6/21/17. Life Advantages, LLC

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1 Life Advantages, LLC Attorneys John F. Kearns III & Rebecca A. Hajosy Kearns & Kearns PC 1121 New Britain Ave West Hartford, CT (860) Kearns & Kearns PC helps our clients protect their life savings, preserve their independence, and maintain their dignity as they confront the problems of aging and disability. Special Needs Trusts Estate Planning Probate & Estates Elder Law Disability Law Kearns & Kearns navigates the legal and long term care issues of aging and wealth management. We address the problems and we provide the solutions. 18% of the population has some level of disability. 12% of the population has a severe disability. 11% of children ages 6 to 14 have a disability. 23% of people with a non-severe disability live alone or with nonrelatives. This compares with 28% of those with a severe disability and 19% without a disability. 1

2 Issues relating to a minor disabled person Health care decisions Financial decisions Benefit Programs Issues relating to an adult disabled person Health care decisions Financial decisions Benefit Programs Estate Planning for the disabled person Estate planning for the family of a disabled person. This seminar handles general legal issues. Each jurisdiction will have very specific rules and statutes governing each area we are discussing. In addition, this seminar is for informational purposes only and does not represent legal advice or establish any form of attorney-client relationship. Please make sure you consult with a legal professional from your jurisdiction before relying on any of the information provided. Prior to Age 18 2

3 Healthcare Decisions: In most jurisdictions, parents are the natural Guardians of Person for their child under the age of 18. If there are no parents, you will need a Guardianship for a Minor Child through the appropriate court (probate/ surrogate/family court). Financial Decisions: In most jurisdictions, parents do not have a natural right to make financial decisions for their minor children. Therefore, if an issue arises where a child is inheriting money, has more than $14,000 in assets, needs to sue someone or otherwise has a financial or contractual issue, a Guardianship of Estate for a minor child may need to be set-up. A minor disabled child cannot receive benefits unless: SSDI Benefits: Their parent is deceased or retired and eligible for Social Security; or Their parent(s) income and assets are so low, they qualify for Supplemental Security Income (SSI). This will be discussed later. Each State will have their own benefit programs. Some are state specific and some are Federal Medicaid programs. These programs typically cover certain groups such as the developmentally disabled, acquired brain injuries, major physical handicaps under age 65, and Autism. Each program has income, asset, and functional eligibility rules. Usually, assets need to be under $1,600 and income needs to be below around $2,000. This programs provide a variety of services up to 24-hour care. 3

4 Age 18+ In most States, the age of 18 is the age of legal majority. Once a person turns 18, a parent or loved one will need to be concerned with: Appointing someone to make their health care decisions. Appointing someone to make their financial and contractual decisions. Available benefit programs such as Medicaid and Social Security. Estate planning for the loved ones of a disabled person. Once a child turns 18 the parent will no longer be able to make health care decisions for the child unless the parent obtains legal authority to do so. In most jurisdictions, there are three different ways to obtain legal authority to make healthcare decisions for a disabled person over the age of 18. The individual s level of capacity will dictate which option to use: Health Care Directive Conservatorship Guardianship 4

5 What is It? A health care directive is a legal document, signed by the individual, that appoints a trusted person to make health care choices when the individual is not able to understand the nature and consequences of his/her healthcare decisions. Limitations: ú Must have capacity ú Does not give the agent authority to override wishes of individual if still has capacity. How Do you Get A Health Care Directive? ú Document signed by the principal in front of witnesses ú Usually done by an attorney ú Principal must have capacity ú The document stays in effect until revoked by the principal or the person is conserved. Some States call the document a: Health Care Power of Attorney, Health Care Agent, or a Health Care Proxy. There are usually three main Types of Health Care Directives Living Will Only: A written statement containing a declarant s wishes concerning any aspect of his or her health care, including the withholding or withdrawal of life support systems. Appointment of a Health Care Representative/Agent. This allows an individual to appoint a trusted person to make health care choices when the individual is not able to share his health care choices with health care providers. Combined Health Care Instructions Document. This document combines both the Living Will and the Appointment of a Health Care Representative/Agent. ú Most Common Choosing a Health Care Representative/Agent. Can have one+ agent(s) To act jointly or severally Better if person is close in proximity as they will most likely be meeting with people, etc. Usually parent or spouse, then a child or sibling (depending on your age) What authority does the Representative Have: Usually there is no authority to involuntarily commit, force certain psychiatric treatments or medications or force placement in facilities. What Happens if you don t have a Healthcare Representative/Agent? Will need to be conserved/placed under guardianship with the Court. 5

6 Some States might call these person a Surrogate or Guardian, but the role is the same. What is it? Appointment of person to make healthcare decisions for you through the court system (probate/ surrogate/family). Voluntary (requires capacity) (some States might not have voluntary appointments) Involuntary Limitations: Individual gives up all rights to make their own healthcare decisions Court involvement and expense Includes obligation for care and control How Do You Get One? Petition to Court in the District where the person lives. Requires a hearing Medical evaluation and report (If Involuntary) Proof of incapacity and need for conservatorship (least restrictive means possible) (If Involuntary) Court appointed attorney (If Involuntary) Service of forms by Marshall (If Involuntary) Rules of Evidence Right to be Present at Hearing (required if Voluntary) Who Can Be a Conservator/Agent Anyone that has an interest in the proposed. Usually a parent, spouse or sibling Other Issues Requires continued court jurisdiction (annual review, etc.) Court appointed attorney (if Involuntary) and hearing costs Petitions for placements, certain psychiatric meds, etc. What if you can t afford a conservator? What is a Guardianship? Not offered in all jurisdictions. The Appointment, by the Court, of a Guardian to handle the health care decisions of another. Very similar to a Conservator of Person, but for individuals with developmental disabilities. Only Guardianship of Person, not Estate. You must get a Conservator of Estate if you need financial and contractual control. As there is no chance of restoration of capacity, future review for restoration of capacity is minimal. For those who are developmentally disabled. Limitations: Individual gives up all rights to make their own healthcare decisions Court involvement and expense Includes obligation for care and control 6

7 For adults Brought by any adult person, official, or guardian, however, hospitals and nursing homes are not permitted to be appointed such guardians. Must by totally or partially unable to meet essential requirements for physical health and safety and/or unable to make informed decisions about matters related to his or her care Can seek Plenary (all) if totally unable to meet needs or limited (supervises only specific stuff) Remember, not offered in all jurisdictions How Do You Get One? Petition to Court in the District where the person lives. Requires a Hearing Assessment by Department of Developmental Services Team and Doctor (or the equivalent in your jurisdiction) Proof of incapacity and need for guardianship (least restrictive means possible) Court appointed attorney Service of forms by Marshall Rules of Evidence Right to be Present at Hearing, but not required Who Can Be Guardian Anyone that has an interest in the proposed. Usually a parent, spouse or sibling May set forth a stand-by guardian Other Issues Requires continued court jurisdiction (annual review, etc.) Court appointed attorney and hearing costs Petitions for placements, certain psychiatric meds, etc. What if you can t afford a guardian? 7

8 There are generally two different ways to obtain legal authority to make financial and contractual decisions for a disabled person over the age of 18. The individual s jurisdiction and level of capacity will dictate which option to use: Power of Attorney Document (requires capacity) Conservatorship/Guardianship (either voluntary or involuntary) What is it: Document that allows an individual to appoint another individual to act on his or her behalf in financial and contractual dealings. In most jurisdictions, a parent is not the legal guardian of estate for a child. In most jurisdictions, a spouse does not have a right to handle the financial affairs of their spouse. Limitations: Must have capacity Individual does not give up authority to make decisions, just adds another person. Agent cannot force decisions. Types (may vary by jurisdiction): General, Educational, Special How Do you Get A Power of Attorney Document? ú Document signed by the principal in front of witnesses ú Usually done by an attorney ú Principal must have capacity ú It usually stays in effect until revoked by the principal or the person is conserved When Does a Power of Attorney Become Effective? Upon Signing (usually). Incapacity is not usually required. Other Issues Fiduciary responsibility May be revoked at any time by the principal/grantor Principal/grantor retains their ability to make decisions also 8

9 May be called a Guardian of Estate or the like in other jurisdictions. What is it? Appointment of person to make financial and contractual decisions for you through the court system. Voluntary (requires capacity) (not offered in all jurisdictions) Involuntary Limitations: Individual gives up all rights to make their own financial and contractual decisions Court involvement and expense Includes fiduciary obligation Bonding is usually required How to Get One: Petition the Court I. Needs Based Benefits (not all benefits available in all jurisdictions) Supplemental Security Income (SSI) Medicaid SNAP Subsidized Housing (HUD/Section 8) Cash Assistance II. Entitlements Social Security Disability Insurance (SSDI) Medicare 27 9

10 Supplemental Security Income n $735 monthly cash benefit* *depending on income, living arrangements, etc. n SSI is a social security program, based on evidence of disability & financial need. 28 Over the age of 65; Blind; or Disabled. Unable to do any substantial gainful activity due to severe physical or mental impairments that will result in death or will continue for not less than one year. Substantial Gainful Activity (SGA) is defined as the ability to earn $1,170 a month, $1,950 if blind. 29 Eligibility for SSI INCOME LIMIT: SSI is reduced dollar for dollar up to the $735* award amount. ASSET LIMIT: liquid resources under $2,000. *This amount may vary depending on whether you are in a Trial Work Period, are a student, or are blind. The first $20 of most income and the first $65 a month of earned income and half of the earned income over $65 are excluded

11 Other Useful SSI Information n Until Age 18, the Parents income is deemed to the child and therefore, very few minors are eligible for SSI n Excess income and assets can be diverted to a special needs trust. n In-kind support for Room and/or board reduces SSI by 1/3 n Parents often charge rent to their child so that the SSI award is not reduced. 31 No asset limit Same Substantial Gainful Employment income limits as SSI ($1,170 a month, $1,950 if blind) A minor child can receive a dependent s benefit if a parent is of retirement age and retired or deceased and is eligible for SS A disabled adult, disabled prior to age 22, can receive SSDI off a parent s record if the parent is deceased (eligible for SS) or parent is receiving SS retirement or SSDI. 32 If the SSDI payment is under $735, you will qualify for SSI as well to bring you up to $735 If you qualify for SSDI, after 2 years (from date of disability determination) you will be entitled to Medicare

12 n There are many Medicaid and State programs. They cover medical costs and some programs cover such things as day programs, occupational therapy, job coaching, residential programs, personal care assistants, home health workers, etc. This programs vary per State. n Medicaid is a joint federal and State program and therefore, certain elements of Medicaid are the same or very similar for each jurisdiction and very different in other respects.. 34 Income Limits* : Vary depending on the program, but most programs have an income limit between $1,980 and $2,199 Asset Limit * : $1,600 or $2,000 in most jurisdictions. Married Couples: The spouse that is not applying for benefits is allowed to keep a Community Spousal Protected Amount that equals half of the couple s assets up to $120,900. There is a lot of legal planning revolving around the need to protect assets while maintaining eligibility. *Certain assets and income are exempt. Excess income and assets can be diverted to a special needs trust. 35 Programs are run by government agencies such as the Department of Social Services, the Department of Children and Families, or the like. Other Eligibility Criteria may be required such as functional levels, certain illnesses, etc. Most programs have a payback to the State for services provided. Most programs provide services, not cash or other assistance. However, most jurisdictions have some form of help with food, heat, electricity, transportation and cash (for the extremely needy) 12

13 Examples of Common Programs ú Developmentally Disabled Waivers ú Acquired Brain Injury Waivers ú Personal Care Assistance Waivers ú Autism Waivers ú Wise Waivers: Mental Health Issues ú Katie Beckett Waiver: Disabled prior to 21- usually very young severely disabled. ú Skilled Nursing Care ú Med-Connect: Program that allows you to keep benefits while you work. n n n n n Medicare Medicare is a federal health insurance program for people over 65 and people under 65 who have been receiving Social Security based on disability for over 2 years. It covers routine, emergency and preventative care. It does not cover long term home health workers, homemakers, day programs, residential care or many of the services needed by persons with disabilities. Persons can be eligible for both Medicare and Medicaid. Medicaid is payer of last resort and covers long-term care costs. There are no income or asset limits. Medicare 38 13

14 A Special Needs Trust is a trust specifically drafted so that trust assets are considered inaccessible/ unavailable resources for calculating public benefits. The trust funds supplement the beneficiary s needs not covered by public benefits. 40 Written contract; Discretionary distributions by the trustee; Beneficiary not entitled to compel receipt of income or principal; Trustee prohibited from making any distributions that would jeopardize beneficiary s public benefits; and Disabled individual must be the sole beneficiary No Transfer penalty to Trust for SSI or Medicaid (for self-funded SNT s) 2. The Trust does not protect assets or income for most State programs (i.e. will still be considered an asset or income for eligibility purposes). 3. State Approval: In most jurisdictions, the Trust must be approved by the Department of Social Services, State Attorney General s Office, Social Security Administration and most other agencies providing benefits. 4. Distribution Rules are different depending on the benefit programs the beneficiary receives. n SSI: no distributions for room or board, no cash n Medicaid: no cash n HUD: no regular or routine distributions 42 14

15 Source of Funds Third Party Anyone except beneficiary Who Establishes Trust Anyone except beneficiary Distribution Upon Death No Restrictions Payback D4A Disabled Beneficiary under age of 65 Beneficiary, parent, grandparent, legal guardian or court State repaid before remainder goes to beneficiaries Pooled D4C* Disabled Beneficiary Beneficiary, parent, grandparent, legal guardian or court State repaid from and/or money goes to non-profit trustee *Some States do not allow a D4C trust, but do have a D4B Miller Trust option, which is very similar to the Pooled Trust-but only for excess income, not excess assets. 43 Irrevocable; Grantors: parent, grandparent, court or guardian; Disabled beneficiary (per SSA) must be under 65; Medicaid must be reimbursed at death of beneficiary; and Sole benefit of beneficiary. Usually beneficiary s money 44 Irrevocable; Non-profit 501(c)(3) as trustee; Trustee manages the funds as part of a pooled trust for disabled persons; Trust account can be created by the beneficiary or parent, grandparent, court or guardian; Beneficiary may be any age (only option for SNT for persons over the age of 65); and At the death of beneficiary, State is reimbursed and/or the non-profit organization retains remainder. Usually beneficiary s money 45 15

16 Pooled Trust A 1. Only grandparent, parent, guardian, court can fund trust. C 1. Any one including disabled individual can fund their trust account. A.2. Any person/corporate trustee can serve. C.2. Not for profit/ c for charity can be Trustee. A.3. Anyone can be beneficiary after Medicaid. C.3. Not for profit/ c for charity must be beneficiary after Medicaid. A.4. Only for beneficiary under age 65. C.4. Beneficiary of ANY age. 46 Clients currently on or who expect to be on benefits may use a D4(C) Trust Usually for person over the age of 65 or who have a small amount of assets, inheritance or settlement; Helps reduce legal/accounting/mgt fees; No family beneficiaries; benefits the charity; 47 Clients currently on or who expect to be on benefits may use a D4(A) Trust For persons under the age of 65 Usually for a large amount of assets, inheritance or settlement; Tailor trust to individual not group; Interest free loan from state Medicaid 48 16

17 1. No Transfer penalty to Trust for SSI or Medicaid (for self-funded SNT s) 2. The Trust does not protect assets or income for most State programs (i.e. will still be considered an asset or income for eligibility purposes). 3. State Approval: In most jurisdictions, the Trust must be approved by the Department of Social Services or equivalent agency, State Attorney General s Office, Social Security Administration and most other agencies providing benefits. 4. Distribution Rules are different depending on the benefit programs the beneficiary receives. n SSI: no distributions for room or board, no cash n Medicaid: no cash n HUD: no regular or routine distributions 49 Free Standing Third Party SNT Testamentary SNT A relative gifts/ bequeaths their money into a Special Needs Trust for the benefit of a disabled individual. Most common estate planning tool for parents of a disabled child No payback to State/Medicaid at death of beneficiary and therefore, you can name secondary beneficiaries Where did the money come from? 51 17

18 Going to an Attorney that focuses on special needs planning is important. Each Trust is crafted to your particular situation and needs. Establishing and Funding a SNT is only the first step. Managing the trust and ensuring continued eligibility are equally important. Go to an attorney that can advise on these ongoing obligations and that will work with you as the trust moves forward. Looking at the big picture including long term goals is an important aspect of Special Needs Planning. 52 Do not leave any assets directly to the child Probate versus non-probate assets Use a Third Party Special Needs Trust Can be free standing or testamentary Can be funded at the time or upon death ú Common to use life insurance proceeds Letter of Intent ABLE Act: Achieving a Better Life Experience Act Total annual contributions of $14,000 per year Disabled person may place up to $100,000 into an account instead of a Trust. Same payback provisions to the State Beneficiary has access of money Not up and running in CT just yet, but available in about 17 other States. Ohio is often used in this part of the country. Must be disabled prior to age 26 Special Needs Trust Fairness Act of 2015 Veteran Benefits ú Helpless Adult Child Disability arose before age