CONGRESS PASSES “SPECIAL NEEDS TRUST FAIRNESS ACT”

The U. S. Senate recently passed H.R. 34, which included a much needed but simple addition to the existing OBRA 1993 statute, which established Medicaid pay-back trusts for the benefit of persons with disabilities.  A Medicaid “Pay-Back” Trust allows a disabled person who is receiving public benefits, such as SSI and/or Medicaid benefits, to place excess funds in a Medicaid Pay-Back Trust without those funds or assets being treated as “excess resources” resulting in a loss of SSI and/or Medicaid. 

The original “(d)(4)(A)” statute [a recitation of a part of the Congressional Act authorizing such trusts, e.g., 42 U.S.C. 1396p(d)(4)(A)], allowed the establishment of such a trust only by a “parent, grandparent, guardian, or the court” and did not authorize the disabled individual him or herself to establish such a trust even if competent to do so.

Apparently there was an unfair or naïve assumption that all disabled persons lacked the capacity to establish a trust on their own, or there simply was a drafting oversight by Congress in the original statute.

The new “Fairness in Medicaid Supplemental Needs Trusts” Act only adds two substantive words to the existing statute; it adds “the individual” to the list of persons authorized to establish a (d)(4)(A) MedicaidPay-Back Supplemental Needs Trust, in addition to a parent, grandparent, guardian, or the Court.

This simple change will eliminate the burden and expense associated with having to go through court proceedings if there was no parent or grandparent available or willing to establish a (d)(4)(A) trust for the benefit of a disabled adult.

The new Act reads as follows:

(a)  In General.—Section 1917(d)(4)(A) of the Social Security Act (42 U.S.C. 1396p(d)(4)(A) is amended by inserting “the individual,” after “for the benefit of such individual by”.

(b)  Effective Date.—The amendment made by subsection (a) shall apply to trusts established on or after the date of the enactment of this Act.

The House of Representatives previously passed this statute and now, with Senate approval and President Obama’s anticipated signing of the bill, a hurdle has been removed for competent disabled persons being able to establish, by themselves, a Medicaid Pay-Back Supplemental Needs Trust to promote their welfare and benefit their lives. 

Curtis J. Shacklett, Esq.
Barber & Bartz, P.C.
525 S. Main St., Ste. 800
Tulsa, OK 74103-4511
Telephone: (918) 599-7755
Facsimile: (918) 599-7756
Email: cshacklett@barberbartz.com
Website: www.barberbartz.com

Trustees: Don’t Give a Debit Card to a Beneficiary of a Medicaid Pay-back Trust!

On July 27, 2015, a Federal District Court in Pennsylvania (Elias v. Colvin, 2015 WL 4529877, M.D. Pa July 27, 2015) ruled that if an individual can direct the use of a trust’s corpus (i.e., principal) the trust should be deemed an available or countable resource to the individual for purposes of SSI (Supplemental Security Income) purposes.

 

In this case, the individual beneficiary was provided a debit card allowing her direct access to her first party Special Needs Trust (SNT) (i.e., a Medicaid Payback Trust).  This direct access ended when the trusteeship changed, perhaps indicating that a more enlightened Trustee took over management of the Trust.  The Social Security Administration (SSA) ruled that the debit card granted the beneficiary access to her trust and, therefore, caused the trust to be deemed an available resource to her, thus, causing a loss of her SSI, and a demand for repayment by the SSA for over $18,000 was asserted against the beneficiary.  The decision of the SSA was upheld on an appeal to the Federal District Court.  This case once again warns the Trustees of the major error caused when a beneficiary of a first party Medicaid payback trust is given a debit card tied to the trust account, allowing access to trust assets by the beneficiary. 

Curtis J. Shacklett, Esq.
Barber & Bartz, P.C.
525 S. Main St., Ste. 800
Tulsa, OK 74103-4511
Telephone: (918) 599-7755
Facsimile: (918) 599-7756
Email: cshacklett@barberbartz.com
Website: www.barberbartz.com

WILL AN INHERITANCE AFFECT SSI AND/OR MEDICAID?

This question arises frequently, and I often receive calls from parents of disabled children or professional Trustees as to the impact of an inheritance received from a grandparent or other relative, and whether or not that inheritance will affect “social security benefits.”

The short answer to this question is YES–if the disabled person is receiving either or both SSI and/or Medicaid.  Under both SSI and Medicaid rules, the disabled person cannot possess more than $2,000 in non-exempt resources.  (Exempt resources include things like clothing, household goods, personal effects, etc.) 

Thus, if a disabled individual inherited or received a gift of money or property that increased his/her bank account or list of assets/resources above $2,000 in value, the recipient would lose his/her SSI and Medicaid benefits unless the excess funds were immediately: (1) spent down below $2,000 for the benefit of the disabled person; (2) used to acquire exempt resources; (3) used to purchase a prepaid irrevocable burial contract up to $10,000; or (4) transferred into one form or another of a Medicaid pay-back trust [called a (d)(4)(A) trust, or a (d)(4)(C) trust, the later also known as “pooled” trust.]

If a disabled person is receiving SSDI (or “SSD”) which is an earned benefit program called “Social Security Disability Income,” an inheritance will not affect the continued receipt of that benefit.  SSDI is not a welfare program like SSI, and thus is not affected by receipt of an inheritance.  But if a person was receiving SSDI and Medicaid, he or she could still lose their Medicaid benefits unless one or more of the four strategies described above was implemented.

CONCLUSION:  A parent, guardian, or other caregiver should rarely discourage gifts be given to a disabled person from other family members, grandparents, etc., since there are ways to salvage these gifts via proper spend-down strategies or setting up a Medicaid payback trust, as described above. 

Curtis J. Shacklett, Esq.

Barber & Bartz

525 S. Main Street, Suite 800

Tulsa, Oklahoma  74103-4511

Telephone:  (918) 599-7755

Facsimile:   (918) 599-7756

E-mail:  cshacklett@barberbartz.com