February, 2006
PART II: THE DOS AND DON'TS FOR TRUSTEES IN
ADMINISTERING A d(4)(A) SPECIAL NEEDS TRUST
Administration of SNT
Complete and sign AHCCCS forms upon initial establishment of
trust, i.e., DE-312 and DE-522, and DE-312 annually on request.
Report modifications to how trust administered to AHCCCS 45 days
in advance or, if an emergency, within 30 days thereafter.
Provide accounting to AHCCCS at time of annual redetermination
of eligibility.
Provide information to SSA only upon request/other than initial
disclosure of establishment of trust.
Make distributions for sole benefit of beneficiary but consider
fact that welfare of beneficiary is dependent in part on welfare of
family.
Income = food, shelter, and cash, whether paid to beneficiary or
someone else on behalf of beneficiary and is subject to applicable
income limits.
Cash distributions offset SSI benefit $ for $ after first
$20.
Distributions for food and/or shelter paid directly to vendor or
provider will reduce SSI benefit by 1/3 rd or 1/3 rd plus $20
depending on living arrangements.
Minimize cash distributions and to extent possible, make
disbursements directly to vendors and providers, or reimburse
expenses paid by someone on behalf of beneficiary.
Obtain prior court approval for substantial disbursements, such
as the following:
• for purchase of vehicle or
residence;
• disbursements for non-covered
medical expenses that presumably should have been paid by other
sources, such as private insurance, but were denied;
• disbursements to family as
compensation for caregiving; and
• disbursements to parents of minor
child for support needs.
File annual accountings with the probate court if trust
established with court approval
Obtain court approval of trustee fees at time file annual
accountings with probate court.
Notice applicable public benefit programs on petitions filed
with the probate court related to authorization of trust
disbursements and annual accountings filed with the probate court,
as well as copy of orders and verification of funds disbursed as
authorized.
Note income tax treatment of trust, which is typically as
grantor trust if any I.R.C. §§ 671-78 powers retained (note, such
trusts should not permit beneficiary to act as trustee nor change
trustee to himself so as to ensure trust treated as unavailable to
beneficiary for public benefit eligibility purposes)
Termination of the Trust
Do not terminate trust during lifetime so as to avoid triggering
payback to AHCCCS!
On death, cease and desist! No distributions to be made for any
purpose without prior notice to AHCCCS or approval of the probate
court with prior notice to AHCCCS.
Promptly notify AHCCCS recovery agent, Public Consulting Group
(PCG) of termination of trust.
Request itemization of AHCCCS claim from PCG, and review with
caregivers.
Claim should not include cost of medical services rendered prior
to establishment of trust to extent liens have been paid.
Claim should be for capitated payment rate, which is
approximately $3,000 per month unless ventilator dependent.
Provide final accounting of trust to PCG.
Pay claim if funds remaining and disburse any remaining balance
accordingly.
Deficit Reduction Act of 2005.
On February 8, 2006, President Bush signed into law S. 1932.
This Act, among other things, imposes substantial changes on
programs such as Medicaid. Specifically, the DRA contains
provisions regarding the treatment of "uncompensated transfers" or
gifts, annuities, and the exclusion of the primary residence for
purposes of financially qualifying for long term care assistance
through Medicaid, which, in Arizona, is the Arizona Long Term Care
System (ALTCS).
With respect to "uncompensated transfers" or gifts, the new law
does several things. First, a transfer penalty or period of
disqualification used to run from the date of the transfer or gift.
Now, it will run from the time of application for ALTCS benefits
assuming the applicant is "otherwise eligible," i.e., has countable
resources below the applicable limit and is medically eligible for
such assistance. Second, "uncompensated transfers" or gifts will no
longer be rounded down as in the past and may result in an
additional penalty period or period of disqualification from
benefits. Third, the "lookback period" or period for which an
application must disclose transfers prior to application has been
extended to sixty (60) months from thirty-six (36) months. Finally,
the state has the discretion to aggregate uncompensated transfers
or gifts, so if monthly gifts of less than the average cost of care
have been made, it may result in a penalty period or period of
disqualification from benefits. These changes will affect transfers
made on or after February 8, 2006; however, it remains unclear
whether the states must enact enabling legislation or promulgate
regulations to implement the changes.
With respect to annuities, an applicant or his/her spouse must
disclose any interest in an annuity, and an application or
recertification shall include a statement that the State becomes a
remainder beneficiary under such annuity. Also, the State shall
notify the issuer of the annuity of the right of the State to be a
"preferred" remainder beneficiary. It is unclear whether Medicaid,
as "preferred" remainder beneficiary, is limited to being
reimbursed the cost of medical services it has provided to the
applicant.
Finally, with respect to the exclusion of the primary residence,
the DRA now limits the exclusion to $500,000 in equity, but
authorizes the states to increase the exclusion to $750,000.
3200 North Central Avenue
. Phoenix . Arizona