Molly Dear Abshire Wright Abshire, Attorneys Bellaire, Texas

 20% of U.S. population is disabled at any given time.  10% of U.S. population is severely disabled and relies on benefit programs to provide for basic needs.  Need for planning for public benefits is growing.

 Evaluates funding options for financing LTC  Assists in qualification for public benefits  Counsels regarding available programs  Preserves existing public benefits  Advises regarding estate planning documents and prepares same

If capacity:  Financial Power of Attorney  Medical Directives  Will and/or Trust If no capacity:  Guardianship/Conservatorship

 Private pay  Long-term care insurance  Public benefits  Medicare  Medicaid  VA Benefits

 Most people feel they will never need LTC  When the need arises many cannot qualify for LTC insurance & premiums may be cost- prohibitive  Many mistakenly believe that Medicare will cover LTC needs  Long-Term Care Partnership Programs  Not counted as income to the Medicaid recipient  Benefits paid = assets can exclude

 Rising costs of care for disabled individuals  Unavoidable Impoverishment  Protection of the “Community Spouse”  Private insurance exhausted  Uninsurability

 Many personal needs left uncovered  Clothing  Dental care  Transporation  Trust planning can help close the gap

 Identify the client  Avoiding fraud  Diligent representation  Malpractice for failing to preserve public benefits  Client capacity and gifting  Medicaid planning by non-attorneys

 Enacted March 23, 2010, fully implemented by Fall of 2014  Expansion of Medicaid benefits to qualified lower income retirees, effective in 2014, states may opt out.  Federal High Risk Insurance Program

 Monthly cash assistance program  For qualified individuals who are disabled before age 65  Worked appropriate number of quarters  Must meet disability criteria  Non-means tested benefit

 Federal Health Insurance Program  80/20 plan  For eligible individuals 65+ and SSDI beneficiaries after 24 months  Lifetime limits  No LTC  Non-means tested benefit

 Part A = in-patient services, home health, hospice and limited SNF  Part B = doctor charges  Part C = Medicare Advantage HMO  Part D = voluntary drug plan

 Medicare has deductibles, co-pays and premiums  Without Medigap, not 100% insured  Choice of provider, but government regulated  Open enrollment period

 For adult children with disabilities  Provides 55% of base pay divided by eligible children  TRICARE health coverage  Non-means tested benefit

Two Types:  Service Connected Disability Compensation – injury, illness or aggravation of a pre-existing condition during active duty, non-means tested benefit  Non-Service-Connected Disability Pension – low income disability payments, means- tested benefit

 Disability contracted during active duty (no wartime requirements)  Veteran must not have been discharged dishonorably  Injury must not be the result of misconduct  Once disability is determined, a rating must be assigned

 Disability does not have to be service connected  Don’t have to be retired military  No requirement for combat  Must meet income and net worth requirements

 Federal cash assistance program  $698/month individual  $1,048/month couple  Provides minimum level of income for individuals with disabilities  Means-tested benefit

To be eligible person must be:  Age 65 or older or blind or disabled,  U.S. Citizen or qualified alien, and  Not a resident of public institute.

 Income limitation  Resource limitation  <$2k for single individual in countable resources  Excluded resources = home, car, prepaid funeral and household goods

 ISM = food & shelter  Lesser of $ for $ reduction or 1/3 reduction of SSI  Example: 1/3 reduction = [$698 x 1/3 = $ $20 disregarded income = $252.67]

 Joint federal and state funded program for medical services  Means-tested benefit  States administer Medicaid 3 different ways:  209b states  SSI states  1634 states

 Example: Connecticut  Use at least one eligibility criteria more restrictive than SSI program

 Example: Alaska  If eligible for $1 of SSI, then eligible for Medicaid  States determine eligibility

 Example: New York & Texas  Use SSI eligibility, if eligible for $1 of SSI, then eligible for Medicaid  SSA determines eligibility

 Hospital – in-patient & out-patient  Physician services  Physical therapy  RX  SNF  Home and community  Community supported living arrangements  Personal care services  Case management services  Emergency care

 For low-income Medicare beneficiaries  Vary according to income, Medicaid states and institutional status  May pay deductibles, premiums and co-pays of Medicare

 Nursing Home Medicaid  Waiver Programs  Community Based Services  Personal Care Services

 Categorical Requirements  US Citizen/lawful alien  65 years of age or older, blind or disabled  Medical necessity  Medicaid facility, Medicaid bed  Income Test  Resource Test

 Cannot give assets away and qualify for means-tested public benefits  5 year look back period for all states  Penalty rules vary by state  Disclaimer not okay

 If there were no restrictions, many individuals would become eligible for Medicaid by giving their assets away  The federal statute requires states to penalize transfers for less than fair market value  In Texas, the transfer penalty affects payments for institutional facility services and eligibility for home and community based waiver programs

 Pursuant to OBRA ‘93  States required to recoup funds expended on Medicaid recipients at death  MERP often affects homestead

 Federal housing subsidy  Means-tested governmental benefit  SNT not considered an asset for eligibility purposes

 Meet a needs based test determining inadequate income for adequate care  Suffer from a permanent and total disability (100%) rating  Veteran must not have been discharged dishonorably  Must not be the result of misconduct  Served at least ninety consecutive days, with at least one day during wartime

 Veterans with low incomes who are over age 65 are considered disabled  Unreimbursed medical expenses may reduce countable income

 A surviving spouse is entitled to a lower pension, VA calls a “death benefit”  The Veteran must have met the previous requirements  The surviving spouse has not remarried  And, meets the requirements for the level of compensation

 The estate of the Veteran must be insufficient to support the Veteran  The net worth is the fair market value of all real and personal property  Except for the homestead and value of personal items within the homestead

 Case by Case analysis  No set amount or limit  Based on actuarial life expectancy and shortfall  $80,000 fallacy

 Many elderly Vets and spouses may qualify  Allows elderly Vets to afford care at home or assisted living  Could be used to pay for care during Medicaid Penalty Period  Monthly cash assistance  Means-tested benefit  Beware of penalty period

 Aid and Attendance – for Veterans who are unable to perform activities of daily living without assistance  Housebound Allowances – for Veterans who are permanently housebound and who meet the requirements for non-service connected disability pension

 Largest healthcare network in the country  Service requirements  Financial eligibility requirements  Enrollment – 10-10EZ  Priority/ Status Groups

 Preventative Care Services  Ambulatory (out-patient) Diagnostic and Treatment  Hospital (in-patient) Diagnostic and Treatment  Medication and Supplies  Federal & State Veterans’ Nursing Homes

 Most common tool to protect resources  May be  Self-settled  Third-party settled  They supplement (but do not supplant) public benefits.

 Individuals who are disabled and need public benefits.  Family members of a disabled person who needs to maintain public benefits.

SUPPLANTING  Food  Shelter  Medical items or services paid by Medicaid SUPPLEMENTING  Medical needs not covered by Medicaid  Social needs  Recreational needs  Educational expenses

2 types:  Special Needs Trust [(d)(4)(A)]  Pooled Special Needs Trust [(d)(4)(C)]

 65 y.o. beneficiary’s own money  Corporate trustee  Payback provision  Settlor = parent, grandparent, guardian or court  Irrevocable

 Beneficiary’s own money  Shared corporate trustee/ administered by non-profit  Payback provision  Irrevocable

 Testamentary or Inter-Vivos  Funded with third party funds  Not a resource, unless client can revoke the trust or direct use of its assets for his own support and maintenance  Distributions to/for client can be countable income (unless for medical/social purposes)

 Self-Settled Trusts v. Third-Party Trusts  Self-Settled Trusts: funded with the beneficiary’s own money  Third-Party Trusts: funded with other people’s money  Always ask yourself: where is the money coming from to fund this trust; not originally, but just before funding

 Elderly clients with capacity and I Love You Wills  Leave estate to a SNT for benefit of surviving spouse  Partition and transfer

 Client is parent/grandparent of disabled child  Inter vivos or testamentary third party SNT  Crummey provisions if taxable estate

 Disabled spouse is divorcing  Consider funding SNT  Disabled child’s parents divorcing  Review effect of child support  Consider funding SNT

 Elderly client with disabled child needs Medicaid eligibility  Consider funding sole-benefit trust with SNT provisions for disabled child  Immediate eligibility for client, continued eligibility for disabled child

 Client is receiving personal injury recovery  Self-settled SNT or pooled trust  Mandatory distribution language  Corporate trustee

 Client is receiving inheritance  Self-settled SNT or pooled trust  Mandatory distribution language  Corporate fee except in rare situation

 If trust is cost prohibitive, consider alternative action  Spend down excess resources  Purchase exempt resources

 SSI POMS standards plus some states impose additional requirements  States have authority to monitor administration of and distributions from SNTs

 Trustee choice  No contributions after age 65  Distribution standards

 Meet POMS requirements.  Some states have non-profits who have formed pooled trusts.  Example: Texas has one pooled trust: ARC of Texas SNT. New York has many pooled trusts.

 Irrevocable  No support language  Distribution provisions  Termination clause  No payback provision

 Corpus not a countable asset, unless client –  Can revoke the trust; or  Direct use of trust assets for his/her own support & maintenance  Distributions to/or client are countable income (if such income is ordinarily counted)  Other distributions do not affect client’s eligibility

 Distributions restricted to goods/services that do not count as income (no cash, food, or shelter)

 Any distribution is allowed that will not actually disqualify client for benefits.  If client not on benefits, distribution for cash, food and shelter okay.

 Trustee may make distributions that result in in-kind support & maintenance (“ISM”), which reduces SSI payments, but does not eliminate benefits.  Distributions for room and board, resulting ISM up to PMV ($252.67) okay.

 Distributions are totally at trustee’s discretion  Trustee may make distributions in any amount & for any purpose  In some states (not Texas) it automatically disqualifies client for Medicaid  Texas Medicaid evaluates each distribution

 Notification to SSA  Notification to state agency  Distribution advice  $ for $ reduction  ISM ▪ Food ▪ Mortgage payments ▪ Rent ▪ Real property taxes ▪ Utilities

 Attendant Care  Medical supplies and equipment  Dental  Electronic equipment  Legal and accounting fees  Entertainment, recreation, short vacation  Non-food grocery items  Telephone and cable expenses  Clothing

 Self-settled SNTs funded with inheritances, excess funds and proceeds from PI claims  Resolve Medicare claims, Medicaid liens  Consider annuity structure tie-in to SNT

 Public benefits planning is a growing area of law  SNTs are an important estate-planning tool  Drafting SNTs is not a “one-size-fits-all” process  Conform to federal and state law  Inquire regarding beneficiary’s need for public benefits in every estate planning consultation