The Future of Special Needs Trusts Under the ACA Faculty Patricia E. Kefalas Dudek Patricia E. Kefalas Dudek & Associates 30445 Northwestern Hwy, Suite 250 Farmington Hills, MI 48334 (248) 254-3462 Email: firstname.lastname@example.org Website: www.pekdadvocacy.com
Who Can Be the Beneficiary? • A Special Needs Trust is a special kind of trust that holds title to property for the benefit of a child or adult who has a disability. • The Special Needs Trust can be used to provide for the needs of a disabled person to supplement benefits received from various governmental assistance programs. • A trust can hold cash, personal property, or real property, or can be the beneficiary of life insurance proceeds. • Special needs trust are often created for those who lack the capacity to handle their own financial affairs. They can be especially helpful for people with mental or physical disabilities who would lose public benefits.
What is a “Special Need”? • Special needs refers to things which are not considered basic needs, but assist in supporting the person when such items uncovered are not being provided by any public agency. • Special needs can include (but are not limited to): • Automobile/Van • Accounting services • Acupuncture/ Acupressure • Alterations or mending to clothing (i.e. shoe repair) • Appliances (i.e. TV, DVD, stereo, microwave, stove, refrigerator, washer/dryer, etc. For full list of: Permissible Distributions **Please notify us if you think of some common examples not on this list**
Types of Special Needs Trust:Self-Settled & Third-Party • Parents (or other family members) of a disabled child can establish a Special Needs Trust as part of their general estate plan. You can route the child's share of the estate into this trust and not worry that your child will be prevented from receiving benefits when you are not there to care for him/her. • Types of Self-Settled Special Needs Trust • Self-Settled – D4A Trust • Pooled Trust – D4C Trust • Some states have - Miller Trust • Two common types of Third Party Trust • Testamentary Special Needs Trust • Stand-Alone Trust
Self-Settled or First Party Trust • As the name implies, a self-settled trust is set up using the person with a disability’s own assets. • For example, a person with a disability who receives an inheritance or has some other property that disqualifies him for public benefits might have the property transferred in to a self-settled trust for his own use. • Of course, a self-settled trust established to obtain SSI/ Medicaid must meet stringent requirements. • First, it must be irrevocable. That means the settlor cannot cancel or amend it. • The trust must be established by a parent, grandparent, legal guardian or a court. • Notwithstanding the term “self-settled”, the beneficiary cannot establish the trust for himself. Quite often seeking the appointment of a guardian who can establish the trust becomes necessary. Finally, the trust must contain a Medicaid “payback” provision or be a Pooled Trust.
Pooled Trust • What is a Pooled Trust? • A pooled trust is a trust established and administered by a non-profit organization. A separate account is established for each beneficiary of the trust, but for the purposes of investment and management of funds, the trust pools these accounts. • For self-settled, or (d)(4)(C) pooled trusts, each subaccount is established by the person with a disability, a parent, grandparent, guardian, or a court, and the trust is funded with the assets of the person with a disability. The trust provides that, upon the death of the disabled beneficiary, if there are funds remaining in the beneficiary's subaccount, the trust must pay to the state an amount up to the total amount of Medicaid assistance provided to the beneficiary, to the extent that the funds are not retained by the trust. The pooled trust is irrevocable to avoid being treated as a resource.
Pooled Trust (cont.) • When is a (d)(4)(c) Pooled Trust used? • Persons with disabilities who receive public benefits, including Supplemental Security Income (SSI) and Medicaid, and then receive an inheritance, divorce settlement, or personal injury settlement or award. The receipt of these funds may make this person ineligible for public benefits. The client could purchase exempt resources, and then reapply for benefits. The person with a disability would then be ineligible for public benefits until these funds are spent down. The person could give the funds away, however, the gifts would result in a period of ineligibility for SSI and Medicaid long-term care benefits. • If under 65 years of age, then the person can transfer the funds to a d(4)(A) Special Needs Trust (SNT). A fourth alternative is to transfer the funds to a d(4)(C) ("Pooled Trust") subaccount. Full article: What is a Pooled Trust, and When Should You Use One?
Pooled Trust (cont.) • Coordination of trust with public services • To achieve a goal for the beneficiary, like staying out of a nursing home is a key reason for use of the trust. • Pooled trust work for people over 65 where D4A trust can’t be used for people over 65. • There is a little-known way for some people in certain states to receive home care through Medicaid, without requiring them to impoverish themselves first. • Here’s how it works: a federal law established in 1993 allows disabled people to put their monthly income or assets — above the amounts Medicaid allows them to keep — into a special type of pooled trust. They can then use the money in the trust to pay for their monthly bills like rent, cable television, phone bill, etc. Medicaid, meanwhile, pays for the home services. Full article: What’s a Pooled Trust? A Way to Avoid the Nursing Home
Pooled Accounts Trust • Established and managed by non-profit charity • Created and funded by individual with a disability or parent / family members • Remainder goes to charity upon person’s death for the benefit of people with disabilities, can include family members • Benefit to people with small / midsize estates and/or small families • Money is used for “special needs during lifetime • Protects Medicaid and SSI eligibility; No ability to pay beyond benefits
Pooled Accounts Trust • Entire amount can be used during lifetime of person with a disability. • Any remaining at death can be used to help other people with disabilities. Pooled Accounts Trust Springhill Housing Corporation, Inc. Special Needs Trust # 3 $500,000 Personal Injury Settlement Special Needs Trust # 2 $10,000 each year, gift from grandparents Special Needs Trust # 1 $5,000 Special Needs Trust # 4 Future transfer from parents will or trust and life insurance Special Needs Trust # 5 $20,000 back SSDI benefits Special Needs Trust # 6-House $50,000-grandmother on Medicaid
Over 65 & Pooled Trust Until relatively recently there was no prohibition from CMS against establishing pooled trust sub-accounts in behalf of disabled persons over the age of 65 who had assets (either their own, or assets resulting from a PI settlement or from other third party sources) in excess of the $2000 asset limit. Such funds can then be used for the benefit of the disabled person to purchase goods and services not covered by Medicaid that may be necessary to assure a decent quality of life for that person. From 1993 through early 2008, CMS did not at any time propose regulations or offer any policy statement or other sub-regulatory guidance suggesting that such transfers were impermissible under federal law. In this regard, disabled persons over 65 were in a similar position to those 65 and under, who are unquestionably permitted to set up special needs trusts or pooled trust sub-accounts, and to benefit from supplemental needs trusts established by third parties. To view full article: Transfers to Pooled Trust Sub-accounts By Persons Over 65 under Medicaid Statute
Over 65 & Pooled Trust Establishing pooled trust sub accounts for the benefit of disabled persons over 65 is explicitly contemplated and permitted by the federal Medicaid statute’s provisions pertaining to pooled trusts, which were enacted in 1993 as part of the Omnibus Budget Reconciliation Act, Pub.L. 103-66, 107 Stat. 312 (August 10, 1993) (hereinafter, OBRA ‘93) Congress has explicitly established three distinct exceptions to the general rule that assets in a first-party funded trust are available for purposes of Medical Assistance eligibility, one of which is a transfer to a pooled trust sub-account. Federal law discusses three types of trusts the assets of which are considered excluded, if the trusts are properly established and administered. These are the Special Needs Trust, the Miller Trust, and the Pooled Trust. To view full article: Transfers to Pooled Trust Sub-accounts By Persons Over 65 under Medicaid Statute
Directory of Pooled Trust Medicaid and SSI law permit "(d)(4)(C)" or "pooled trusts" for beneficiaries with special needs. Such trusts pool the resources of many beneficiaries, and those resources are managed by a non-profit association. Unlike individual disability trusts, which may be created only for those under age 65, pooled trusts may be for beneficiaries of any age and may be created by the beneficiary herself. Click herefor the Directory of Pooled Trust Around the U.S.
Testamentary Special Needs Trust • Established at the death of the person establishing the trust pursuant to their trust or will • Are not immediately accessible until the share belonging to the special needs trust is transferred into the special needs trust; • Is a sub trust created within the scope of the broader revocable living trust or will • Can work for spouses in a nursing home
Stand-Alone Third-PartySpecial Needs Trust • Established while the stand-alone Grantor is alive • Can receive assets from multiple persons wishing to provide for the well-being of the person with special needs (parents, grandparents, siblings, etc.) • When the Grantor dies, or perhaps becomes disabled, the assets remain immediately accessible to assist the person with disabilities from the date the trust is established • Is a single purpose trust • Can remain empty until funded for Medicaid planning or upon death of Grantor
Third Party Special Needs Trust • Third party Special Needs Trust can be created within a pooled trust as well • In order to protect vulnerable family members, counsel will properly suggest a custom drafted third-party special needs trust as part of a complete estate plan. Most third party trusts are created either by execution of a custom drafted document, or through use of a third party joinder agreement with a pooled trust • Works really well for families with multiple generations of Medicaid long-term support users or with genetic disabilities (Huntington’s; Fragile X, etc.) Full article: The Third-Party Pooled Trust: an alternative planning tool to help avoid the biggest mistakes in special needs planning
Funding a Special Needs Trust: How Much is Enough? • The Grantor will want to ensure that the person with special needs will remain financially secure even when you are no longer there to provide financial back up. Given the significant, ongoing expenses involved in the loved ones long-term support and uncertainty about what needs may arise or what public benefits may be available, determining how much a special needs trust (SNT) should hold is no small feat.
Funding a Special Needs Trust: How Much is Enough? • Fortunately, help in calculating your special needs goal is available from special needs calculators, which are accessible free of charge on the Internet. • Here are two such calculators: • MetDesk Special Needs Calculator: http://www.metlifeiseasier.com/metdesk(Available on the Special Needs Answers site at: http://www.specialneedsanswers.com/resources/calculators.asp) • Merrill Lynch Special Needs Calculator: www.totalmerrill.com/specialneeds . (Click Special Needs Calculator under "Tools and Resources".)
Funding a Special Needs Trust: How Much is Enough? • The first step in determining the amount to protect in an SNT is considering your goals and expectations for your child's future. • If you haven't yet created a Memorandum of Intent, also called a Letter of Intent or a Life Plan, this is the time to draft such a document. It should address factors such as your child's medical condition, legal advocacy needs, ability to work and desired living arrangements, all of which will drive the special needs calculations. • This really allows for details on how to coordinate public benefits with the private resources • Look at samples: important to address private health insurance, uncovered Medicaid, dental specifically.
Letter of Intent • A Letter of Intent is one of the most important documents a parent can complete for the child’s future care-givers • This is not a stand-alone document; it should be incorporated into an estate planning process • Can be used when caring for parents or grandparents as well • The Letter of Intent should provide the trustee with guidance as to what “special needs” the beneficiary has or will have and define the quality of life as quality means different things to different people • The Letter of Intent should be frequently updated as the beneficiary’s needs change
Sample Letters of Intent • http://www.pekdadvocacy.com/firm-news/client-intake/attachment/letter-of-intent-information-regarding-child/ • http://www.pekdadvocacy.com/documents/pattispublications/Representing/Att7.pdf • http://www.pekdadvocacy.com/documents/pattispublications/Representing/Att8.pdf
Quality of Life Social, travel, recreation, etc. Education Housing with Person Directed Supports Transportation Medical Care and Equipment Real Employment Letter Of Intent Be Specific!
Transportation Phone Cable Social / Recreational Housing Rent from SSI or SSDI Rent $ Family Community Support Services CMH Support Services (Waiver) Dept. of Community Health-formerly FIA Adult Home Help Services Food Stamps Roommate Beneficiary Coordination of Public Benefits with SNTsHow It Works Special Needs Trust
The Affordable Care Act (ACA) • The Affordable Care Act (ACA) is the most important legislation affecting special needs planning since 1993 when Congress enacted 42 USC §1396p(d) that authorized special needs trusts (SNTs). Much of the ACA is focused on protecting the rights of people with chronic, long-term physical or cognitive conditions. In this article, we will discuss the important features of the ACA to allow the special needs practitioner to provide proper advice to their clients and how the ACA will affect existing special needs plans. Excerpt from: How the Affordable Care Act Affects Special Needs Planning By: Kevin Urbatsch, Esq. & Michelle Fuller, Esq
Access to Health Care • Under the provisions of the ACA, many of the barriers to private health care for persons with disabilities will disappear. The biggest change is that a pre-existing condition will no longer deny an individual access to private health care. The ACA also makes private health care more attractive because it removes the lifetime limits on health insurance that made private plans unattractive to many persons with profound disabilities. An added benefit of the ACA is that it requires private health care coverage for children (up to age 26) on a parent’s plan even if that child has moved away, is disabled, gone to school, or married. Also, the ACA caps the amount of money that a person will have to pay out-of-pocket each year on premiums and deductibles. For example, if the person in California earns less than $17,235 a year, the annual out-of-pocket limit he or she has to pay is $2,250. Otherwise, the general ACA annual out-of-pocket limit for an individual is $6,250 per year. Excerpt from: How the Affordable Care Act Affects Special Needs Planning By: Kevin Urbatsch, Esq. & Michelle Fuller, Esq
Access to Health Care • There is a mandate that all persons in the United States be covered by health care. Because so many persons with disabilities have limited income, the ACA provides ways to pay premiums at a reduced cost. If the person with a disability has income, he or she can pay a reduced premium even if they earn up to 400 percent of the federal poverty limit (FPL) ($45,960 for individual in 2013). For example, for the year 2014 in California, a person earning less than $17,235 a year will pay between $19 to $57 a month for a premium based on their actual income. Excerpt from: How the Affordable Care Act Affects Special Needs Planning By: Kevin Urbatsch, Esq. & Michelle Fuller, Esq
Expanded Access to Medicaid • For those persons with disabilities who have little to no income, access to Medicaid (for people between the ages of 19 to 65) will be expanded to include individuals with incomes up to 133 percent of the FPL (plus an automatic 5 percent income disregard) ($15,586 for individual in 2013). There is no resource limitation for this new expanded Medicaid program. Thus, for new people qualifying for Medicaid, they can have more than the $2,000 in resources and still qualify for Medicaid if their income is below 138 percent of the FPL. It is important to note that this new expanded program does not apply to persons currently receiving Medicaid, for those over age 65 applying for long-term care nursing home care, and some other restrictions. Further, not every state has agreed to participate in Medicaid expansion, so it is important to see if your state has agreed to implement expanded Medicaid. Excerpt from: How the Affordable Care Act Affects Special Needs Planning By: Kevin Urbatsch, Esq. & Michelle Fuller, Esq
Expanded Access to Medicaid • There are several important health care benefits generally not covered by the ACA and private health care that are important to persons with disabilities. Two of the most important (and expensive) benefits that the ACA will not cover include payment for long-term skilled nursing care and payments for in-home care giving services. Thus, for clients with disabilities who require nursing home level care or who require caregivers in order to remain independent in the community will likely still need Medicaid to assist them with their ongoing care. In some states, Medicaid provides unique services for the developmentally disabled that specialize in support for independent living and other related services. Thus, it is important for the practitioner to determine what health care-related services for persons with disabilities are covered by Medicaid (but not through private health care) in determining whether a client should give up his or her government-paid-for health care. Excerpt from: How the Affordable Care Act Affects Special Needs Planning By: Kevin Urbatsch, Esq. & Michelle Fuller, Esq
Key Provisions in ACA • The Affordable Care Act has set new standards, called essential health benefits, outlining what health insurance companies must now cover. But there's a catch: Insurance firms can still pick and choose to some degree which specific therapies they'll cover within some categories of benefit. And the way insurers interpret the rules could turn out to be a big deal for people with disabilities who need ongoing therapy to improve their day-to-day lives. • The new rules for what health insurance companies have to cover may still change. Federal regulators plan to review them as the health law rolls out and could make changes in 2016. Excerpt from: Obamacare Presents Complex Choices For People with Disabilities
Essential Benefit Package The ACA links the essential health benefits package to limits on cost-sharing. So health plans that are required to provide essential health benefits will also be required to limit the amount consumers will have to pay out-of-pocket. Specifically, health plans will be prohibited from requiring consumers to pay annual cost-sharing that is greater than the limits for high deductible plans linked to health savings accounts. Currently, those limits are $5,950 per year for individuals and $11,900 per year for families. In addition, small group plans must limit deductibles to $2,000 for individual coverage and $4,000 for family coverage. As with all health plans under the ACA, there is no cost-sharing for certain preventive health services recommended by the United States Preventive Services Task Force. To view full article: Essential Benefits
Essential Benefit Covered Under the ACA • Ambulatory patient services • Emergency services • Hospitalization • Maternity and newborn care • Mental health and substance use disorder services • Prescription drugs • Rehabilitative and habilitative services and devices • Laboratory services • Preventive and wellness services • Chronic disease management • Pediatric services, including oral and vision care
What are the cost-sharing rules for the essential health benefits? The ACA links the essential health benefits package to limits on cost-sharing. So health plans that are required to provide essential health benefits will also be required to limit the amount consumers will have to pay out-of-pocket. Specifically, health plans will be prohibited from requiring consumers to pay annual cost-sharing that is greater than the limits for high deductible plans linked to health savings accounts. Currently, those limits are $5,950 per year for individuals and $11,900 per year for families. In addition, small group plans must limit deductibles to $2,000 for individual coverage and $4,000 for family coverage. As with all health plans under the ACA, there is no cost-sharing for certain preventive health services recommended by the United States Preventive Services Task Force. To view full article: Essential Benefits
Are your employees ready for consumer-driven health care? • If you’re an employer, it’s likely that your workers have been reluctant to educate themselves about their choices in light of upcoming changes to the health care scene, such as the implementation of state and federal exchanges under the Patient Protection and Affordable Care Act (ACA). That may be because they’re waiting for you to make the first move. • According to results from the recently released 2013 AflacWorkForcesReport, 75% of workers surveyed said that they thought their employers would educate them about changes to their health care coverage as a result of the ACA;s health care reform provisions, but only 13% of employers said that educating employees about health care reform was important to their organization.
According to results reported by Aflac, 53% of employers have implemented a high-deductible health plan (HDHP) in the last three years, and Aflac says this is a growing trend. The survey also shows that, despite the shift toward HDHPs and defined contribution health care plans by employers, along with the upcoming implementation of state and federal exchanges, 55% of workers said they had done nothing to prepare for possible changes to the health care system. Sited from WoltersKulwer Law & Business To view full article:Consumer-Driven Health Care
Mental Health Parity In 2008, Congress passed the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act taking a great step forward in the decade-plus fight to end insurance discrimination against those seeking treatment for mental health and substance use disorders. This law requires health insurance to cover both mental and physical health equally. Under this law, insurance companies can no longer arbitrarily limit the number of hospital days or outpatient treatment sessions, or assign higher co-payments or deductibles for those in need of psychological services. To view full article: Mental Health Parity
Mental Health Parity The 2008 act closes several of the loopholes left by the 1996 Mental Health Parity Act and extends equal coverage to all aspects of health insurance plans, including day and visit limits, dollar limits, coinsurance, co-payments, deductibles and out-of-pocket maximums. It preserves existing state parity and consumer protection laws while extending protection of mental health services to 82 million Americans not protected by state laws. The bill also ensures mental health coverage for both in network and out-of-network services. To view full article: Mental Health Parity
Could a Trustee of SNT Determine to go Without Insurance? • What happens if I don’t sign up for Obamacare? • You won’t have health insurance. You’ll be responsible for every from the flu shots to major surgery. • I thought I could just sign up when I need it? • Not exactly. The law requires insurance companies to cover people with pre-existing conditions, but you still have to sign up during the enrollment period. That will be from October 1, 2013 to March 31, 2014. • Serious problems in Michigan with delayed Medicaid Expansion and states with no Medicaid expansion
Could a Trustee of SNT Determine to go Without Insurance?cont.) • So what if I get sick after March 31, 2013? • You’ll have to wait until the next enrolment period, which begins October 1, 2014. Until your new coverage kicks in January 1, 2015, you’ll have to pay for any medical costs. • What if I lose my insurance during the year? • You can sign up them. Outside of the regular enrollment period, people can sign up for insurance when they have a major life-changing event (i.e. getting married, changing jobs, having a baby, or moving to a new state)
Could a Trustee of SNT Determine to go Without Insurance?(cont.) • Are there any penalties for not signing up? • Yes, if you don’t sign up for insurance, you’ll pay a fine when you do you taxes in 2015. The fine will be $95.00 or 1% of your annual income, whichever is higher. And in future years, it will be even higher. • What if I refuse to pay the fine? • The IRS will take the money out of any refund you would receive on your federal income tax. It is not allowed to put you in jail or seize your property for failing to pay the fine, however.
Could a Trustee of SNT Determine to go Without Insurance?(cont.) • When do I have to sign up? • Technically speaking, you need to have insurance on January 1, 2014. However, the enrollment period lasts until March 31, 2014 and you may be able to sign up later in the year if you have a major life event. • What if I am uninsured for part of the year? • You won’t pay the full fine. The amount is prorated, so you would just pay for the number of months you were uninsured. Also, gaps of less than three (3) months in a given year aren’t counted.
Could a Trustee of SNT Determine to go Without Insurance?(cont.) • Are there any other exceptions? • Yes, but they are limited. Certain religious groups, such as the Amish, and federally recognized Indian tribes don’t have to sign up. You can also get exemption if you have a lower income, especially if your state rejected the Medicaid expansion. • Medicare or Medicaid is enough! (Either only Part A Or Parts A & B) To view full article: Obamacare
What if I have Medicare? • Medicare isn’t part of the Health Insurance Marketplace, so you don’t need to do anything. If you have Medicare, you are considered covered. • The Marketplace won’t affect your Medicare choices, and your benefits won’t be changing. No matter how you get Medicare, whether through Original Medicare or a Medicare Advantage Plan, you’ll still have the same benefits and security you have now. You won’t have to make any changes. • Medicare’s Open Enrollment Period (October 15-December 7) hasn’t changed. To view full article: Donut Hole
ACA Provisions(cont.) • Expanded Medicare benefits for preventive care, drug coverage • Medicare benefits have expanded under the health care law–things like free preventive benefits, cancer screenings, and an annual wellness visit. • You can also save money if you’re in the prescription drug “donut hole” with discounts on brand-name prescription drugs. To view full article: Donut Hole
Closing the Donut Hole The Patient Protection and Affordable Care Act and accompanying health care reform legislation added important improvements to Medicare prescription drug coverage. The health reform law helps cover expenses for people falling into the "donut hole" coverage gap beginning in 2010, and the hole in coverage is eliminated altogether by 2020. The law also provides for additional assistance for low-income beneficiaries. To view full article: Closing the Donut Hole
Closing the Donut Hole • The new law provides assistance to help seniors bridge this donut hole. • 50 percent rebate on brand-name drugs in 2012. A 50 percent rebate will be applied at the pharmacy for brand name medications. • 14 percent rebate on generic drugs in 2012. A 14 percent rebate will be applied at the pharmacy for generic medications. • Closure of the donut hole by 2020 for brand-name and generic drugs. The co-payments required for brand-name and generic drugs will be phased down to the standard 25 percent by 2020, eliminating the donut hole. For brand-name drugs, manufacturers will increase their discounts each year to negate the coverage gap. Beginning in 2011, co-payments required by Part D law for generic drugs will be reduced by seven percentage points each year until the coverage gap is eliminated for these drugs as well. • Immediate assistance for seniors. A typical senior that fell into the donut hole saved $250 in 2010, over $600 in 2011, and will save over $3,000 by 2020. • Provides catastrophic coverage sooner to protect seniors. The legislation will help seniors get out of the donut hole sooner beginning in 2014. The dollar amount of the catastrophic threshold, where seniors' co-payments are dropped to 5 percent of drug costs, will be more slowly increased from year to year at this point. To view full article: Closing the Donut Hole
Closing the Donut Hole Assistance for Low-Income People • The health reform legislation also provides improves eligibility and coverage for low-income Medicare beneficiaries: • Co-payments are eliminated for many beneficiaries receiving home- and community-based services who are eligible for both Medicare and Medicaid. • The new law will reduce the number of low-income beneficiaries that are required to change plans each year to maintain zero premiums. • It allows widows and widowers to more easily retain their low-income eligibility. • Outreach programs are enhanced to ensure that more beneficiaries who are eligible for a Low-Income Subsidy are able to enroll. To view full article: Closing the Donut Hole
Other ACA Provisions to Watch • Medicaid Managed Long Term Services and Supports • State Demonstrations to Integrate Care for Dual Eligible Individuals and other Medicare-Medicaid Coordination Initiatives • Other Long Term Services and Support Include • Balancing Incentive Program • Medicaid State Plan Amendments under 1915(i) • Community First Choice Option under 1915 (k) • Medicaid Health Homes Click here for full site