special needs, 4-29-2015 presentation (03047766x7a241)

James A. SinglerCalfee, Halter & Griswold [email protected]

Calfee, Halter & Griswold LLP, 2800 First Financial Center, 255 East Fifth Street, Cincinnati, Ohio 45202

Cincinnati | Cleveland | Columbus | Calfee.com

Special Needs Planning

Introduction

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Disability

• 2% of U.S. population born with disability or later becomes disabled• Mental retardation, cerebral palsy, epilepsy• Autism at epidemic proportions• Veterans injured at war• Terminology: “Special Needs” is the commonly accepted term• Use of the word “typical” instead of “normal”• What will happen to my child when I am no longer here?• Note: Data derived from the Ohio State Bar Association

Special Needs Planning

Calfee, Halter & Griswold LLP

Common Terms

• Special Needs Trust : A general term to describe a Trust which is for a special needs beneficiary, but there are various types

• Medicaid Payback Trust: 42 USC § 1396p(d)(4)(A). Also known as a “(d)(4)(A) Trust” or a “Payback Trust.”

• Pooled Medicaid Payback Trust• Supplemental Services Trust• Third Party Trust: Trust created by one party for the benefit of

another• Wholly Discretionary Trust: Terminology of the Ohio Trust Code

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Medicaid Payback Trust


•Statute states that the assets of a (d)(4)(A) Trust are not countable if the Trust meets the following requirements• Trust funded with the assets of a person who is under age 65• The Trust is established for the benefit of such individual by a

parent, grandparent, legal guardian or the court; and• The State will receive all amounts remaining in the trust upon the

death of such individual up to an amount paid by Medicaid• These Trusts are useful where a disabled person receives an

unexpected windfall• Not a good mechanism for small sums of money

Pooled Trust (d)(4)(C) Trusts


• Good tool for small sums of money• Similar to Medicaid Payback Trust• Funded with the assets of the disabled person• Assets not countable for purposes of Medicaid and SSI• Established by and administered by a non-profit• No age restrictions• At death of beneficiary, the funds may be retained by the Trust. Any

funds not retained by the Trust are paid to the State• No minimums

Third Party Wholly Discretionary Trust


• This is the Trust we establish the most• Assets of parent or grandparent• Cannot be the assets of the beneficiary• Usually part of a Revocable Living Trust• At death of Grantor, Trust becomes irrevocable and the assets

for the special needs beneficiary are allocated to the third party wholly discretionary trust

• Assets not countable for purposes of Medicaid and SSI• If assets ever become countable, the Trust terminates and assets

distributed elsewhere• Distributions may be made only in the absolute, sole and

unfettered discretion of the Trustee

Programs


• Federal, State and Local Resources

• Social Security Disability (SSD) and Medicare available regardless of income or assets

• Need Based Programs: Supplemental Security Income (SSI) and Medicaid

SSI Eligibility


• Strict income and assets guidelines for eligibility• Provides $733 per month (single individual) to those who are

blind, disabled or over 65, but otherwise fail to qualify for SSD

• SSI recipients qualify for Medicaid• Gifts, inheritance, proceeds from litigation received by

someone receiving SSI benefits are considered income and/or resources and may disqualify from benefits

• Cannot own more than $2,000 in countable assets• Not all assets countable, the home and the car are not

countable

Disability under Social Security


• Sometimes severity of disability is not disputable

• One must be permanently and totally disabled

• Benefits do not vary based upon level of disability

• May take months or years for benefits to be granted

• Social Security is a complex area of the law

Medicaid


• State and Federal program administered by the Ohio Department of Medicaid

• Must be income and resource eligible• Income less than $643 per month• Resources of less than $1,500

• Not all assets are countable• Children may remain on parent’s health insurance

until 26

Estate Planning


Past:• The thought was to disinherit children with disabilities• Assets generally given to other siblings with the understanding

that the assets would be used for the special needs beneficiary• This becomes more complicated with divorce, creditor issues and

lack of trust worthiness

Present:• Third Party Wholly Discretionary Trusts• Does the beneficiary have assets?• Does the special needs beneficiary have capacity to establish

legal documents?• Small Estates?

Special Needs Planning Example


Facts:

• Ben is 10 years old and has autism. Likely will not be able to live alone.

• Husband works for P&G and makes $250,000 per year. Mom stays at home with Ben.

• Ben has a 529 Plan in his name with $25,000 in assets• There are two other siblings• Retirement assets of $500,000• $500,000 home in Mason• Husband has group term life insurance, two times salary• There are minimal other assets

Special Needs Planning Example


Ben• Establish Healthcare Directives, General Powers of Attorney, Last

Wills, and Revocable Living Trusts for the Parents• Ben’s cognitive ability• Guardianship, minor and as adult• Is Ben a beneficiary of another estate?• Life Care Plan for Ben• Health Insurance• Financial Planning

Progression of Benefits and Services


•Early Intervention•Special Education for children under the age of 22

• Benefit Eligibility: For most of our clients there are no public benefits availability while the child is a minor•Transition at 18: Is a guardianship necessary?•At 18 child may be eligible for Medicaid and SSI

• Transition at 21: End of special education services at age of 22. Encourage clients to advocate for a good transition plan in the school.

• Critical Years 22-25: Critical years for establishing a work pattern, or, some other form of routine.

Duties of Local School Districts


• Child with disabilities is eligible for free, appropriate public education

• Children under the age of 22 receive specially designed instruction• Child entitled to receive services in the least restrictive environment

and school district is required to pay• Students entitled to attend school until they graduate or turn 22• When they turn 18, the rights transition to the student• Beginning at least one year before the student turns 18, the school

must inform the student that the rights will transfer to the student at 18

• Parents should have child sign a power of attorney to allow them to still be part of the process

Recent Fiduciary Litigation


Facts

• Special Needs Beneficiary born in 1980, had a debilitating stroke at age of 15 resulting in cognitive ability of a first grader•Malpractice claim paid out to a court established (d)(4)(A) Trust

• Trust being administered by large corporate trustee, but this was the only special needs trust at the bank

• Bank did not want to provide any sort of administration/advice outside of the investment management services•Guardian of beneficiary requested resignation. Bank refused.•Guardian filed a Petition to have the Bank removed.

• Trust document stated that Trustee shall investigate all available governmental benefits. •Trustee never investigated governmental benefits•Trustee removed, with judgment against Trustee for attorney fees

Miscellaneous Planning

•Reduction in budgets•Closer look at older Trusts•Trust Reformation

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This presentation is provided by Calfee, Halter & Griswold LLP for education and information purposes only. This presentation is not intended to provide legal advice on specific subjects. The resolution of legal issues depends upon the specific facts of a particular situation and the laws involved. This presentation may be considered advertising under applicable laws. Nothing contained herein or in any attachment hereto is intended to be used, or can be used, to avoid penalties imposed under the Internal Revenue Code.

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special needs, 4-29-2015 presentation (03047766x7a241)

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