CAN THE TRUSTEE OF A SPECIAL NEEDS TRUST EMPLOY A PARENT OF A DISABLED CHILD AS A CAREGIVER FOR THAT CHILD? (PART II)

(This is a follow up to a blog posted 2-14-12)

Since posting my last blog on 2-14-12, I received a response email from Mr. Travis Smith, Esq. assistant general counsel to the Oklahoma Department of Human Services as to the question posed in the heading of that and this blog post. Mr. Smith is the “go to” person with regard to questions affecting Medicaid qualification through DHS in Oklahoma. I quote his response in part:

“…OKDHS treatment of payments to parents of minors is not specifically addressed in the OAC[“Oklahoma Administrative Code”-the official administrative record that includes policies promulgated by the Oklahoma Health Care Authority controlling Medicaid qualification in Oklahoma]. “And how OKDHS treats any payment to any parent of a minor will be very fact dependent and that they [i.e. parents] should have [their] specific circumstances checked out [i.e., with legal counsel or with OKDHS] before they start making payments.”

He further stated that: “the trust corpus [of the special needs trust] would be available [i.e., treated as a resource thus disqualifying the child from continued receipt of Medicaid benefits] if the parent provides the kind of care that the NM case dealt with.” He is referring to a very significant New Mexico federal court case entitled “Steffan Hobbs vs. Marsha Zenderman, [et al], Secretary of the Department of Human Services.” The opinion was rendered in 2008 and affirmed on appeal to the tenth circuit [579 F.3d 1171, 1179 (10th Cir. 2009)], the same appellate court that hears cases from Oklahoma. The facts in the case evidence considerable free spending habits of the parents in using trust assets to pay for things that benefited the parents/family and not just the disabled child (i.e., violated the “sole benefit rule”). The parents used the trust funds also to pay the mother for care giving for their disabled/brain injured child. Although it appears that the parents may have taken advantage of the trust in paying for things that benefited the parents directly and indirectly, the court also noted that payments were made to the parent for services she “was already legally obligated to provide as a parent.” The door appeared to be somewhat left open for “skilled services” a parent might provide and examples given were “physical or other therapist” or performing “skilled services,” the latter not being defined.

So again, in conclusion a trustee, whether professional or parent, needs to seek legal advice before assuming that payments to a parent as a caregiver will be approved.

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

CAN THE TRUSTEE OF A SPECIAL NEEDS TRUST EMPLOY A PARENT OF A DISABLED CHILD AS A CAREGIVER FOR THAT CHILD?

I have been asked this question numerous times by professional trustees and parent-trustees of special needs trusts (“SNT”). The answer is: “it depends.”

First of all, an SNT established by a parent or other “third party” and not funded by assets belonging to the disabled person is not subject to the “sole benefit” rule that governs what are called “first party” SNT’s.  A first party SNT is one that is statutorily authorized and is established for the sole benefit of the disabled person and funded with assets/resources that belong to the disabled person.  This type of trust is a “Medicaid pay-back” trust and the assets contained in it are not treated as an available resource to the disabled person and thus do not hinder receipt of SSI and/or Medicaid.  However, these first party trusts (sometimes called d4A trusts) must be established for the “sole benefit” of the disabled person and no other person can be a co-beneficiary with the disabled person as long as the disabled person is alive.  It is this “sole benefit” rule that gets in the way of providing compensation to a parent as a caregiver.

Generally, the law requires a parent to care for his/her minor child (whether disabled or not) without any compensation for doing so.  Sometimes, however, if both parents are working, and in particular, if they are doing so because of economic necessity, it creates considerable hardship if substantial expense is incurred for specialized care-giving services for a live-at-home disabled child.  This may result in not much economic benefit to one of the parents for continuing to work, when much of the income from employment is spent on caregivers. In addition, a parent may feel (and often does) that he/she can provide far better care giving services to their disabled child than those they would otherwise hire to provide care.  Thus, two questions arise: (1) “Can I quit my job, stay at home with and take care of my disabled child, and be compensated from my disabled child’s Medicaid-payback SNT?”; and (2) “If, so, how much can I be paid?”

If the disabled child is an adult (i.e., of legal age-i.e. at least 18 years old), there is currently no requirement by SSA (Social Security Administration) or Medicaid to provide care and support for that child by the parent.  Thus, obtaining consent or approval by SSA or Medicaid for parental compensation from the SNT may be more likely to be approved (subject to considerable scrutiny by SSA and Medicaid).  However, if the disabled child is a minor, due to the legal obligation of support placed upon all parents, a parent obtaining consent to be compensated from a first party SNT is far less likely. In addition, because of the “deeming” of income rules by SSA the child may experience a reduction in his/her SSI benefits if the parent is paid from the SNT.  In the event the parent is approved to receive compensation from a first party SNT, in all events the parent could not be paid more than that charged by independent qualified/trained caregivers.  Further,  the parent may not be able to be paid for more than forty (40) hours per week since it will be assumed that the parent can provide care for the child on nights and weekends, etc.  Because the “sole benefit” rules are a potential hindrance to compensation to a care giving parent, and somewhat vague as to how they might apply to specific circumstances, we suggest you check with our office and discuss your particular circumstances before assuming that compensation from a first party SNT to a parent will be allowed. (also see SSA POMS: SSI 01120.201F)

Curtis J. Shacklett

Barber & Bartz

525 S. Main, Suite 800

Tulsa, OK 74103

(918)599-7755

cshacklett@barberbartz.com

LIFECARE TRANSITION PLANNING FOR THE SPECIAL NEEDS CHILD

Most families that have a special needs (i.e., disabled) son or daughter collect a wealth of information about the special needs of that child, including information regarding medical care, educational issues, names of doctors, consultants, care-givers, special activities, and a host of other important bits of information that are critical to the ongoing care of their child.

However, experience with our clients has shown that, in spite of the parent’s good intentions, much of that information is held and remains “between the ears” of the parent rather than in one conveniently organized and well-documented format that would be readily available and transferrable to a successor guardian, caregiver, or Trustee for the disabled child in the event of the loss of life or disability of the parent.

We think it critically important that families with special needs children build a “Lifecare Transition Notebook” to contain such relevant and critically important information in a clear and well organized manner.  Such a notebook will be of priceless value to another family member or friend who takes on some responsibility for caring or overseeing care for the special needs child after the parent can no longer do so. 

In addition, providing a copy of the “Lifecare Transition Notebook” to the professional Trustee who may eventually assume responsibility for managing the Special Needs Trust will help the Trustee have additional and critical information to assist the Trustee in making critical investment or disbursement decisions involving the Trust.

We at Barber & Bartz can provide such a personalized “Lifecare Transition Notebook” to our clients, if requested, as part of the estate and special needs planning services that we provide.