April 2005
VOLUME 2, ISSUE
2
"TO SNT OR NOT TO SNT, THAT IS THE QUESTION"
Shakespeare's well known verse in the
play of Hamlet is apropos in the area of public benefits planning.
You have a client who is disabled, and eligible for and receiving
public benefits assistance, namely, Supplemental Security Income
(SSI) and Medicaid benefits, the latter of which are AHCCCS
benefits in the State of Arizona. Your client will soon be the
recipient of proceeds from a personal injury settlement,
inheritance or other source. What do you do? The answer seems
obvious; establish a special needs trust ("SNT")! You have heard
that such a trust can be established for an individual who is
disabled and to which his income and/or assets can be funded,
thereby maintaining his eligibility for public benefits and
providing a means by which to supplement his needs.
Hold on! Not so fast! Do not forget the
requirements under federal law that must be met: (1) The individual
must be disabled according to Social Security (SSA) criteria, or
medically eligible for Arizona Long Term Care System (ALTCS), a
program of AHCCCS; (2) the trust must be established before age 65;
(3) the trust must be established by a parent, grandparent,
guardian/conservator, or court of law; and (4) the trust must
provide for reimbursement to Medicaid the cost of medical services
it has provided to the beneficiary. Easy enough! But do not forget
that each state may have additional requirements, such as Arizona,
which requirements are codified at A.R.S. § 36-2934.01, as amended
on August 25, 2004.
Establishment of a special needs trust
is actually a relatively simple matter once the decision has been
made to do so. What is often not so simple or straightforward is
evaluating whether or not an individual's circumstances merit
establishment of such a trust, or whether the individual will be
best served by such a trust.
There is no cookie cutter answer. Each
case must be evaluated taking into account individual
circumstances. What is the age of the individual, i.e., his life
expectancy, and nature of his disability? To what extent are the
public benefit programs meeting his needs? What is the gap between
what is being provided by the public benefit programs and the
individual's level of need? Oftentimes in personal injury matters,
a life care plan report is completed detailing anticipated expenses
over the individual's life expectancy. This life care plan report
can be useful, but must be modified to delineate what in reality
the individual will need and utilize, as well as the extent to
which private and public resources will provide for such needs.
What public benefits is the individual
currently eligible for and receiving, as well as potentially
eligible for and receiving? If SSI and Title XIX Medicaid, then a
special needs trust will preserve such benefits. If other than SSI
or Title XIX Medicaid, such as Food Stamps, TANF (Temporary Aid to
Needy Families), Section 8 through HUD, then a special needs trust
may not preserve such benefits. Maybe the benefits for which the
individual is eligible or may be eligible are not based on
financial need, such as Social Security Disability Insurance (SSDI)
and Medicare, or they do not consider resources, such as many of
the AHCCCS programs other than ALTCS. In such instances, receipt of
funds may not affect eligibility and a special needs trust may not
be necessary.
How much will the individual be
receiving? Although there is no clear benchmark, if relatively
nominal, then there may be alternatives to a special needs trust,
such as immediately "spending down" the funds on exempt or excluded
resources. For purposes of SSI and ALTCS eligibility, real property
that serves as the individual's primary residence, one vehicle,
household goods and personal effects, a burial plot, and burial
arrangements are excluded. Legitimate debts can be paid. Services
can be pre-paid for a limited period of time.
How can the special needs trust be
utilized? For purposes of SSI and ALTCS, as with most other public
benefit programs, disbursements of "income," which is typically
defined as food, shelter, or cash, may impact the benefit amount or
eligibility. A state may have additional restrictions on what may
be paid out of the trust for Medicaid eligibility purposes.
Arizona, for instance, specifies what disbursements are allowable
out of a special needs trust. A.R.S. § 36-2934.01 states in part
that a "financially responsible relative," i.e., a parent of a
minor child or spouse, cannot be compensated by a special needs
trust for caregiving services rendered, nor can a family member's
travel expenses be paid out of a special needs trust when
accompanying the beneficiary who cannot travel alone. Furthermore,
if real property or a vehicle are purchased by the special needs
trust, then such assets must be titled to the special needs trust,
or, alternatively, a lien taken back by the trust in the case of a
vehicle. In such instances, the home in which the individual is
disabled and his family lives will be subject to the requirement
that AHCCCS be reimbursed the cost of medical services it has
provided to the individual upon termination of the trust, which is
typically at death.
The above is merely a glance into the
various factors to be taken into account before jumping head first
into a special needs trust. This is an arrangement that you do not
want your client to go into hastily. The client must be informed
and know what to anticipate. He, and the professionals assisting
him in making this decision, will need time to gather the necessary
information and evaluate the options. "To SNT or not to SNT, that
is the question," the answer to which is not readily apparent. But
when the decision to establish a SNT is made after due diligence,
then you can be assured that your client will benefit from the
arrangement.
UPDATES
The Center for Medicare and Medicaid
Services (CMS) approved Arizona's amendments to its State Plan
under Title XIX of the Social Security Act allowing for TEFRA Liens
on January 4, 2005.
The changes to SSI income and resource
rules outlined in Volume (2), Issue (1) of AZ Special Needs News
became effective March 9, 2005.
AHCCCS withdrew SB 1161 regarding
annuities, which was discussed in Volume 2, Issue 1 of AZ Special
Needs News, this legislative session but forewarns that the Center
for Medicare and Medicaid Services (CMS) is looking at addressing
annuities as a Medicaid planning tool on the national level.
RESOURCE LINKS
Ms. Swartz has been awarded the NAELA
Outstanding Chapter Member in Arizona for 2005.
Ms. Swartz will be serving as Chair of
the Estate and Trust Law Advisory Commission of the State Bar of
Arizona, which submits recommendations to the Board of Legal
Specialization regarding attorneys who have applied for
certification as Specialists in Estate and Trust Law.
www.azspecialneeds.com
3200 North Central Avenue
. Phoenix . Arizona