Special Needs Trusts and the ABLE Account: Evaluating the OptionsPresented by:

Amelia Crotwell, Certified Elder Law Attorney

Elder Law of East Tennessee

Goals:

Explain the connection between Medicaid or means-tested benefits and excess income/resources.

Describe the challenges to negotiating this relationship and the use of Special Needs Trusts.

Communicate the benefits of ABLE Act and contrast with Special Needs Trusts.

Means-Tested Benefits

Means-Tested Benefits require that the recipient meet certain income and resource limits to qualify.

Some benefits also require that recipients meet the SSA definition of disability.

Medicaid/TennCare

SSI

Temporary Assistance to Needy Families (TANF)

Qualified Medicare Beneficiaries (QMBs)

Section 8 Housing

Food Stamps

Cover Kids or Children’s Health Insurance Program (CHIP)

Veteran’s Benefits

SSA Definition of Disability

An individual is considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than 12 months.

TennCare and Waiver Programs Medicaid – health care for persons who are aged, blind or disabled

SSI – cash benefit from the Social Security Administration for persons who are aged, blind or disabled (automatically eligible for M’caid)

TANF – cash assistance to parents who have fallen on hard times (automatically eligible for M’caid)

QMB – state M’caid program pays Medicare premium and helps with medical and drug costs

TennCare and Waiver Programs, Continued Section 8 – rent subsidy via voucher or reduced rent in a public housing

complex

SNAP – food and nutrition assistance

CHIP – low or no cost health insurance

Veteran’s Benefits - Low Income Pension, Special Compensation, Housebound Benefits, or Aid and Attendance

Medicare Savings Programs

Qualified Medicare Beneficiary (QMB)

Specified Low-Income Medicare Beneficiary (SLMB)

Qualifying Individual (QI)

Qualified Disabled and Working Individuals (QDWI)

Extra Help (Low Income Subsidy)

Excess Income and Resources When a person qualifies for a

means-tested benefit, receipt of excess resources can cause them to lose the benefit.

It is critical to know the available options for safeguarding these funds for the benefit recipient’s wellbeing and quality of life.

Know the Options

Special Needs Trusts

3rd Party

d4a

d4c

Savings Account

ABLE Account

What is a Special Needs Trust? Two Kinds of Trusts:

Self-Settled Third Party

Distribution Guidelines make a trust a SNT.

Self-Settled

Assets to fund the trust belong to the person with a disability

Payback provision required

Irrevocable

d4a and d4c

No transfer penalty for grantor

When to Use:

Inheritance

Settlement

Any large sum received by the person with a disability

d4a Special Needs Trust Established by Parent, Grandparent, Conservator, or Court

Irrevocable

Inter Vivos

One Lifetime Beneficiary

Under Age 65 and Definition of Disability

Payback Provision

d4c Special Needs Trust Established by Parent, Grandparent, Conservator, Court, or the Person with

a Disability

Irrevocable

Inter Vivos

One Lifetime Beneficiary

Any Age and Definition of Disability

Payback Provision

Trustee must be a non-profit and a separate account must be maintained for each beneficiary

Third-Party Assets to fund the trust belong to a third party (e.g. parent)

No payback requirement

Revocable or irrevocable

Potential transfer penalties if third-party grantor requires benefits

When to Use:

Parents with child receiving benefits

Spousal supplemental needs

3rd Party Special Needs Trust Assets of a Third Party

Typically the Parent of a Child

Beneficiary of Any Age

No Payback Provision Requirement

Revocable or Irrevocable

Estate Planning:

List a contingent beneficiary

Part of Last Will for spouse or child

Trustees and Distribution Guidelines Who should be appointed as

trustee? Independent trustee preferred Family member and independent

as co-trustees Trust advisor can assist if a trustee

needs to be replaced or removed

Distributions should not be made directly to beneficiary

Avoid distributions for food and shelter (SSI recipients)

ABLE Account “Achieving a Better Life Experience” Account

Disabled before Age 26

Distributions controlled by DIDD/State of TN Contractors

Payback Provision

Can be transferred to another family member disabled before age 26

Limits $14k/year; Total $100k

May be available January 1, 2016

Status Update on Federal Regulations and Tennessee Availability

Case Studies

Let’s review handouts together.

Case Study: 3rd Party SNT

Wanda and Harry are the parents of Alicia, Joe, and Brock. 

Alicia receives SSI, TC and Waiver. 

Wanda and Harry have a home worth 100k and bank accounts and investments worth $200k and and Harry has an IRA of 300k. 

Joe and Brock do not have special needs. 

Wanda and Harry suggest that they will disinherit Alicia and give all their assets to Joe and Brock so Joe and Brock can “take care of” Sis. 

Case Study: d4a SNT

Gary is 50 years old

Gary is on the DIDD Statewide Waiver and receives SSI and TC. 

His Aunt Aida, his closest living relative, just died leaving him a home worth $400,000, an investment account worth $300,000 and her car, a Mazda Miata $15,000. 

Aunt Aida did no planning. 

Case Study: d4c SNT

Becky is 35. 

She is disabled as a result of a car accident at age 28.

She receives SSDI, SSI, Medicare, TennCare, food stamps, and lives in Section 8 housing.   

Her father died and left her a small life insurance policy worth $50,000. 

She has no family to help her manage the money. 

Case Study: ABLE Account Bronwyn is 45 and was born with a

disability.

She gets SSI and DIDD waiver services. She gets TennCare too. 

She works in a sheltered workshop and sometimes earns up to $500 per month in income. 

Bronwyn’s parents and grandparents sometimes like to make gifts of cash to her for special trips and things. 

She can’t find enough ways to spend her money and she likes to save. 

Her brother, Pierce, also has a disability and also receives SSI. 

Thank you!

Contact us:Elder Law of East Tennessee903 N. Hall of Fame DriveKnoxville, TN 37917

865-951-2410

info@elderlawetn.comwww.elderlawetn.com