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Tip O'Neil Would Certainly Agree

Date: September 1, 2011

The second problem with “unfiltered” information from the internet lies in the fact that the law governing Special Needs Estate Planning in general, and Special Needs Trusts in particular, varies greatly from state to state, and in some cases from region to region within an individual state. Like politics, Special Needs Trust practice is in many ways a local endeavor.

Consider an adult with mental illness who resides independently and receives services through a community based, Medicaid funded program. Assume that his only source of income is Social Security Disability income (SSD), and that he does not receive Supplemental Security Income (SSI). Assume further that his brother is Trustee of a Special Needs Trust that was established by his parents when they died a number of years ago. Can the Trustee use money from the Trust to make rent payments so that his brother can move into a nicer apartment without impacting Medicaid benefits?

In New York, the answer is yes, because our trusts are typically drafted as “fully discretionary” trusts (meaning that the Trustee can pay for housing if he chooses to do so) and our Medicaid program does not (with a few limited exceptions) count payments to third parties as income for Medicaid budgeting purposes. The answer would be different in other states, where Special Needs Trusts are drafted to prevent distributions for support items like housing, and where the Medicaid program rules treat housing payments differently. So the answer to the Trustee’s question will depend on the state of domicile and the types of programs that support the Trust beneficiary in the community.

Here’s another one. How much money can the beneficiary of a Special Needs Trust have in his name without impacting benefits? Many websites use the figure of $2,000 as the resource limit for Special Needs Trust beneficiaries. In some cases - like when the beneficiary is a Supplemental Security Income (SSI) recipient - this figure is correct. In others (like in the case of the New York beneficiary with mental illness described above), the Medicaid program’s resource limit will control. In New York in 2010, that limit is $13,800. In other states, the figure is different.

Variations abound. If an individual is married and receiving services through a community based, Medicaid funded program, can the non-disabled spouse return to work without impacting benefits? That additional household income would help take some of the financial pressure off of the Trustee of the Special Needs Trust (which is being held for the spouse with the head injury). The answer depends on the type of Medicaid funded program which is supporting the beneficiary in the community. Some programs count the income of the non-disabled spouse in determining Medicaid eligibility for the spouse with the head injury, some don’t.

Are we saying that a website should provide detailed and current information to cover every possible variation? Absolutely not, as we believe this to be an impossible task even for the most seasoned and committed professional. We are simply saying that in the areas of government benefits and Special Needs Trusts, context is everything, and internet-based information lacks context.

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