SSI and Special Needs Trusts

The contents of most trusts you create for yourself will be considered available to you in determining your eligibility for SSI. On the other hand, assets of most trusts that someone else creates and names you as a beneficiary of will not be considered to belong to you for purposes of determining your SSI eligibility. If you created and funded an irrevocable trust for your own benefit prior to January 1, 2000, it will be grandfathered, and in most cases its assets will not be considered to belong to you.

Trusts designed to aid a person with special needs are commonly known as “special needs trusts.”  There are three main types of special needs trusts: the first-party trust, the third-party trust, and the pooled trust. All three name the person with special needs as the beneficiary, but they differ in several significant ways.

A first-party trust is designed to hold a SSI beneficiary’s own assets, but it must be created by the beneficiary’s parent or grandparent, or by a court, even though the beneficiary’s assets are going to fund the trust. While the beneficiary is living, the funds in the trust are used for his benefit, and when he dies, any assets remaining in the trust are used to reimburse the government for the cost of his medical care. These trusts are especially useful for beneficiaries who are receiving SSI and come into large amounts of money, because the trust allows the beneficiary to retain his benefits while still being able to use his own funds when necessary.

The third-party special needs trust is most often used by parents and other family members to assist a person with special needs. These trusts can hold any kind of asset imaginable belonging to the family member or other individual, including a house, stocks and bonds, and other types of investments. The third-party trust functions like a first-party special needs trust in that the assets held in the trust do not affect an SSI beneficiary’s access to benefits and the funds can be used to pay for the beneficiary’s supplemental needs beyond those covered by government benefits. But a third-party special needs trust does not contain the “payback” provision found in first-party trusts. This means that when the beneficiary with special needs dies, any funds remaining in her trust can pass to other family members, or to charity, without having to be used to reimburse the government.

A pooled trust is an alternative to the first-party special needs trust.  Essentially, a charity sets up these trusts that allow beneficiaries to pool their resources for investment purposes, while still maintaining separate accounts for each beneficiary’s needs. When the beneficiary dies, the funds remaining in her account reimburse the government for her care, but a portion also goes towards the non-profit organization responsible for managing the trust.

Given the complexity of this field, any trust should be drafted by an experienced attorney knowledgeable about SSI matters.

If you would like further information about special needs trusts and SSI please contact the Law Office of Jason A. Jenkins, P.A. at (954) 256-9192 or Jason@jajlawfirm.com.

Key Elder Law Numbers for 2016

Below are figures for 2016 that are frequently used in the elder law practice or are of interest to clients.

Medicaid Spousal Impoverishment Figures for 2016

These figurs are unchanged from 2015.  The minimum community spouse resource allowance (CSRA) is $23,844 and the maximum CSRA remains $119,220. The maximum monthly maintenance needs allowance is $2,980.50. The minimum monthly maintenance needs allowance will be $1,991.25 ($2,490 for Alaska and $2,291.25 for Hawaii) until July 1, 2016.

Medicaid Home Equity Limits

Also no change from 2015: Minimum: $552,000; Maximum: $828,000

For the CMS document announcing the 2016 impoverishment and home equity figures, click here.

Income Cap

The income cap for 2016 applicable in “income cap” states remains $2,199 a month.

Gift and estate tax figures

Federal estate tax exemption: $5.45 million for individuals

Lifetime tax exclusion for gifts: $5.45 million

Generation-skipping transfer tax exemption: $5.45 million

The annual gift tax exclusion remains at $14,000.

Long-Term Care Premium Deductibility Limits for 2016

The Internal Revenue Service has announced the 2016 limitations on the deductibility of long-term care insurance premiums from taxes. Any premium amounts above these limits are not considered to be a medical expense.

Attained age before the close of the taxable year Maximum deduction
40 or less $390
More than 40 but not more than 50 $730
More than 50 but not more than 60 $1,460
More than 60 but not more than 70 $3,900
More than 70 $4,870

Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary’s total qualified long-term care expenses or $340 per day (for 2016), whichever is greater.

For these and other inflation adjustments from the IRS, click here.

Medicare Premiums, Deductibles and Copayments for 2016

  • Part B premium: $104.90/month (unchanged)
  • Part B premium for beneficiaries not “held harmless”: $121.80
  • Part B deductible: $147 (unchanged)
  • Part B deductible for beneficiaries not “held harmless”: $166
  • Part A deductible: $1,288 (was $1,260)
  • Co-payment for hospital stay days 61-90: $322/day (was $31)
  • Co-payment for hospital stay days 91 and beyond: $644/day (was $630)
  • Skilled nursing facility co-payment, days 21-100: $161/day (was $157.50)

Premiums for higher-income beneficiaries:

  • Individuals with annual incomes between $85,000 and $107,000 and married couples with annual incomes between $170,000 and $214,000 will pay a monthly premium of$170.50 (was $146.90).
  • Individuals with annual incomes between $107,000 and $160,000 and married couples with annual incomes between $214,000 and $320,000 will pay a monthly premium of$243.60 (was $209.80).
  • Individuals with annual incomes between $160,000 and $214,000 and married couples with annual incomes between $320,000 and $428,000 will pay a monthly premium of$316.70 (was $272.70).
  • Individuals with annual incomes of $214,000 or more and married couples with annual incomes of $428,000 or more will pay a monthly premium of $389.80 (was $335.70).

Rates differ for beneficiaries who are married but file a separate tax return from their spouse:

  • Those with incomes between $85,000 and $129,000 will pay a monthly premium of$316.70 (was $272.70).
  • Those with incomes greater than $129,000 will pay a monthly premium of$389.80 (was $335.70).

For “Medicare 2016 costs at a glance,” click here.

Social Security Benefits for 2016

Most Social Security figures remain unchanged.  The monthly federal Supplemental Security Income (SSI) payment standard stays at $733 for an individual and $1,100 for a couple.

Estimated average monthly Social Security retirement payment: $1,341 a month (was $1,328) for individuals and $2,212 (was $2,176) for couples

Maximum amount of earnings subject to Social Security taxation: $118,500 (unchanged)

For a complete list of the 2016 Social Security figures, go to: https://www.socialsecurity.gov/news/press/factsheets/colafacts2016.html

If you are in need of legal services and would like to schedule a consultation, please call us at (954) 256-9192 or e-mail us at office@jajlawfirm.com

Durable Power of Attorney

For most people, the durable power of attorney is the most important estate planning instrument available — even more useful than a will. A power of attorney allows a person you appoint — your “attorney-in-fact” or “agent” — to act in place of you – the “principal” — for financial purposes when and if you ever become incapacitated.

In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship, your representative may have to seek court permission to take planning steps that she could implement immediately under a durable power of attorney.

A power of attorney may be limited or general. A limited power of attorney may give someone the right to sign a deed to property on a day when you are out of town. Or it may allow someone to sign checks for you. A general power is comprehensive and gives your attorney-in-fact all the powers and rights that you have yourself.

In Florida, a durable power of attorney takes effect immediately upon their execution, even if the understanding is that they will not be used until and unless the grantor becomes incapacitated.

However, attorneys report that their clients are experiencing increasing difficulty in getting banks or other financial institutions to recognize the authority of an agent under a durable power of attorney. A certain amount of caution on the part of financial institutions is understandable: When someone steps forward claiming to represent the account holder, the financial institution wants to verify that the attorney-in-fact indeed has the authority to act for the principal. Still, some institutions go overboard, for example requiring that the attorney-in-fact indemnify them against any loss. Many banks or other financial institutions have their own standard power of attorney forms. To avoid problems, you may want to execute such forms offered by the institutions with which you have accounts. In addition, many attorneys counsel their clients to create living trusts in part to avoid this sort of problem with powers of attorney.

If you are in need of legal services and would like to schedule a consultation, please call us at (954) 256-9192 or e-mail us at office@jajlawfirm.com

Help Paying for Medicare

Medicare is not free; there are premiums and deductibles. If you don’t qualify for Medicaid and can’t afford a Medigap policy, you may be able to get help paying for the costs of Medicare.

There are four Medicare assistance programs, called Medicare Savings Plans:

  • Qualified Medicare Beneficiary (QMB): The QMB program pays for Medicare Part A deductibles, Medicare Part B premiums and deductibles, and coinsurance and deductibles for Part A and Part B.
  • Specified Low-income Medicare Beneficiary (SLMB): The SLMB program pays for Medicare Part B Premium.
  • Qualifying Individual (QI-1) Program: The QI-1 program is an expansion of the SLMB program that you must apply for each year. It pays for Medicare’s Part B Premium.
  • Qualified Disabled and Working Individuals (QDWI) Program:The QDWI Program helps pay for Medicare’s Part A premium.

To qualify for these programs, you must be eligible for Medicare Part A (even if you are not enrolled) and have limited income and resources. The income and resource requirements can vary from state to state, so check with your state before applying. In general the following limits are applied.

Program Income Limits
QMB Monthly income must be at or below 100 percent of the poverty level. To find the current poverty guidelines, click here.
SLMB Monthly income must be between 100 percent and 120 percent of the poverty level. To find the current poverty guidelines, click here.
QI – 1 Monthly income must be between 120 percent and 135 percent of the federal poverty level. To find the current poverty guidelines, click here.
QDWI Monthly income must be below 200 percent of the federal poverty level. To find the current poverty guidelines, click here.

Personal assets, including cash, bank accounts, stocks and bonds must not exceed $4,000 for an individual and $6,000 for married couples. Your house and car do not count as personal assets. Some states allow additional resources above these figures; for example, New York has no resource limits for the QI-1 Program.

If you are in need of legal services and would like to schedule a consultation, please call us at (954) 256-9192 or e-mail us at office@jajlawfirm.com

What is Medicaid?

Medicaid (called “Medi-Cal” in California, “MassHealth” in Massachusetts, and “TennCare” in Tennessee) is a joint federal-state program that provides health insurance coverage to low-income children, seniors, and people with disabilities. In addition, it covers care in a nursing home for those who qualify.

In the absence of any other public program covering long-term care, Medicaid has become the default nursing home insurance of the middle class. Lacking access to alternatives such as paying privately or being covered by a long-term care insurance policy, most people pay out of their own pockets for long-term care until they become eligible for Medicaid.

As for home care, Medicaid has traditionally offered very little — except in New York, which provides home care to all Medicaid recipients who need it. Recognizing that home care costs far less than nursing home care, more and more states are providing Medicaid-covered services to those who remain in their homes.

Although their names are confusingly alike, Medicaid and Medicare are quite different programs. For one thing, all retirees who receive Social Security benefits also receive Medicare as their health insurance. Medicare is an “entitlement” program. Medicaid, on the other hand, is a form of welfare — or at least that’s how it began. So to be eligible for Medicaid, you must become “impoverished” under the program’s guidelines.

Also, unlike Medicare, which is totally federal, Medicaid is a joint federal-state program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive federal money, which pays for about half the state’s Medicaid costs. (The state picks up the rest of the tab.) This complicates matters, since the Medicaid eligibility rules are somewhat different from state to state and they keep changing. This most recently occurred with the passage of the Deficit Reduction Act of 2005 (the DRA), which significantly changed rules governing the treatment of asset transfers and homes of nursing home residents. To be certain of your rights, consult an expert. He or she can guide you through the complicated rules of the different programs and help you plan ahead.

If you are in need of legal services and would like to schedule a consultation, please call us at (954) 256-9192 or e-mail us at office@jajlawfirm.com

The Need for Medicaid Planning

One of the greatest fears of older Americans is that they may end up in a nursing home. This not only means a great loss of personal autonomy, but also a tremendous financial price. Depending on location and level of care, nursing homes cost between $40,000 and $180,000 a year.

Most people end up paying for nursing home care out of their savings until they run out. Then they can qualify for Medicaid to pick up the cost. The advantages of paying privately are that you are more likely to gain entrance to a better quality facility and doing so eliminates or postpones dealing with your state’s welfare bureaucracy–an often demeaning and time-consuming process. The disadvantage is that it’s expensive.

Careful planning, whether in advance or in response to an unanticipated need for care, can help protect your estate, whether for your spouse or for your children. This can be done by purchasing long-term care insurance or by making sure you receive the benefits to which you are entitled under the Medicare and Medicaid programs. Veterans may also seek benefits from the Veterans Administration.

Those who are not in immediate need of long-term care may have the luxury of distributing or protecting their assets in advance. This way, when they do need long-term care, they will quickly qualify for Medicaid benefits. Giving general rules for so-called “Medicaid planning” is difficult because every client’s case is different. Some have more savings or income than others. Some are married, others are single. Some have family support, others do not. Some own their own homes, some rent. Still, a number of basic strategies and tools are typically used in Medicaid planning.

If you are in need of legal services and would like to schedule a consultation, please call us at (954) 256-9192 or e-mail us at office@jajlawfirm.com

The Five Components of a Good Estate Plan

Many people believe that if they have a will, their estate planning is complete, but there is much more to a solid estate plan. A good plan should be designed to avoid probate, save on estate taxes, protect assets if you need to move into a nursing home, and appoint someone to act for you if you become disabled.

All estate plans should include, at minimum, two important estate planning instruments: a durable power of attorney and a will. A trust can also be useful to avoid probate and to manage your estate both during your life and after you are gone. In addition, medical directives allow you to appoint someone to make medical decisions on your behalf.

Will

A will is a legally-binding statement directing who will receive your property at your death. If you do not have a will, the state will determine how your property is distributed. A will also appoints a legal representative (called an executor or a personal representative) to carry out your wishes. A will is especially important if you have minor children because it allows you to name a guardian for the children. However, a will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly-owned property, property in trust, life insurance proceeds and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate and aren’t covered under a will.

Trust

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” Trusts have one set of beneficiaries during those beneficiaries’ lives and another set — often their children — who begin to benefit only after the first group has died. There are several different reasons for setting up a trust. The most common reason is to avoid probate. If you establish a revocable living trust that terminates when you die, any property in the trust passes immediately to the beneficiaries. This can save time and money for the beneficiaries.

Certain trusts can also result in tax advantages both for the donor and the beneficiary. These could be “credit shelter” or “life insurance” trusts. Other trusts may be used to protect property from creditors or to help the donor qualify for Medicaid. Unlike wills, trusts are private documents and only those individuals with a direct interest in the trust need know of trust assets and distribution. Provided they are well-drafted, another advantage of trusts is their continuing effectiveness even if the donor dies or becomes incapacitated.

Power of Attorney

A power of attorney allows a person you appoint — your “attorney-in-fact” — to act in your place for financial purposes when and if you ever become incapacitated. In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, your representative may have to seek court permission to take planning steps that she could implement immediately under a simple durable power of attorney.

Medical Directives

A medical directive may encompass a number of different documents, including a health care proxy, a durable power of attorney for health care, a living will, and medical instructions. The exact document or documents will depend on your state’s laws and the choices you make.

Both a health care proxy and a durable power of attorney for health care designate someone you choose to make health care decisions for you if you are unable to do so yourself. A living will instructs your health care provider to withdraw life support if you are terminally ill or in a vegetative state. A broader medical directive may include the terms of a living will, but will also provide instructions if you are in a less serious state of health, but are still unable to direct your health care yourself.

Beneficiary Designations

Although not necessarily a part of your estate plan, at the same time you create an estate plan, you should make sure your retirement plan beneficiary designations are up to date. If you don’t name a beneficiary, the distribution of benefits may be controlled by state or federal law or according to your particular retirement plan. Some plans automatically distribute money to a spouse or children. Although others may leave it to the retirement plan holder’s estate, this could have negative tax consequences. The only way to control where the money goes is to name a beneficiary.

If you are in need of legal services and would like to schedule a consultation, please call us at (954) 256-9192 or e-mail us at office@jajlawfirm.com

Social Security Disability Benefits (SSDI)

Disability benefits are available to qualified recipients under two programs, Supplemental Security Income (SSI) and Social Security Disability Income (SSDI).   SSI is a means-tested program for people with disabilities who have very limited means, but SSDI is an insurance program that is available to qualified workers with disabilities regardless of their resources.  As of November 2014, some 10.9 million disabled workers and their dependents were receiving SSDI benefits from Social Security.

SSDI pays cash benefits to people who are unable to work for a year or more because of a disability. Benefits continue until you are able to work again on a regular basis, or until you reach retirement age. At that point, the disability benefits automatically convert to retirement benefits, but the amount remains the same. After receiving SSDI benefits for two years, you also become eligible for health insurance coverage under Medicare. The disability program also includes a number of work incentives to ease your transition back to work.

Who is eligible?

As with retirement benefits, you must have accumulated a certain number of work credits before you can qualify for SSDI disability benefits. However, fewer credits are required to qualify for the disability program than for retirement. You can earn up to four credits per year of employment. How many credits you need to qualify for disability depends on the age you become disabled.

Before age 24: You may qualify if you have six credits earned in the three-year period ending when your disability starts.

Age 24 to 31: You may qualify if you have credit for having worked half the time between age 21 and the time you become disabled. For example, if you become disabled at age 27, you would need credit for three years of work (12 credits) out of the previous six years (between age 21 and age 27).

Age 31 or older: In general, you will need to have accumulated the number of work credits shown in the chart below. Unless you are blind, at least 20 of the credits must have been earned in the 10 years immediately before you became disabled. If you are disabled by blindness, your work credits can be from any time after 1936.

Born After 1929, Become Disabled At Age: Credits You Need:
31 through 42 20
44 22
46 24
48 26
50 28
52 30
54 32
56 34
58 36
60 38
62 or older 40

Certain members of your family may qualify for disability benefits on your work record should they become disabled. The amount of these benefits depends on your earnings record. These family members include:

  • Your spouse who is age 62 or older, or any age if he or she is caring for your child who is under age 16 or disabled and also receiving checks;
  • Your widow or widower or divorced spouse (if the marriage lasted at least 10 years) age 50 or older should he or she become disabled. The disability must have started before your death or within seven years after your death;
  • Your unmarried son or daughter, including an adopted child, or, in some cases, a stepchild or grandchild.

When is a child entitled to disability benefits?

Children under age 18 who are disabled may be eligible for childhood disability benefits if their parent has a disability or is deceased and was insured at the time of death. An unmarried disabled child who is older than age 18 may be eligible for benefits if the disability began before age 22. There is no upper age limit for childhood disability benefits.

In addition, unmarried children are entitled to child’s insurance benefits on the Social Security record of their disabled or deceased parents if the child is under age 18 or between age 18 and 19 and a full-time student.

Who is “disabled”?

The Social Security Administration uses a strict definition of disability. The program does not pay for partial disability or short-term disability. To qualify for benefits under SSDI, your disability must prevent you from doing any substantial gainful work, and it must last or be expected to last a year or to result in death.

Despite the rule that the disability must be expected to last a year, you should apply for benefits as soon as the condition becomes disabling and your doctor is willing to state in writing that it is expected to last at least a year. If it turns out that you recover sooner than expected, the SSA will not ask for its money back.

Older workers who become disabled tend to have an easier time having their claims approved. The SSA recognizes that it is more difficult for older workers to be retrained or to find new employment. In addition, the agency knows that a disabled worker who is, say, 60 years old and will be receiving retirement benefits in a few years anyway will cost it less in benefit outlays than a younger worker would.

The amount of disability payments

As with other Social Security benefits, the amount of your disability payments is based on your age and your earnings record. The calculations are the same as those for retirement benefits, although fewer work credits are needed to qualify for benefits. You can obtain the SSA’s estimate of what your disability benefits would be by requesting Social Security Statement SSA-7004 (formerly known as the Personal Earnings and Benefit Estimate Statement) from the SSA. You can request a copy by mail or online by visiting this page on the SSA Web site:

Your spouse and minor or disabled children are also eligible for benefits. The most that you and your family can receive, however, is either 85 percent of your salary before you became disabled or 150 percent of your own disability benefit, whichever is less.

In most cases, the SSA allows you to supplement your benefits with a small amount of income (in 2015, up to $1,090 a month or $1,820 for the blind).

Beneficiaries who are eligible for more than one Social Security program — say, disability and retirement benefits — cannot collect more than one Social Security benefit simultaneously. If you are eligible for two benefit programs, you will receive the higher of the two benefit amounts, but not both. The exception is Supplemental Security Income, which you can receive while collecting benefits from another Social Security program. However, you are permitted to collect disability payments from a private insurer, the Veterans Administration, or other source at the same time that you are receiving Social Security disability benefits. This holds true for workers’ compensation benefits as well, although your Social Security disability benefits will be reduced if the total of your workers’ compensation and disability benefits exceeds 80 percent of your average wages before you became disabled.

Applying for benefits

Unlike applying for retirement benefits, the application process for disability benefits is complicated and time-consuming. Before you can collect benefits, you have to have been disabled for at least six months. However, since the application process itself can take up to six months, do not wait for the six-month period of disability to elapse before applying for benefits; do it as soon as you become disabled.

The initial application is made at your local Social Security Office. (Don’t know where your local office is? Click here for the SSA’s Social Security Locator.)  If the office determines that you have sufficient work credits to collect disability benefits, it will forward your application to a Disability Determination Services office in your state, which will make the decision about whether you meet the Social Security Administration’s criteria for disability. This decision is made by a doctor and a disability evaluation specialist. They may request additional medical records and/or request a medical evaluation or test. This exam will be paid for by the SSA.

If you are in need of legal services and would like to schedule a consultation, please call us at (954) 256-9192 or e-mail us at office@jajlawfirm.com

Five Planning Pointers for Parents with Disabled Children

Buy enough life insurance. A parent is irreplaceable, but someone will have to fill in if the worst happens. It may be siblings or other relatives. In all likelihood, that family will have to pay for at least some services the parent or parents had provided when able. If the estate is not large enough for this purpose, it can be made large enough through life insurance proceeds. Premiums for second-to-die insurance (which pays off only when the second of two parents passes away) can be surprisingly low.

Set up a trust. Any funds left for a child with special needs, whether from an estate or the proceeds of a life insurance policy, should be held in trust for his or her benefit. Leaving money for anyone with a special need jeopardizes public benefits. Many people with special needs cannot manage funds — especially large amounts. Some families disinherit children with special needs, relying on their siblings to care for them. This approach is fraught with potential problems. Siblings can be sued, get divorced, disagree on their responsibilities, or run off with the funds. It can also cause tax problems for the siblings. The best approach is a trust fund set aside for the child with special needs.

Create a will and appoint a guardian. While a will and the appointment of a guardian is important for anyone with minor children, it is doubly so if the child has special needs. Finding the right guardian can be difficult. In some cases, the care needs of the child may be so demanding that he or she will need a different guardian from his or her siblings. The parents need to make these determinations while they can. The will is the vehicle for the appointment of a guardian.

An adult child may also require a guardian when the parent can no longer serve in this role (whether officially appointed or not). It will probably not be legally possible to officially appoint a successor guardian once the parent is out of the picture. So, it may make sense to begin making the transition to a new guardian while the parent is able to assist in the process. This can be in the form of a co-guardianship, or passing the baton to a successor guardian.

Write down the care plan. All parents caring for children with special needs are advised to write down what any successor caregiver would need to know about the child and what the parent’s wishes are for his or her care. Should the child be in a group home, live with a parent, be on his or her own? Usually, the parent knows best, but needs to pass on the information. The memo or letter can be kept in the attorney’s files with the parent’s estate plan.

Coordinate with other family members. Even a carefully developed plan can be sabotaged by a well-meaning relative who leaves money directly to the child with a special need. If a trust is created for the benefit of the child, grandparents and other family members should be told about it so that they can direct any bequest they may like to leave to that child through the trust.

If you are in need of legal services and would like to schedule a consultation, please call us at (954) 256-9192 or e-mail us at office@jajlawfirm.com