The Special Needs trust is funded …. now what?

Funding a first party Special Needs Trust with alimony, an inheritance, or a personal injury settlement can preserve those assets for benefit of a person who is receiving or applying for means-tested government benefits such as SSI, DDD or Medicaid/MLTSS. There is quite a process to establish the trust and then fund it with these assets. But that’s just the beginning — not the end.

The person who receives these benefits has an affirmative obligation to notify the Agency when there is a change in assets or income. This duty still applies even though the assets that are held in a qualified Special Needs Trust are not counted as the person’s assets or income. This duty still applies even though the transfer of the person’s assets into the trust may be an exempt transfer. And this duty still applies even though a Court may have reviewed the trust and entered an order allowing the assets to be transferred to the trust.

If the person receiving the benefits has a Representative payee appointed for him/her by the Social Security Administration, the duty to report rests with the Rep. payee. If the Trust document meets all of the relevant criteria, benefits should continue or be approved, as the case may be. However if it turns out that the transaction or trust are defective, there may be wrongfully paid benefits and the representative payee and disabled person could be facing a demand for repayment years later.

What should be done? A copy of the fully executed trust and its EIN# paperwork should be promptly submitted to the agency for its review, along with the relevant court order and written verifications of the transfer and funding of the Trust, such as deposit slips and bank/brokerage statements for the trust. The Trustee should then maintain the account records on an ongoing basis as well as the receipts and copies of cancelled checks so that these verifications can be produced to the agency upon demand. If no response is received from the agency within a reasonable time of when the trust was submitted, the agency should be contacted.

The burden of proving and maintaining eligibility for public benefits rests with the recipient and the representative payee. Attending to these crucial steps can prevent problems down the road.

Call for advice on preparation, funding and administration of Special needs trusts … 732-382-6070.


Special Needs Fairness Act signed into law by President Obama

Today is a good-news day for people with disabilities who want to set up a Special Needs Trust to preserve their eligibility for critical benefits: the President has signed the Special Needs Fairness Act — S349 — into law. . Since 1993, an applicant or recipient of Supplemental Security Income (SSI) or Medicaid (now MLTSS in New Jersey) has been able to shelter their excess resources by transferring them into an irrevocable, first party Special Needs Trust for their own sole benefit, sometimes called a D4A trust (for the section of federal law that allows this). The thing is, the Trust itself could only be established by the person’s parent or grandparent, legal guardian [with Court permission], or by a Court. This created a problem for individuals who had no parent, grandparent or guardian. Such an individual could not just hire an attorney to prepare the Trust and provide advice on how to fund it. S/he would have to hire an attorney to petition the Court to establish the trust, and it would have to be on notice of interested parties such as next of kin and the State of New Jersey. This was a time-consuming process and would sometimes create problematic delays that would pose a risk for filing an application or maintaining ongoing eligibility.

The new law corrects this gap in the statute. Now, an individual who has disabilities but is otherwise managing his own affairs can establish the trust without going to Court. This certainly recognizes the capability of individuals with disabilities by allowing them to do their planning privately with their attorney rather than publically in court.  Each state has its own requirements for the exact terms of these trusts, within the framework of the federal Medicaid and SSI statutes and regulations, so the Trust needs to be written carefully to comply with the State’s requirements. And it still has to be established and funded before age 65.

For advice and assistance in establishing special needs trusts, call us at …


Going from ACA Medicaid to “Regular” Medicaid Can Be a High Wire Act Without Legal Assistance

New Jersey has a lot of roads to eligibility for Medicaid, and that’s a good thing.  All of those roads are called NJ FamilyCare, and that’s a confusing thing.

Medicaid in New Jersey is provided by five Managed Care Organizations (MCO) now through NJ FamilyCare.  You must choose one to get services, including long-term services and supports (LTSS), which will be coordinated by the MCO care manager.

If you began to receive Medicaid/NJ FamilyCare benefits because you were income- eligible and without other creditable health coverage (in other words, you receive Medicaid through the Obamacare Medicaid expansion), you could lose your Medicaid coverage if you have a change in your modified adjusted gross income (MAGI) or you obtain other coverage (like Medicare). Unless you are eligible for Medicaid through another pathway (called Aged, Blind or Disabled, or ABD) you will lose services.

For example, if a person with limited income and no insurance had an unexpected illness and spent time in the hospital, it is likely that the hospital got the person on Medicaid through Obamacare, enrolled the person in an MCO, treated that person, and then discharged that person to a rehabilitation facility, where long-term care would also be covered.  However, if there is a later increase in income which would allow that person to purchase subsidized insurance, Medicaid will be discontinued and there will no longer be a payor for the nursing facility or other long-term care setting.  Hence, the need to scramble for ABD, which can co-exist with other insurance coverage.

Planning for ABD Medicaid could include:  spending down resources, establishing a Qualified Income Trust for income, establishing a Special Needs Trust for assets, or other planning that could involve a spouse or disabled or minor child.  In the case of a special needs trust, this type of planning must be done before your 65th birthday.

New Jersey’s Medicaid expansion benefit package does include, via federal waiver, MLTSS–so you must always think about how your eligibility category might change and how to maintain the benefits you currently have.  It can be a very difficult process, but we can help–call us at 732-382-6070.

The NJ Estate tax may be going away, but you can still do important planning with a Will

On October 14th, Governor Christie signed a tax package into law which does away with the New Jersey estate tax  and certain income taxes in exchange for a 23 cent per gallon increase in the gasoline tax so that the roads and bridges can be repaired. There’s still no estate tax on any assets that pass at death to your spouse.  At the present time, the estate tax exclusion is only $675,000, so many couples have estate plans in which this amount is transferred at death into a ‘credit shelter trust” for the surviving spouse so that it will pass to the heirs free of estate tax when the second spouse dies. About 99 % of NJ estates have to pay estate tax. As of January 1, 2017, $ 2 million can pass to your other heirs free of estate tax. The estate tax will be totally repealed as of January 1, 2018. With the new law, this # will likely drop to less than 15% in 2017 (based on the 2014 tables from the Office of Legislative Services cited by Forbes Magazine).

So do you need a Will? Certainly. Without a Will, the law determines who inherits your estate. On the other hand, if you want to distinguish among your next of kin and leave unequal amounts, you need to sign a document such as a Will. If you don’t want a certain person to inherit their share outright — because of pending divorce, or debtor-creditor problems, or disability or youth — you need to consider writing a trust into your Will to receive their share. Oftentimes, a person who is on disability benefits like SSI or Medicaid inherits assets because their parent didn’t plan things carefully. They are then at risk of losing their benefits because they’ve got access to resources. Court proceedings are often required, to establish a Special Needs Trust and direct the inheritance into the trust.

With estate taxation disappearing as an issue for most people, it’s important to turn your attention to how you’d like your estate to be managed over the long-term for the greatest benefit of your heirs. Has it been years since you looked at your old Will? …………….

Call us for updated estate and trust planning … 732-382-6070