Can Special Needs Trusts Reimburse Travel Expenses?

Everyone is familiar with the high cost of travel and the difficulties of staying in touch with distant family.  But families of people with special needs often face high travel expenses from medical emergencies, unforeseen circumstances or constant care taking.

Whether these expenses can be reimbursed and how depends on the type of special needs trust. If the trust was created as a third-party trust, meaning that it is funded with money from someone other than the trust beneficiary,then family members can typically be reimbursed for these expenses if allowed under the trust.  Stricter rules apply, however, where the trust is set up as a first-party trust, meaning that is funded by the beneficiary’s own money.

Distributions from first-party trusts are subject to the “sole benefit” rule, which is meant to ensure that trust distributions are used solely for the benefit of the trust beneficiary.  Prior to 2012, no distinction existed for family members’ travel expenses between first- and third-party trusts – travel to visit the beneficiary was allowed.  But that August, the Social Security Administration (SSA) revised its Program Operations Manual System (POMS), the guidebook that agency employees follow when determining a person’s Supplemental Security Income eligibility, in a way that appeared to interpret the “sole benefit” rule for first-party trusts to bar reimbursement of family members’ travel expenses.

Following an outcry by disability advocates, the SSA rescinded the change and implemented a compromise in May 2013. Although the compromise retained the general prohibition on reimbursement of travel expenses from first-party trusts, it created two, relatively broad, exceptions.The first exception apples to medical treatment. Specifically, the POMS states that trust distributions are allowed for the “payment of third party travel expenses which are necessary in order for the trust beneficiary to obtain medical treatment.”Second, first-party trusts can reimburse travel expenses where the trust beneficiary who lives in an institution, nursing home, or other long-term care facility or  supported living arrangement, and  if the travel is “for the purposes of ensuring the safety and/or medical well-being of the individual.”

To find out more about whether your trust can reimburse family members’ for travel expenses, determine the type of trust you have and investigate how the above rules apply.  For more information on how your trust works, you are welcome to contact our office and make an appointment to speak with the attorney who can review the specifics of your circumstances.

Note: It is expected that the SSA will soon issue new directives broadening the allowable distributions for such expenses.  We will update our readers if and when this occurs.

Final Tax Bill Expands Medical Deductions

Federal law allowed families with medical expenses exceeding 10 percent of their adjusted gross incomes to deduct certain medical expenses from their income taxes, provided that they itemize their deductions. For the two months leading up to passage of the new tax bill, the entire future of the deduction was in doubt. The version of the tax bill that the House of Representatives passed November 16, 2017, would have scrapped the deduction altogether, prompting an outcry from disability rights advocates.  The Senate version, however, maintained the deduction.

The final version, in fact, expands the number of families eligible for the deduction, at least temporarily.  For the current 2017 tax year and 2018, all families whose medical expenses exceed 7.5 percent of their adjusted gross income will have the option of deducting certain medical expenses. The threshold will, however, revert back to 10 percent for the 2019 tax year.

This 7.5 percent benchmark mirrors regulations that existed prior to the Affordable Care Act (ACA), which had raised it to 10 percent for non-elderly families. For the elderly, the 7.5 percent threshold expired in 2016 and also rose to 10 percent.  According to the IRS, 8.8 million households, or almost 6 percent of tax filers, claimed medical deductions in 2015.

 

 

Announcing Our Fall Lecture Series:

12:15, December 5, 2017
“Top Ten Estate Planning Mistakes to Avoid”

12:15, December 12, 2017
“Trust v. Will – Pros and Cons”

12:15, December 19, 2017
“Incapacity Planning – Taking charge before its too late”

All classes are located at the:
Chintimini Senior & Community Center
2601 NW Tyler Avenue
Corvallis, Oregon 97330
Phone: (541) 766-6959

To register please contact Chintimini.

 

Is There a Difference Between “Supplemental” and “Special” Needs Trusts?

Have you heard the terms “special” needs trust and “supplemental” needs trust and wondered what the difference is? The short answer is that there’s no difference. Here’s the long answer:

When the field of special needs planning began more than two decades ago, trusts created for people with disabilities were generally called supplemental needs trusts. The thinking was that the purpose of the trusts was to supplement the assistance provided by Medicaid, Medicare, Social Security, Supplemental Security Income and other public benefit programs whose level of support is often meager.

With passage of legislation in 1993 (“OBRA”) authorizing the creation of self-settled trusts (first-party) under 42 USC 1396p(d)(4)(A), some practitioners called for distinguishing between these new trusts and third-party trusts often created by a parent, by calling the former special needs trusts and continuing to call the latter trusts supplemental needs trusts. But this approach never really caught on.

Instead, over time both types of trusts have come under the rubric of special needs trusts and the term “supplemental needs trust” has fallen away. The term “special needs trust” refers to the purpose of the trust — to pay for the beneficiary’s unique or special needs. In short, the name is focused more on the beneficiary, while the name “supplemental needs trust” addresses the shortfalls of our public benefits programs.

Special needs trusts now encompass both traditional third-party trusts and first-party trusts created under OBRA, which are often known as (d)(4)(A) trusts (referring to the statute), or as pay-back trusts (referring to the feature that any funds remaining in the trust at the beneficiary’s death must be used to reimburse the state Medicaid agency), or as self-settled trusts (referring to the fact that these trusts are created with the Medicaid beneficiary’s own funds).

Special needs trusts created with someone else’s funds, whether a parent, grandparent, or someone else, are often referred to as third-party special needs trusts.

In short, the reference to the trusts as supplemental needs trusts rather than special needs trusts is something of a survival. But what’s in a name? Whether supplemental or special, the trusts serve the same purpose of helping meet the needs of individuals with disabilities while still permitting them to qualify for vital public benefits programs.

In-depth Look at ABLE Account Uses

ABLE (Achieving a Better Life Experience Act of 2014) accounts allow people with disabilities or their families to establish tax-free savings accounts.  These accounts won’t affect their ability to qualify for, or remain on, government assistance as long as the account balance does not exceed $100,000.  Any adult with special needs who owns more than $2,000 in countable assets is generally ineligible for many public benefits programs, including Medicaid and Supplemental Security Income (SSI). But because an ABLE account is not counted as a resource for most public benefits programs, the account provides savings options that can make a big difference to families with special needs children.  Here are five practical uses for an ABLE account that could have a significant impact on a beneficiary’s quality of life:

Protecting UGMA/UTMA account funds: Does your minor child have a savings account? Perhaps gifts from family over the years were deposited into the child’s account? When the child becomes an adult, that bank account will suddenly be counted as a resource for purposes of determining eligibility for many public benefits programs. One practical use of an ABLE account is as a repository for money from an UGMA/UTMA account of a child who is coming of age so that it will not be counted in determining her continued eligibility for public benefits.

Shielding income: Another practical use for an ABLE account is as a receptacle for child support, alimony, or even earned wages. Using an ABLE account for sources of income such as these shields them from being counted as a resource of the child. If more than $2,000 is accumulated by the child over time in an ABLE account, the eligibility for government programs is protected. In addition, an ABLE account is flexible enough that payments deposited into an account can easily be used to pay for many of the expenses a child may have.

Windfalls: An ABLE account can play a beneficial role if your child is expecting to receive a small settlement or award, or even an inheritance or gift. Here’s how this might work for a child receiving, say, a a $150,000 settlement. Although no more than $14,000 can be deposited into an ABLE account each year, and an individual can have only one ABLE account, there are still options. The child could transfer $14,000 into her ABLE account, and a structured annuity could be purchased with the remaining $136,000 that would fund the ABLE account for a certain amount each month so that the total deposited into the account each year would not exceed $14,000.  In this way, a complex special needs trust could be avoided.

Giving the child financial control: It can be frustrating to a competent but disabled adult to lack authority and control over their fiances.   It is important to know that An ABLE account is managed and controlled by the disabled person. An ABLE account gives a competent disabled adult access to money that s/he alone can decide how to spend. Through an ABLE account, the child can decide whether or not to save money for such things as a home, a car, or even a wedding. Note, if a disabled individual is not legally competent or able to wisely manage resources, then  a special needs trust may be a more appropriate option.

Paying household expenses: Another beneficial use of an ABLE account is using it to pay for utilities and other housing expenses without triggering SSI’s “in-kind support and maintenance” (or ISM) penalty that would otherwise be incurred if a third party, including a special needs trust, made the same expenditure. When it comes to  its ISM rules, the Social Security Administration views money in an ABLE account as if it were the SSI beneficiary’s money, so there is no penalty when the recipient of a government benefit uses her own funds from an ABLE account to pay for his/her own housing expenses.

When it comes to planning for your child’s needs, you may wish to consider the advantages of an ABLE in conjunction with other planning choices such as a special needs trust, to craft a strategy that best fits your child’s needs now and in the future.

 

 

Upcoming Classes, Spring 2017

Please join attorney, Kara Daley, for her Spring 2017 Legal Savvy Seminars at the Corvallis Senior Center.

How to Avoid Probate Have you heard a horror story about probate? To find out what’s really involved and how to protect yourself, bring your questions to this brief, funny and insightful class. Th, May 11 12:15 – 1:15 pm Fee: $1.50

Understanding Estate Planning Has Suze Orman or other experts led you to believe you need a will or a trust? Find out what’s actually necessary in Oregon and how to get started. Th, May 18 12:15 – 1:15 pm Fee: $1.50

Care Contracts – Your Obligations Have you or a loved one signed an arbitration contract with a Care Provider? Do you wonder what you’ve signed, or how it works? This is the course for you! Th, May 25 12:15 – 1:15 pm Fee: $1.50

For more information or to register please click herehttp://www.corvallisoregon.gov/index.aspx?page=257

Mom’s Dying: How Do I get her Affairs in Order?

Please accept our sympathy even as we recognize your need for plan language. Although this is a difficult time, it is mom’s last chance to straighten out her affairs and there are some things that she may need to do.

During mom’s remaining lifetime, she may need other people to help her with her affairs. Legal authority to act on behalf of another is conveyed through a durable power of attorney. If mom still has legal capacity, she can give power of attorney to a trustworthy family member or friend. A power of attorney can be used to sign contracts, pay bills and manage assets. A power of attorney can be best obtained from mom’s lawyer; however, a Steven-Ness Durable Power of Attorney Form can be a reasonable alternative under some circumstances. If mom does not have capacity and authority to act is needed, a guardianship or conservatorship may be required.

Second, mom should consider formalizing her medical wishes in an advanced directive and possibly a POLST form. An advanced directive is an Oregon statewide form which names a person to make healthcare decisions only when mom is unable to communicate with her doctor. This person is mom’s healthcare agent. The advanced directive also states mom’s wishes regarding life support. The advanced directive is usually obtained at a doctor’s or lawyer’s office or can be found at the secretary of state’s website https://www.oregon.gov/DCBS/shiba/Documents/advance_directive_form.pdf.

A POLST is a physician’s order for life sustaining treatment- colloquially referred to as a DNR, a ‘do not resuscitate order’. This is obtain directly from mom’s doctor and is typically used only when there is a serious illness.

Mom may also wish to understand what will happen to her assets when she is gone. It is a good idea to check in with mom’s attorney soon to make sure her estate plan is functioning properly.  If mom has named a joint owner on her bank account, has made a pay-on-death (POD) designation on a bank account, or has named a beneficiary on an IRA or life insurance policy, then it is important to know that the asset will go to the person named regardless of what mom’s will or trust may say. Only assets without such designations will pass according to mom’s will or trust. If mom does not have a will and dies with assets in her name alone with no beneficiary, then those assets will pass to the beneficiaries via probate. Similarly, keep in mind, all wills also go through probate. If mom wants to avoid probate, she may want to consider a trust.

Please keep I mind that this is very general advise only. To understand the specifics of mom’s situation, it is a good idea to speak with an attorney and identify issues before they become problems.

The Best Laid Plans….

Have you seen, “Manchester by the Sea?” This sad, cinematic depiction of a father’s death, highlights the need for parents to plan, realistically for their minor children. In the film, the father presumes his brother will act as guardian and trustee for his minor son and executes a well thought out Will but for one central flaw. The father had failed to discuss the plan with his brother who (spoiler alert) ultimately declines to serve as guardian or trustee.  This begs the question:

If you have children under 18, have you made plans for them if the unthinkable occurs?

Have you discussed these plans with the people you hope will fulfill them?

If you have not made plans or you have questions about their fulfillment, take a few minutes to speak with an attorney. Properly planning for your children’s future can save them a life time of regrets.

Legal Savvy Series: 2016 Classes

How to Avoid Probate: Have you heard a horror story about probate? To find out what’s really involved and how to protect yourself- bring your questions to this brief, funny and insightful class. Thursday, December 1, 2016 at 12:15

Understanding Estate Planning: Has Suzy Oreman or others lead you to believe you need a will or a trust? Find out what’s actually necessary in Oregon and how to get started. Thursday, December 8, 2016 at 12:15

Location: Chintimini Senior & Community Center Fee: $1.50

IMMEDIATE DUTIES: PROBATE

The bereaved are often concerned about immediate duties after the passing of a loved one and before their appointment with an attorney.  Here are a few items that the personal representative can start work on:

  • Complete and pay for funeral arrangements (If a person other than the deceased pays for this expense they are allowed to be reimbursement later in probate, but only if there are enough funds to pay other senior creditors first.)
  • Secure the home
  • Check on valuables
  • See to the well-being of any pets
  • If personal property is taken by others after the deceased dies, the personal representative should obtain a receipt from the person holding the property and make sure to let them know that it is not legally their property until authorized in probate proceeding.
  • Exercise due diligence but remember probate takes time, be kind to yourself.