Assets in 529 College Tuition Plan are Not Considered Available Resources of the Over Age 18 Beneficiary

A recent question has arisen regarding whether or not assets held in a 529 College Savings Plan (“Qualified Tuition Program”) for the benefit of a beneficiary who is disabled over eighteen years of age will be treated as a “resource” by either or both SSI (Supplemental Security Income) or Medicaid.

Some parents establish a 529 Plan for a young child in anticipation of saving for the child’s future (and the presumed need for) post-high school education expenses at a college or university.  Years later, due to illness, injury, developmental delays, or disabilities, it may become apparent to the parent that the child would not likely be able to attend college or university but instead does then, or shortly will, need to apply for and receive public benefits like SSI and/or Medicaid.  Will those funds held in a 529 Plan contributed by the parents (or others) now hinder, or even prevent, the beneficiary from being able to obtain SSI and Medicaid, if the beneficiary would otherwise qualify for those benefits??

Social Security has issued a POM which addresses how College Savings Plans are to be treated by the SSA.  The POM is found at SI 01140.150, entitled “Qualified Tuition Programs” (QTPs).  Included in the provisions of this POM is the specific finding that, since the 529 is deemed to be “owned” by the person establishing the account, it is therefore not owned by the beneficiary and, therefore, should not be deemed a resource of the disabled beneficiary.  This is great news for the beneficiary.  In fact, the parent (who is normally the custodian of the account) can use the funds to benefit the beneficiary in certain circumstances for educational needs without having the transfer the assets into an ABLE Account (see blog post), or into another alternative, such as a Medicaid Payback Trust [e.g., (d)(4)(A) or (d)(4)(C)].

In addition, the 529 Plan does not require any “Medicaid payback” to the state Medicaid program since the assets held in the 529 Plan are not deemed to be owned by and are not, therefore, “resources” of the beneficiary.

The recently passed “Tax Cuts and Jobs Act” expanded the use of 529 Plans for expenditures for K-12 tuition, thus making the assets available for educational purposes of a younger disabled person who may not qualify for college or university.  After completion of whatever educational needs the beneficiary has, the new tax act does allow 529 Plans to be rolled over into an ABLE account.

Using the funds in the 529 Plan to benefit the disabled beneficiary, without damaging the beneficiary’s public benefits and without incurring a Medicaid “payback” at the death of the beneficiary, is a two-fold benefit, a real “win/win.”
 

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

NEW GUARDIANSHIP STATUTE ELIMINATES “GAP” AND TIME DELAY IN APPOINTMENT OF GUARDIAN FOR DISABLED MINOR APPROACHING ADULT AGE

On May 2, 2017, Oklahoma Governor Mary Fallin signed HB2247 authorizing the filing of a petition and conducting of a hearing for appointment of a guardian for a disabled minor child within ninety (90) days prior to the child reaching age eighteen (18).  Prior to the passing of this new statute, the parents of the disabled child were required to wait until the child reached his/her 18^th birthday before being permitted to file a petition and thereafter (approximately 30 days following the date of filing) having a hearing to seek appointment of a guardian over their now adult disabled child.

Under the new statute there will be no “gap” or lag time between the child arriving at age 18 and the date of a hearing on the matter, since the court order under this new procedure will become effective automatically when the child reaches 18.  Under the existing law, no petition for a disabled child was permitted to be filed until after the child turned 18, thus causing a “gap” in time during which no guardian was in place until a hearing was conducted, usually within a month after filing the petition. 

This new procedure will relieve the minds of many parents who have expressed concern to me about something happening during the “gap” period when no guardian has yet to be appointed because the hearing to appoint a guardian has not yet occurred but their child has already reached age 18. 

With the new statute, though parental authority technically ceases when the child reaches 18, if the new statutory procedure is implemented after a hearing is conducted (sometime during the 90 days prior to the child reaching the age of 18), the parents will become guardians on the child’s 18^th birthday and there will then be no loss of authority/watch-care over their disabled child, a welcome relief to many parents.

The statute becomes effective November 1, 2017. 

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

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