Date: February 1, 2012

Lets get this straight: we love the internet, and we couldn’t carry on our practice without it. When we learn of an unfamiliar disability or diagnosis, off to the internet we go. We look for information on the disability, how it impacts a client’s life, and what types of programs and services are available to help support the individual in the community. This information helps us provide better legal advice and draft better planning documents.

Similarly, new clients often arrive at our office with basic information on special needs trusts, guardianship, and government benefits, most of it garnered from the internet. With both client and counsel having done their (internet based) preliminary research, we can get right to a discussion of the client’s needs and intentions. You’ve heard the commercial: “An educated consumer is the best customer.” The same concept applies in the area of Special Needs Estate Planning and Elder Law.

And there’s more. We use the internet for legal research, to remain abreast of changes in the law, and to maintain contact with colleagues from other states who practice in the same area. Our clients use the internet to meet other parents of children with special needs, to find programs and services in their communities, and to follow developments in medication, treatment and therapies. All in all, the internet is a great resource for client and counsel alike.

That was the good part, but when it comes to legal information on the internet, there is a down side as well. Without context and perspective, it can be difficult to determine the good from the bad, and the useful from the counterproductive. In this issue of the Special Needs Estate Planner, we highlight a few areas where we think internet information can become a hindrance rather than a help.

All Are Not Created Equal

We expect that everyone who reads this Newsletter is familiar with the concept of a “Special Needs Trust.” This type of trust is specifically designed to hold money for individuals with disabilities who participate in any number of means tested government benefit programs, and is used to provide goods
and services which supplement what is available through those programs. For those who want more information, we suspect that their first step would be an internet search on the topic. This is where readers need to be cautious.

One of the most common points of confusion for clients (and many professionals) is the distinction between a “First Party” Special Needs Trust (a trust funded with the assets of the person with the disability) and a “Third Party” Special Needs Trust (a trust funded with someone else’s assets). If a visitor to a website discussing Special Needs Trusts does not know the difference between the two (or if the website does not draw a sufficient distinction in its explanation), the visitor may draw conclusions which are not relevant to her situation. For example, a First Party Special Needs Trust must provide that Medicaid benefits will be repaid to the State upon the death of the individual with the disability (the “payback” clause). Third Party Special Needs Trusts do not need to include a payback clause, and funds remaining in the Trust can go wherever the creator of the Trust chooses.

Yet we regularly hear clients and professionals alike say that Special Needs Trusts require a Medicaid “payback” at the end of a beneficiary’s life, without distinguishing between the two types of Special Needs Trusts. If a parent wants to update her estate plan and believes (incorrectly) that any money she leaves for her child with a disability will be subject to Medicaid repayment, she may choose to leave that child out of her estate plan altogether. Many websites do not make this distinction clear, leaving their less-informed visitors with the wrong impression. A good Special Needs Estate Planning attorney should ask about disability as part of the intake process and then guide the client to the right decision (which would include a Third Party Special Needs Trust without a payback clause), but we know from experience that this is not always the case.

Tip O’Neil Would Certainly Agree

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.

You Can’t Judge a Book…

Now this may sound self serving, but we couldn’t let this topic go without mentioning the websites of professionals (attorneys, financial planners, accountants, private care managers and others) which announce relevant experience in this area. And because our readers are spread all over New York with a good number from other states as well, we thought the topic was important enough to include here.

We all know in our heart of hearts that we shouldn’t draw conclusions – positive or negative – about a professional based solely on a website or yellow page ad, and yet we all rely on these sources to help us filter out the seemingly endless number of options we have for professional services. We also  know that no one really monitors what a professional might say on a company website about her experience in a particular practice area or discipline. But still, it’s easy to be persuaded by a good presentation…

Over the years, we have seen increased attention given to special needs planning and related disability issues. Many financial institutions are expanding their Trust and other financial management services to meet the needs of an increasing number of families wrestling with disability. Lawyers and accountants are dedicating time and resources to learning more about this area of practice, and we see case managers and other service providers who had traditionally concentrated on the elderly population expanding their reach so as to offer privately paid advocacy and services to the younger individuals with disabilities (see the April 2006 issue of The Special Needs Estate Planner, “Private Care Management and Oversight Services for Individuals With Disabilities: A Growing Need”). In general, these are good developments because they increase the number of options available to consumers of these services, and the internet is a great way to locate competent professionals who are located in our own communities.

That said, anyone can become an “expert” on the internet. A privately paid geriatric care planner can become a seasoned case manager for individuals with disabilities, a special education lawyer can become a special needs estate planning expert, and a tax-focused financial planner can become an experienced special needs estate planning professional – just by saying so on their website.

The same rule would apply to our law firm. We do not represent individuals in criminal defense matters, but let’s say that we decided to begin accepting these clients. If we updated our website to say that we practice in this area, how would a visitor know that we have no credible experience in this area of practice? A seasoned consumer of legal services might ask for references or copies of attorney biographies if they are not on the website, but most will simply accept what is said on the website as gospel.

So how does someone find a seasoned and credible professional in the areas of Special Needs Estate Planning and Elder Law? The best way is the old fashioned way: by talking to other, similarly situated families, by talking to service coordinators and staff from local disability organizations, and by talking to other professionals who serve the disability community, like doctors and other health care professionals. These professionals will often have an ear to the ground and can give you some suggestions. And once you have a few names, you can do your own background check. Is the professional actively involved with the disability community, or does she have a family member with a disability? How long has she concentrated her practice in this area? Does she have any published articles that you can review? We know that this is more time consuming than a simple internet search, but in the long run we think the extra time is time well spent.

This newsletter is not intended as a substitute for legal counsel. While every precaution has been taken to make this newsletter accurate, we assume no responsibility for errors or omissions, or for damages resulting from the use of the information in this newsletter. If you would like to be removed from our distribution list, please email us or call us at (518) 881-1621