Patti's Blog - Advocate for Elders, People with Disabilities and Their Families

Special Needs Trusts

Excerpt from: Medicaid Answers (click for full article)

 

There are three main types of special needs trusts a person can use to protect assets:

1) The Special Needs Trust (known as a “(d)(4)(A) trust” based on its designation under federal law) is a common trust used to protect lawsuit or insurance proceeds or inheritances for someone who is disabled and needs or may need long-term care.  This trust must include a Medicaid payback provision at the death of the disabled beneficiary.

2) The Pooled Trust (authorized under (d)(4)(C)) also works similar to a (d)(4)(A) trust in that it is set up for individuals who are under 65 and disabled.  The same types of assets can be protected in them, but the pooled trust is established by a charity which runs and administers the trust for a number of disabled beneficiaries.  Some portion of the reminder is paid back to Medicaid when the disabled beneficiary dies and the rest is retained by the charity.

3) The Third-Party Special Needs Trust (often referred to as an “Amenities Trust”) is often established by parent or grandparent to leave assets in trust for the benefit of a disabled child or grandchild.  The money or assets can stay in trust and does not qualify towards what has to be spent down to achieve Medicaid or SSI eligibility.  The trust funds can be used to cover those things not covered by government assistance — referred to as amenities.  Because it is set up by a third-party, the remainder in the trust fund can pass through to other heirs or beneficiaries at the death of the disabled beneficiary.

Finding and Choosing a Pooled Special Needs Trust

Excerpt from: NOLO: Law for All (click for full article)

 

Joining a pooled special needs trust might be a good option for your family if you don’t have much money to leave for your loved one, or if you don’t know a suitable person to name as trustee of your trust.  Learn more about how pooled trusts work and why you might want to join one in the article Pooled Special Needs Trusts onNolo.com. Here’s how to find and choose a quality pooled trust. 

Searching for a Pooled Trust

Pooled trusts must adhere to strict state rules, so to keep things manageable, most pooled trusts only take residents that reside in the same state. To find a special needs pooled trust in your state, try contacting one of these organizations:

• Academy of Special Needs Planners: www.specialneedsanswers.com
• The Arc: www.thearc.org
• The Center for Special Needs Trust Administration, Inc.: www.sntcenter.org
• The National PLAN Alliance: www.nationalplanalliance.org

If you find a pooled trust that you’re interested in, it’s time to ask some detailed questions about how the trust will provide for your loved one.

Pooled Special Needs Trusts

Excerpt from: NOLO: Law for All (click for full article)

 

Benefits of Pooled Trusts

Here are some advantages of pooled trusts:

• The people managing the trust and its assets will be knowledgeable about agency rules regarding income and resources and will be able to deal with any questions from the SSI or Medicaid programs.
• The trust directors usually are relatives of people with disabilities and are attuned to that community.
• Even if you don’t have a lot of money to leave to your loved one, a pooled trust can give your loved one the benefits of a special needs trust.

Pooled Trust Denied Tax-Exempt Status

From Academy of Special Needs Planners: (click for full article)

The U.S. District Court for the District of Columbia rules that a Massachusetts pooled trust is not entitled to tax-exempt status because the trust has not shown that it is organized and operated exclusively for an exempt purpose and that its net earnings don't inure to the benefit of a private individual. Family Trust of Massachusetts, Inc. v. United States (D.D.C., No. 11-00680 (RBW), Sept. 24, 2012).

Massachusetts elder law attorney Peter M. Macy founded the Family Trust of Massachusetts, a pooled special needs trust, in 2003. Attorney Macy is the President, Treasurer and Executive Director of the trust, which has grown from 20 beneficiaries to more than 300, with annual revenues of $667,679 in 2009. In 2005, the trust filed a request for a determination from the IRS that it is a tax-exempt organization that falls under the provisions of Section 501(c)(3) of the Internal Revenue Code.

The IRS issued a proposed adverse determination in 2008 but never issued a final notice of determination, so the trust filed an action requesting declaratory relief from the U.S. District Court for the District of Columbia. Both parties filed motions for summary judgment, with the IRS taking the position that the trust was not entitled to tax-exempt status because the trust had not shown that it was being run solely for an exempt purpose. As evidence, the IRS pointed out that Attorney Macy's compensation from the trust grew in proportion to the size of the trust's revenue, and that the trust did not solicit charitable contributions to offset operating costs. The trust maintained that Attorney Macy's compensation was actually lower than average and that he had donated hundreds of hours of time to the trust without compensation. The trust also argued that it was not required to solicit charitable contributions in order to qualify as a tax-exempt organization.

The court grants the government's motion for summary judgment, finding that the trust has not proved that it is entitled to tax exempt status. The court states that the trust "does not actually offer authoritative comparability data for the Court to determine whether [Macy's] salary is, in fact, reasonable." The court also determines that the trust is not operated exclusively for an exempt purpose because its "profit margin begins to appear more a product of a growing commercial enterprise than a tool for expanding the pooled investments that might enable beneficiaries to reap a greater return or enjoy reduced fees."

Editor's note: While the trust does not qualify as a tax-exempt organization, that may or may not be dispositive of the question as to whether it qualifies as exempt for Medicaid purposes under 42 USC 1396p(d)(4)(A), which requires that the trust be “established and managed by a non-profit organization.”  The question is whether the Massachusetts Medicaid agency deems tax exempt and non-profit to be synonymous.

Pool trusts ensure care of adults with special needs

From Jewish Journal: (click for full article)

“Keys! Keys!” David Weisbord says as he tugs at his father’s hand, pulling him toward the door.

“OK, Child, we’ll go for a ride,” Seth Weisbord says with loving exasperation.

A ride with dad around David’s Culver City neighborhood is one of David’s favorite diversions, and Seth is happy to indulge.

“One of our biggest concerns is how to fill his days in a meaningful way,” Seth says.

David is 28 and severely impacted by autism; he is largely nonverbal and also has a degenerative nerve disorder that atrophies the muscles in his arms and legs.

Seth Weisbord and his wife, Beth, have worked hard to assure their son’s quality of life. They bought David a three-bedroom, breeze-crossed bungalow in Culver City, which he shares with a roommate, also disabled. David also has round-the-clock caregivers who guide him in simple household tasks and life skills, and take him for walks in the neighborhood, or for a drive out to Griffith Park or the movies. He takes weekly therapeutic gymnastics and swimming lessons, and he is learning to use an app on his iPad to communicate through pictures. On weekends, he rides his adult tricycle around a nearby park while his caregiver jogs alongside.

Not much of this would be possible on the $621.54 a month David receives in Supplementary Security Income payment from the state — a sum that is supposed to cover all living expenses. Although the Regional Center, which coordinates state-funded care, pays for his caregivers and some therapy, David would not have his tricycle, his iPad, his television, most of his clothing or pocket money for the movies — or the van to get there — without the special needs trust the Weisbords set up.

To be sure, not all families have the Weisbords’ resources, but Seth is working to help other parents figure out how to achieve some level of financial stability for their developmentally disabled children, ones likely to be unable to support themselves when they reach adulthood and who will continue to need financial support after the parents die.

Pooled Trusts

From Thomas E. Simmons: (click below for full article)

In March, April and June of this year, three important court decisions results in a negative impact for pooled trusts serving older individuals with disabilities throughout the country.  All three courts concluded that Medicaid ineligibility penalties could be assessed against disabled individuals funding a pooled trust if the individual was age 65 or older at the time of funding the trust.

Download Pooled-Trust-Article

 

Third Circuit Court Decision Affirms Medicaid Recipients of Any Age Are Allowed Use of Pooled Special Needs Trusts

From Digital Journal: (click for full article)

The National Academy of Elder Law Attorneys (NAELA), along with the Special Needs Alliance and the Pennsylvania Association of Elder Law Attorneys (PAELA), filed a brief of amicus curiae in support of appellees, Zackery D. Lewis, et al., against the Pennsylvania Department of Public Welfare in Lewis v. Alexander, involving pooled special needs trusts (Case no. 2:06-cv-03963-JD, U.S. Court of Appeals for the Third Circuit).

“Pooled special needs trusts let people with disabilities who have modest savings — as little as $5,000 — hold onto them without losing their Medicaid benefits,” said NAELA board member Ron M. Landsman, CAP, the principal author of the NAELA amicus curiae.

A Case for Pooled Special Needs Trusts

From Secured Futures: (click for full article)

The importance of flexible and low cost, full service (d)(4)(C) Trusts:

Poold trusts combine the resources from many individuals, reducing costly fees and creating a robust and stable trust while allowing the disabled individual to remain financially eligible for public assistance benefits.

Prof. Rosenberg’s Article Cited by Third Circuit Court of Appeals

Excerpt from Cuny School of Law: (click for entire article)

In Lewis v. Alexander, 2012 U.S. App. LEXIS 12546 (3d Cir. 2012), a class action challenging aspects of Pennsylvania’s state law regulating pooled special needs trusts for people with disabilities, the Third Circuit held that federal Medicaid law preempted the more restrictive state law provisions.  On the merits, the court cited Professor Joe Rosenberg’s article, “Supplemental Needs Trusts for People with Disabilities:  The Development of a Private Trust in the Public Interest,” 10 Boston University Public Interest Law Journal 91 (2000), for its analysis of the legislative intent, scope, and application of the federal Medicaid law that governs pooled special needs trusts. Professor Rosenberg’s article has previously been cited by the N.Y. Court of Appeals and various federal and state courts.  Professor Rosenberg co-teaches the Elder Law Clinic with Professor Degna Levister.

Read the opinion

Read Professor Rosenberg’s article

New Maryland Law Specifically Allows Transfers into Pooled Trusts by Those Over 65

Excerpt from The Academy of Special Needs Planners:

The Maryland legislature has responded to the Department of Mental Health and Hygiene's attempt to limit the use of pooled trusts by passing a law that officially encourages the use of special needs trusts by people with disabilities, prohibits the Department from setting limits on the amount of money a person with disabilities can transfer into a pooled trust, and bars the Department from assessing a transfer penalty if a person who is over 65 transfers his assets into a pooled trust. The law, which was signed by Governor Martin O'Malley on May 19, 2011, will also prevent any state agency that provides services to people with disabilities from adopting regulations that are more stringent than existing federal law, regulations or policies with regard to the treatment of special needs trusts.

According to Maryland elder law attorney Jason Frank, the bill had its genesis when harsh regulations were proposed in January that would have, among other provisions, capped the accounts that could be transferred into (d)(4)(C) trusts at $100,000, barred the use of trust funds -- both ((d)(4)(A) and (C) -- for food and shelter and eliminated 65+ Medicaid enrollees from utilizing (d)(4)(C) trusts. (Federal law allows trustees to purchase food and shelter with trust funds, subject to the presumed maximum value rule.)

"We were able to get the sympathetic ears of two legislators in each House and they agreed to sponsor the bill," Mr. Frank told ASNP. "The regs were withdrawn, with every intention of bringing them back in substantially the same form. Meanwhile, the bill passed, with only one substantive amendment, without opposition in both Houses. I don't know whether it simply passed under the radar of the MA folks or not. They didn't even appear at the first hearing, just sent a letter opposing it."