law of East Tennessee903 N. Hall of Fame DriveKnoxville, TN 37917
865-951-2410
info@elderlawetn.comwww.elderlawetn.com
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