GeriLaw | Robert Fleming, Tucson elder law attorney, and colleagues

Stimulus Payments for Seniors and Persons with Disabilities

The American Recovery and Reinvestment Act of 2009 (ARRA or Stimulus Bill) includes a one-time payment of $250 to anyone who received any kind of Social Security benefit, including retirement, survivors and disability benefits, Railroad Retirement or Veterans Administration (VA) disability compensation or pension benefits during November 2008, December 2008, or January 2009.  Most people who receive Supplemental Security Income (SSI) will also receive the one-time payment; however, persons in nursing homes who receive a monthly SSI benefit of $30 will not receive the payment.  Most payments will go out this month and all should be received by June 4, 2009.  Children receiving Social Security benefits who are under the age of 18 (or 19 if still in high school), will not be eligible for the payment; however, adult children who receive disability payment on a parent’s record will receive a payment.  Additionally, children who receive SSI will receive a payment.

Eligible recipients will receive a notice regarding the payment.  The payment will go to the recipient using the same means as the regular benefit.  For example, if the usual monthly benefit is directly deposited to a bank account, the one-time payment will also be directly deposited.  If the usual payment arrives by mail, the extra payment will be mailed as well.

If a person is in a nursing home, and the usual monthly benefit is sent to the nursing home, then the one-time payment will be sent to the nursing home as well.  According to ARRA, the nursing home must set aside the $250 payment for the nursing home resident to use as the resident sees fit.  The law specifically states that “The entire payment shall be used only for the benefit of the individual who is entitled to the payment.”   The nursing home is not permitted to keep the funds and apply them toward the resident’s nursing home costs.  The Centers for Medicare and Medicaid Services (CMS) has advised nursing home surveyors about the one-time payment and residents’ rights to the payment.

The one-time payment will not count as income for federal, state or local benefits.  The amount is also excluded as a resource in the month in which it is received, and for the following nine months without being taken into account for purposes of determining eligibility for Medicaid.  If the funds are not spent by the end of the ten month period, then the remaining funds will be counted as a resource.  The payment will not count as earnings for Social Security disability benefits. Additionally, the payment also will not count as gross income for income tax purposes.

If an eligible Social Security recipient does not receive the one-time payment by June 4, 2009, then the recipient can phone the Social Security toll-free number at 1-800-772-1213.  A word of warning to eligible recipients: If anyone phones or e-mails you asking for personal information to process your payment, do not provide the caller with this information.  If you are unsure about the identity of someone claiming to be a representative of the Social Security Administration, then phone 1-800-772-1213 to verify the call.  You may report suspicious activity involving Social Security programs and operations to the Social Security Fraud Hotline at www.socialsecurity.gov.oig/hotline, or call 1-800-269-0271.

To find out more about the one-time payment, you can contact the following agencies:

For Social Security or SSI recipients, visit www.socialsecurity.gov.

For Railroad Retirement recipients, visit the Railroad Retirement Board (RRB) at www.rrb.gov or call 1-877-772-5772.  You will receive your one-time payment from RRB; you do not have to do anything in order to receive your payment.

For VA benefit recipients, visit www.va.gov or contact your local VA facility for more information.  You will receive your payment from the VA, and you do not have to do anything in order to receive your payment.

Andrew H. Hook
Oast & Hook.
www.oasthook.com

Powers of Attorney and Fiduciary Duty

A recent Faquier County, Virginia, Circuit Court case illustrates the need for specific provisions in durable powers of attorney.

In Mountjoy v. Smith (Case No. CL8-300, February 26, 2009), the matter came before the court upon cross-motions for summary judgment.  Mr. Smith’s executrix alleged that his wife, Evelyn Smith (now deceased), breached the fiduciary duty owed Mr. Smith under a power of attorney executed by Mr. Smith.  The court issued an opinion in which it addressed the threshold question of the validity of the durable power of attorney (DPOA).

Mr. & Mrs. Smith were married in 1946 and remained married until their deaths.  In May, 2006, Mr. Smith executed a DPOA naming Mrs. Smith as his agent.  The DPOA did not include specific authority for the agent to create a trust, although the DPOA did have several paragraphs granting other specific powers.  The DPOA also included two paragraphs with general grants of authority.  Mr. Smith never directed Mrs. Smith to make an estate plan for him; however, Mrs. Smith arranged for two separate trust documents to be prepared, one for her, and one for Mr. Smith.  Mrs. Smith executed both trust documents without her husband’s knowledge.  The trusts were not mirror images of each other; the estate plan included transferring real properties into the trusts, changing the ownership of the properties from tenants by the entireties into tenants in common.  Mr. Smith was unaware of these actions until two months after Mrs. Smith’s death; he then executed a document revoking the trust in his name that Mrs. Smith had established.  Mr. Smith, through counsel, made a demand for alleged entitlements existing through Mrs. Smith’s trust.

The court’s analysis focused on the lack of specific authority in the DPOA for Mrs. Smith to set up an estate plan for Mr. Smith.  Mrs. Smith’s estate argued that the specific powers in the DPOA to negotiate sums of money and enter into contracts, along with the DPOA’s general grants of authority, were sufficient authority for Mrs. Smith’s actions.  The court stated that “The law in Virginia is that a power of attorney will be strictly construed” (citing Bank of Marion v. Spence, 155 Va. 51, 53 (1930) and Horchkiss v. Middlekauf, 96 Va. 649 (1899).)  Mrs. Smith’s executrix suggested that the Commonwealth has softened its stance on this issue in Jones v. Brandt Executrix, 274 Va. 131 (2007).  The court stated that Brandt differed from the case at hand because Mrs. Smith created a trust in which she named herself as beneficiary of the trust if Mr. Smith died first, then changed the form of ownership of properties transferred into the trust.  Mr. Smith was not the beneficiary of the trust she created for herself, if Mrs. Smith died first.  Further, Mrs. Smith concealed her actions from Mr. Smith.  She could have sought her husband’s approval for her actions, but did not.  The court also found that Mr. Smith did not ratify Mrs. Smith’s actions; on the contrary, he terminated the trust Mrs. Smith created for him as soon as he learned of the trust.  The court also found that Mr. Smith’s attempt to protect his property rights by demanding alleged entitlements from Mrs. Smith’s trust did not serve as ratification of her actions.  The court held that Mr. Smith’s trust was void; this also invalidated the conveyance of the real properties to both trusts.

Andrew Hook
Oast & Hook
www.oasthook.com

Is a Guardian Personally Liable for Nursing Home Costs of Ward?

That is the question posed (on narrow facts) in this week's Elder Law Issues article at elder-law.com. The answer in that case -- and probably in most cases raising similar questions -- turned on the language of the admission contract itself.

To start with the result: in Five Star Quality Care v. Lawson, the case described in Elder Law Issues, the Missouri Court of Appeals ruled that the Public Administrator, Bonnie Sue Lawson, would not be personally liable for her ward's nursing home bills. The reason the issue even arose: it took Ms. Lawson over a year to figure out that she would need to get appointed as conservator of her ward's estate (she was already guardian of the person) in order to liquidate two small life insurance policies to get her ward's assets below the eligibility limit. During that time the nursing home incurred over $15,000 of unpaid bills caring for the ward.

The reason Ms. Lawson was not liable turned on the language of the admissions agreement. A general term of the contract (it was in fact included under the heading "General Provisions") required Ms. Lawson to use "due care." Elsewhere, however, the contract dealt specifically with what would happen if a Medicaid application was denied: the agreement required Ms. Lawson to pay all the nursing home costs, but limited that payment to being made "from the Resident's assets."

More generally, a guardian or conservator who signs a nursing home agreement should not be personally liable for the nursing home costs. That result could be different, in particular facts, if:

    1. The signer owed an obligation of support to the nursing home resident that would make the signer liable whether or not they signed the contract (most often this argument will come up when a spouse is institutionalized).

    2. The admissions document clearly indicates that the signer is assuming personal responsibility. The best way to avoid this result is, of course, to read the document before signing. It also helps to sign "as guardian" (or "as conservator" or "as agent under a power of attorney" or whatever fiduciary relationship the signer may have). In fact, it might be even better to sign "as guardian only, and not individually" (with appropriate adjustments for the actual fiduciary relationship, of course). Remember, though, that even if the signer foolishly accepts individual responsibility, that may not be the final word on the subject. There is likely still an argument to be made that the signer received nothing in return for his or her acceptance of the liability.

    3. The fiduciary commits fraud, or breaches his or her fiduciary duty. It is likely that a fiduciary breach would need to be fairly egregious before the fiduciary would be personally liable for the resident's nursing home expenses -- but it is not difficult to image a scenario in which a conservator (or an agent under a power of attorney) might take all the ward's money improperly and leave the nursing home without any source of payment.

The bottom line: read the nursing home admission agreement before signing it. Have it reviewed by an attorney if you are unsure of what you are agreeing to do. Do not sign without clearly indicating your fiduciary relationship.

Robert B. Fleming
Fleming & Curti, PLC
Tucson, Arizona
www.elder-law.com

DISTRIBUTIONS FROM SELF-SETTLED SPECIAL NEEDS TRUST RELATING TO MEDICAL EXPENSES by Thomas D. Begley, Jr., Esquire

_________________________________________________________________________________

 

 

            One of the most pressing needs for disabled beneficiaries is medical care.

 

Medical Insurance

 

            It is crucial that the disabled beneficiary obtain some form of medical insurance.[1] Options include the following:

 

•           Private Medical Insurance. Typically, the only source of private medical insurance at regular rates is through the parent's coverage with the parent's employer. Parents of such child must make every effort not to lose their jobs.

 

•           COBRA. The Consolidated Omnibus Budget Reconciliation Act of 1996 (COBRA) allows former employees and their dependents to continue the employer's coverage for a limited period of time, commonly 18 months. However, if the employee became disabled within two months of the qualifying event causing him to lose medical insurance coverage, COBRA coverage may be extended for 29 months. If the former employee died, divorced, or became entitled to Medicare, then the employee's dependents are eligible for 36 months of coverage.

 

•           State-Mandated High-Risk Pools. Many states have high-risk pools to cover persons who are uninsurable in the private market. This coverage often tends to be very expensive.

 

•           Medicare. Medicare is only available to persons under 65 if they are disabled and have 20 quarters of coverage. If they receive SSD, then two years after the determination of disability they are entitled to Medicare. Persons receiving Medicare should obtain a Medicare supplement policy. There is usually a very limited open enrollment period to obtain this coverage after which it becomes impossible to obtain because of pre-existing conditions.

 

•           Medicaid. Persons receiving SSI also receive Medicaid. In non-SSI states having a Medically Needy program, persons qualify for Medicaid by spending down their income if income is above a certain amount. Some states have income caps. Other ways of obtaining Medicaid are through state Medicaid waiver programs, including various Kid Care programs available in many states. Eligibility rules vary. A Katie Beckett waiver program is very desirable, because the income and assets of the parent are not deemed to the children. Some states do not call their programs Katie Beckett, which is a specific categorically eligible group of Medicaid recipients, but the effect is the same because those state identify groups of children with disabilities and provide for Medicaid eligibility so the waiver services are available. Slots tend to be extremely limited.

 

Non-Covered Medical Expenses

 

            Typically, Medicaid pays for 100 percent of covered expenses. However, very often, psychological services, certain types of testing and some special therapies are not covered. It is appropriate for a trustee to pay for these non-covered services. It is also appropriate for a trustee to pay for dental care, prescriptions, and podiatrist care.

 

Provider Non-Acceptance

 

            Some providers do not accept Medicaid, because of the low reimbursement rate. It is difficult to find a dentist participating in the program. Some persons with disabilities choose physicians who do not accept Medicaid. It is appropriate for a special needs trust to pay for services from those physicians.

 

Out-of-Pocket

 

            If the person with a disability receives Medicare, rather than Medicaid, there may be copayments, deductibles and payments for services that Medicare does not cover. It is appropriate to pay for those costs from a special needs trust.

 

 

 

 

Thomas D. Begley, Jr., CELA

Begley, Begley & Bookbinder, PC

ATTORNEYS AT LAW

 

COMMITTED TO EXCELLENCE

Specializing in Elder & Disability Law

    

www.begleylawyer.com

 

(800) 533-7227

 

---

[1] Roger M. Bernstein, Health Insurance and COBRA Issues Collateral to SNT's and Settlements,

Stetson

University

College

of Law, Special Needs Trusts IV (Oct. 18, 2002).

Grandparents Visitation Rights

The relationship between a grandparent and a grandchild can be one of great joy and importance for both grandparent and youngster. But sometimes an event such as a parent's death, divorce or estrangement can tear families apart, and alter or sever relationships. After such events, the child's parents or guardian may block any further contact with grandparents, who may then take legal steps to maintain contact with the grandchildren they love.

As such situations became increasingly common, in the 1970s state legislatures began enacting “grandparent visitation” statutes to protect the visitation rights of grandparents and other caretakers. Today, all 50 states have some type of grandparent visitation law. These statutes allow grandparents to ask a court to give them the legal right to maintain their relationships with their children's children.  Visitation statutes, however, do not give a grandparent an absolute right to visitation, and the laws vary widely from state to state on crucial details such as who may petition for visitation rights, under what circumstances a grandparent may file such a petition, and on what legal grounds the petition will be granted.

States differ on the extent to which parents have a right to control their children's upbringing. Some states have viewed visitation by grandparents as only a small infringement on the right of a parent to raise a child. These states focus on what is in the “best interest of the child” in making decisions about whether or not to allow grandparents to visit. In these “permissive” states, even unrelated caretakers can often petition for visitation rights, and grandparents can seek visitation even in cases where the family is intact (i.e., there has not been a divorce or a death in the family). In these states, courts may award grandparents visitation rights even if the parents object. Other states are more protective of a parent’s right to decide what is best for the child. These states have “restrictive” visitation statutes, meaning that generally only grandparents, not other caretakers, have visitation rights, and these rights may be pursued only if the child's parents are divorcing, one or both parents have died, or the child was born out of wedlock. In other words, in these states the parents in intact families have the final word on whether or not grandparents are allowed to visit.  Still, the “best interest of the child” is the legal standard in most states for determining whether grandparents should be granted visitation.

There are no firm rules for determining when a court will grant visitation; every case is decided on its own facts and merits. Grandparents, however, can take steps to improve their chances of gaining visitation rights.  In deciding visitation cases, courts often consider the previous relationship between the grandparent and grandchild, and they look favorably on evidence of a consistent and caring relationship. For this reason, a grandparent should try to build a meaningful relationship with a child from the outset. If the child’s parent rejects the grandparent’s efforts to visit, the grandparent should keep a record of the grandparent’s attempted contacts and continue to make a reasonable effort to preserve the relationship with the grandchild, like sending gifts and cards. When it comes time to meet with an attorney, grandparents should have documentary evidence and names of witnesses to support their claim that visitation is in the best interest of the child.

The Virginia Code specifically names grandparents as persons with a “legitimate interest” in custody and visitation cases.  The Virginia Code requires the court to give “primary consideration to the best interests of the child,” and sets a higher standard of proof for persons other than parents, by providing that: “the Court shall give due regard to the primacy of the parent/child relationship but may upon a showing by clear and convincing evidence that the best interests of the child would be served thereby award custody and/or visitation to any other person with a legitimate interest.” The Virginia Code sets out ten factors that the court must consider in determining custody and visitation, and does not give grandparents a legal right to visit a grandchild, but a right to petition for visitation.

In June 1998, the Supreme Court of Virginia, in the decision of Williams v. Williams, denied parental grandparents’ visitation with their granddaughter that was opposed by both of the child’s parents. The court affirmed the decision of the lower court that the right of parents in raising their children is a fundamental right protected by the United States Constitution. The court held that “...before visitation can be ordered over the objection of the child’s parents, a court must find an actual harm to the child’s health or welfare without such visitation. A court reaches consideration of the best interests standard in determining visitation only after it finds harm if visitation is not ordered.”

In May 1999, the Court of Appeals of Virginia, in the decision of Dotson v. Hylton, granted the paternal grandmother visitation with her granddaughter. The visitation was favored by the child’s father, but was objected to her by her mother. The significant difference in facts between the Williams decision and the Dotson decision was that in the Dotson decision one of the parents favored the visitation.  Where both of the living parents of a child object to visitation, the Virginia courts require that a grandparent show actual harm to the child without visitation. This is a restrictive standard.

One way to avoid a court battle is to try professional mediation. In mediation, the disputing parties engage the services of a neutral third party to help them hammer out a legally binding agreement that all concerned can live with. The disputing parties can control the process, and they have a chance to explain their perspectives and feelings. In a court, on the other hand, the judge will ultimately make a decision based on laws that may seem unfair to one or both sides.

Andrew Hook
Oast & Hook
www.oasthook.com

Spouses and Undue Influence with Executing a Will

In In re Will of Jones (N.C. Sup. Ct., No. 37A08, Dec. 12, 2008), the decedent, Mr. Jones, executed a will and trust agreement on March 3, 2005, (“March will”) in which he directed that his farming operations and all personal effects be distributed outright to his wife, Mrs. Jones, except for certain cattle which he devised to a friend.  The will also directed that his shares of stock in Carolina Packers Inc., a meat packing business of which Mr. Jones was the president and majority shareholder, be placed in a trust for the benefit of Mrs. Jones for her life and then to three longtime Carolina Packers employees.

Although Mr. Jones had been diagnosed with cancer in 2004, he stayed strong until April 2005, when his health began a steady downhill course.  By late July 2005, Mr. Jones was experiencing pain and confusion, CT scans showed multiple tumors in his brain, and his physicians noted that he was profoundly weak.  In August 2005, Mr. Jones became a “total care” patient and relied heavily on others, especially Mrs. Jones, to assist him with daily living activities.

According to depositions and testimony from Mr. Jones’s longtime friends and acquaintances, Mrs. Jones, who had been married to Mr. Jones for 47 years, thought she should receive more of Mr. Jones’s estate, and she was upset about the contents of the March will.  As Mr. Jones’s health continued to deteriorate, Mrs. Jones repeatedly emphasized to him that everything should be left to her.  She also screened calls to Mr. Jones from his attorney, and she dominated business conversations in which she previously took little part.  By the end of August 2005, Mrs. Jones had convinced Mr. Jones to make another will leaving virtually everything outright to her.  Mrs. Jones then found an attorney to draft this new will, and Mr. Jones executed it on September 1, 2005, (“September will”).

Mr. Jones died on October 11, 2005, and the March will was submitted for probate three days later. Mrs. Jones challenged the March will on the grounds that the September will was valid and expressly revoked all previous wills.  The trial court granted summary judgment to Mrs. Jones, concluding that there was no genuine issue of material fact as to whether Mrs. Jones unduly influenced Mr. Jones with respect to executing the September will, and the trial court found that the September will should control.  The North Carolina Court of Appeals affirmed the decision of the trial court.  This decision was appealed to the North Carolina Supreme Court.

The North Carolina Supreme Court acknowledged that prior will contest cases “demonstrated a strong respect for marriage and suggest that spouses are often accorded special consideration in undue influence cases in light of their close relationship with the testator.”  The Court said that in this case, there still remained the question of whether the wife’s influence was “undue.” The Court then analyzed the seven factors under North Carolina law to determine whether undue influence could have existed in this case.  These factors are: 1) Old age and physical and mental weakness; 2) That the person signing the paper is in the home of the beneficiary and subject to his constant association and supervision; 3) That others have little or no opportunity to see him; 4) That the will is different from and revokes a prior will; 5) That it is made in favor of one with whom there are no ties of blood; 6) That it disinherits the natural objects of his bounty; 7) That the beneficiary has procured its execution.  In analyzing these factors, the Court acknowledged that all seven factors need not be present, and that each factor should be carefully considered in light of the facts of each case.  The Court did not reach any conclusion regarding the allegations, but discussed which evidence related to the seven factors might permit a jury to reasonably infer undue influence.  As a result of its analysis, the North Carolina Supreme Court reversed the decision of the Court of Appeals, holding that there existed genuine issues of material fact related to the issue of undue influence, and that the trial court should have allowed a jury to consider those issues.  The lesson to be learned from this case is that a testator may possibly be unduly influenced not just by children, strangers, or more distant relatives, but also by a spouse. 

Andrew H. Hook
Oast & Hook
www.oasthook.com

Confidential Relationships and Joint Accounts

A recent Supreme Court of Virginia case highlights the meaning of “confidential relationship” as it pertains to joint ownership of bank accounts.

In Estate of Audrey Jane Parfitt v. Parfitt (Record No. 081100, February 27, 2009), the decedent (“Jane”) executed a will leaving her estate to her children and stepchildren in equal shares.  During Jane’s final illness, she required extensive assistance, and received help from paid caregivers as well as from her son (“Jeff”) and his wife (“Boyka”).  Jeff was added as a joint owner on Jane’s bank account so that he could pay Jane’s bills; this was done with the full knowledge and consent of Jeff’s brother.  Jane, Jeff, and Jeff’s brother agreed that Jeff would quit his job to care for Jane, and that Jeff would pay himself $500 from the joint account. 

During the period that Jeff was providing care for Jane, Jeff liquidated several of Jane’s assets and obtained loans, and deposited the funds into the joint account.  The assets included a $106,000 annuity, $14,000 and $12,811 CDs, a $50,000 home equity loan, and a $155,000 reverse mortgage.  The total value of the deposited assets was at least $338,580.12.  Jeff then transferred $305,591 from the joint account to an account he shared with his wife.  He also wrote checks totaling $67,500 to himself from the joint account and he wrote checks totaling $9,013.37 to other payees for his and Boyka’s benefit.

After Jane’s death on March 7, 2006, Jane’s estate filed a complaint against Jeff, alleging breach of fiduciary duty, conversion, unjust enrichment, and a claim in detinue.  Boyka was later added as a defendant on the same claims.  The trial court entered an order holding that “(i) the estate had failed to establish the existence of undue influence; (ii) the evidence had not established a confidential relationship between Jeff and Jane; and, (iii) the estate had failed to prove a claim in detinue, for conversion, or for unjust enrichment.”  The Supreme Court of Virginia awarded an appeal to the estate on assignments of error including that the trial court made errors of law in determining that the estate did not demonstrate a confidential relationship existed between Jeff and Jane, and in determining that the estate did not demonstrate a prima facie case of undue influence, thereby shifting the burden of proof to Jeff and Jane.

The Supreme Court of Virginia first reviewed the law of undue influence in Virginia and reiterated that, “[T]he presumption of undue influence arises and the burden of going forward with the evidence shifts when weakness of mind and grossly inadequate consideration or suspicious circumstances are shown or when a confidential relationship is established.” (Citing Friendly Ice Cream Corp. v. Becker 268 Va. 23 (Va. 2004).)  The Court stated that in this case, it did not have to decide the issue of Jane’s state of mind, “because a confidential relationship was established as a matter of law by Jeff’s joint ownership of the bank account through which all the assets at issue flowed.”  The Court said that Jeff and Boyka received “considerable benefit” by virtue of their actions regarding Jane’s property.  This benefit is a necessary precondition to shift the burden when a transaction is challenged on the basis that it was procured by undue influence in a confidential relationship.  The Court said that one class of confidential relationships that may give rise to a presumption of undue influence was present in this case, that being when one person is an agent for another.  The Court cited Virginia Code § 6.1-125.15:1, which provides that “[p]arties to a joint account in a financial institution occupy the relation of principal and agent to each other, with each standing as a principal in regard to his ownership interest in the joint account and as agent in regard to the ownership interest of the other party.”  The transfers that were challenged resulted in assets passing through an account that Jeff and Jane held as joint owners with the right of survivorship, and all of the funds belonged to Jane.  Because the funds in the joint account were Jane’s, and Jeff had no funds of his own in the account, pursuant to the statute, Jeff was an agent with regard to the entire account.  By the same statute, fiduciary duty was created because of the establishment of a confidential relationship.  “The confidential relationship created a presumption that the self-dealing transactions were ‘unduly obtained.’” The Court therefore held that the trial court erred in holding that there was no confidential relationship, and also erred in failing to shift the burden of production to Jeff and Boyka to rebut the presumption of undue influence with respect to the challenged transactions.  The Court reversed the judgment of the trial court, and remanded the case for a new trial.

Andrew Hook
Oast & Hook
www.oasthook.com

DISTRIBUTIONS FROM SELF-SETTLED SPECIAL NEEDS TRUSTS by THOMAS D. BEGLEY, JR., ESQUIRE

           

                Distributions from self-settled special needs trusts are usually subject to more severe restrictions than distributions from third party special needs trusts.  Many State Medicaid Agencies have regulations or internal policies governing how these distributions can be made.  Under federal law,[1] distributions from a self-settled special needs trust must be for the benefit of such individual.  In a CMS letter,[2] distributions from the trust must be “solely for the disabled individual’s benefit.”  Some states interpret this slightly differently.  In New Jersey, distributions must be “for the sole benefit of.”[3]  In New York, distributions must be for the “primary benefit of.”[4]

 

                If distributions from a trust must be solely for the disabled individual’s benefit and certain distributions actually benefit other parties, then the other parties must pay a pro rata share. 

 

                Generally, distributions from a self-settled special needs trust may not be made to discharge a legal obligation of support of a parent.  Many states, such as New Jersey, by regulation prohibit the use of trust funds to discharge a legal obligation of support unless the parents are unable to satisfy the legal obligation of support from their own funds. 

 

Examples of Permissible Trust Distributions/SSI Recipients

 

                Examples of permissible trust distributions from a trust established for the benefit of an SSI recipient are:

 

•              Home purchase, with rent paid by occupants;

•              Home improvements, repairs, and maintenance by outside source;

•              Tools to perform home improvements, repairs, and maintenance by homeowner;

•              Installation of burglar alarm or monitoring/response system in home;

•              School tuition, books, and supplies;

•              Health and life insurance premiums;

•              Entertainment purposes, including books and magazines; trips to movies, plays, museums, and sporting events; audio/video equipment; or hobby supplies;

•              Purchase and maintenance of car, or bus passes;

•              Household goods and other items of personal property of reasonable value;

•              Clothing;

•              Payment for items such as cleaning supplies and paper products;

•              Telephone expenses;

•              Dental care, physical therapy, massages, support services, and other medical costs not covered by any benefit programs;

•              Home care services not covered by another program;

•              Durable medical equipment, such as wheelchairs; or

•              Gifts of limited amounts to family members (under certain circumstances, for example gifts can be made from a third party special needs trust if specifically authorized in the document, i.e., gifts for birthdays and holidays).

               

                If a beneficiary can pay his/her pro rata share of household expenses, then a one-third reduction of the SSI grant can be avoided.

 

ISM

 

                If a trustee provides in-kind support and maintenance that is food or shelter, then SSI benefits may be reduced. Depending on the household in which the individual resides, the benefit may either be reduced by the actual value or the presumed maximum value. A beneficiary can always show that the actual value is less than the presumed market value. If the actual value exceeds the presumed market value, then the benefit is only reduced by the presumed market value.[5]

 

                While such distributions may have the negative consequence of reducing the trust beneficiary's SSI payment, there is nothing in the federal statute to preclude the use of trust funds for food or shelter.[6]

 

Examples of ISM

 

                Examples of trust distributions that will reduce SSI benefit are:

 

•              Shelter-related expenses which are specifically defined in the SSI program (mortgage payments, real property taxes, heating and cooling bills, electricity, water, sewage, garbage collection);[7] and

•              Groceries or meals.

 

General Rules

 

                Under the distribution rules for special needs trusts, trustees should not make certain payments, including cash to the beneficiary, cash to family members of the beneficiary under 18 years of age, and, distributions to third parties. Also, trustees should try to avoid payment of: mortgage, rent, real estate taxes, homeowner's insurance, utilities, garbage removal, and food. On the other hand, they should always pay income taxes, trustee fees, attorney fees, administrative costs, and all regularly recurring expenses. Finally, it is important to for them to retain public benefits counsel and a care manager.

 

                Distributions must be made in such a manner that they are not considered to be income to the beneficiary for public benefits purposes. In a leading case, an Oklahoma court determined that the trust in question was an exempt resource; however, distributions might be characterized as income, if they were used for food and shelter.[8] The court required the trustee to disclose the character and amount of each disbursement so that the state of Oklahoma could determine whether it is income within the Oklahoma Medicaid eligibility regulations.[9]

 

 

 

Thomas D. Begley, Jr., CELA

Begley, Begley & Bookbinder, PC

ATTORNEYS AT LAW

 

COMMITTED TO EXCELLENCE

Specializing in Elder & Disability Law

    

www.begleylawyer.com

 

(800) 533-7227

 

---

[1] 42 U.S.C. §1396p(d)(4)(A).

[2] CMS Letter to

All

State

Medicaid Directors, Subject:  Treating Disability Trusts Under Transfers of Assets, Trusts, Estate Recovery and Third Party Liability Rules (June 5, 1996).

[3] NJAC 10:71-4.11(g).

[4] New York State Department of Social Services, Transmittal 96 Adm-8 iv A 7 b ii.

[5] POMS S.I. 0835.300.

[6] CMS Letter from Thomas E. Hamilton, Director, Disabled and Elderly Health Programs Group, dated July 5, 2001, to Janet L. Lowder.

[7] POMS S.I. 00835.020.B.36 and 00835.465.D.1; 20 C.F.R. §416-1130b.

[8] Trust Co. of

Okla.

v. State ex rel. Dep't of Human Servs., 890 P.2d 1342 (

Okla.

1995).

[9] Trust Co. of

Okla.

v. State ex rel. Dep't of Human Servs., 890 P.2d 1342 (

Okla.

1995).

WHAT RECORDS TO KEEP AND HOW LONG TO KEEP THEM

Digging through piles of records can be a frustrating task. It can take only one search to find something to raise the question: “Do I really need to keep all these documents?” While the answer may be “no,” one must be careful about discarding old records.  Before you do a complete cleaning and shred all the documents in your filing cabinet, however, please note that it is important for you to retain certain pieces of information.  Shredding old records will help protect you against identity theft, but disposing of too much can leave you unprotected. While there are no firm rules on record retention, Oast & Hook provides the following information to help guide you in what documents you should keep and how long you should keep them: 

ATM Receipts: These should be kept only until you balance your checkbook. After that, shred them.

Bank Statements:  You don’t need to keep your bank statements. The only exception is if you are applying for a mortgage, and even then you need only a three month history.

Credit Card Statements: These should be kept for only the past three months. Credit card statements merely reflect the charges to your card, and your credit card company can reproduce these reports if you need them.

Financial and Investment Documents:  Investments often result in receiving vast amounts of mail, such as prospectuses, privacy notices and address confirmations.  If you don’t plan on acting on this information, get rid of it.  You need to retain balance statements for only the past three months.  Any time you purchase a new investment, however, you should retain the transaction record until you sell the investment and complete your income tax return.  In addition, you may want to keep any benefit information if it would be helpful to you in determining your future benefits.

Home Insurance:  Retain home insurance documents for a minimum of five years; however, if there is any question that issues may arise in the future, then keep these records for ten years.  Insurance companies do keep this information, but you should not rely solely on them to provide it.

Home Repair Bills:  The general rule is to keep these records for ten years.  This should adequately protect you should litigation or other disputes arise that are connected to the repairs or workmanship. If there is a lien on the property connected with the work or repairs, then make sure to obtain a satisfaction of lien from the contractor and keep that document as long as you own the property.

Life Insurance Policies:  Life insurance policies should be kept for the duration of the policy, plus an additional three years.  

Medical Records:  Personal health records, such as medical history, contact information of personal physicians, and prescribed treatments and prescriptions - should be kept indefinitely.  All other medical records, however, such as premium statements, physician or hospital bills, copies of prescriptions, only need to be kept for five years after treatment has ended (unless items have been claimed on your tax returns, in which case the supporting documents should be kept for seven years).

Mortgage Documents:  You should keep mortgage documents for the duration of the mortgage. Once you have paid off the mortgage, the bank must record a satisfaction of the mortgage.  Keep the record of satisfaction as long as you own the property.
  
Pay Stubs:  If your pay stubs contain the history of all the past pay stubs for the year, then you need to keep only the most recent one.  If they don’t provide payment history, then keep all pay stubs until you receive an overview statement at the end of the year.  After you receive the overview statement, you may discard all previous pay stubs.  Please note that pay stubs contain all the information an identity thief needs to steal your identity.  Therefore, dispose of these cautiously, preferably by shredding.

Tax Returns:  The general rule is to keep tax returns, whether business or personal, for seven years. Thus, when you file a new return, you may shred the one no longer needed.  Although the IRS has three years to audit you after you file your income tax return, there are several exceptions to this rule, and it is better to be safe than sorry. Further, it is important to save all the information used in preparing your returns, for it is up to you to provide this information if you are audited or asked related questions.

Utility Bills:  You need to keep your utility bills for only the last three months.  If you write off on your income tax return anything contained in these records, then you should keep these documents as tax records.

Warranty Documents:  All warranty documents may be disposed of at the time the warranty expires or you get rid of the item. 

Andrew Hook
Oast & Hook
www.oasthook.com

Pooled Trusts - Statutory Requirements by Thomas D. Begley, Jr., Esquire

POOLED TRUSTS – STATUTORY

REQUIREMENTS

 

By Thomas D. Begley, Jr., Esquire

 

           

A self-settled pooled trust is defined as a trust containing the assets of an individual who is disabled that meets the six conditions discussed in the following sections.

 Disabled

The trust must be for the benefit of a person with disabilities. Disability is defined by the Social Security Act § 1382c(a)(3). A person receiving SSI or SSD has already been determined to be disabled by the Social Security Administration and no further determination is necessary. If the individual is not receiving SSI or SSD, the State Medicaid Agency has to make a determination. The criteria of the SSI program must be used even in 209b states, unless the state had a more restrictive policy in 1972.[1]

 Non-Profit Association

The trust is established and managed by a non-profit association. A non-profit organization is an organization defined in § 501c of the Internal Revenue Code (IRC) and also has tax-exempt status under § 501(a).[2]

Separate Account

Separate accounts must be maintained for each beneficiary of the trust. For purposes of investment and management of funds, the trust may pool the funds in the individual accounts. The trust must be able to provide an individual accounting for the individual.[3] Each individual subaccount gets its own EIN number. Each self-settled subaccount is taxed to the beneficiary as a grantor trust.

 Solely for the Benefit Of

The trust account must be maintained for the sole benefit of the individual with disabilities. The trust account must be established for the sole benefit of the disabled individual. If the account provides a benefit to any other individual, this exception to the trust transfer rules does not apply.[4]

 Established By

The trust may be established by a parent, grandparent, or legal guardian of such individual, or by such individual, or by a court.[5] The fact that the individual may establish the trust himself is different from a self-settled special needs trust under (d)(4)(A).[6] If a third party establishes a trust account on behalf of the individual, the third party must have legal authority to act with regard to the assets of the individual.[7] This requirement refers to the individual who physically took action to establish the trust, even though the trust was established with assets of the SSI claimant/recipient. Since the pooled trust has already been established, this provision applies to the subaccount within the pooled trust.

A Pooled Trust can also be established by a Representative Payee.[8] The POMS permit the transfer of disability benefits to establish a trust or to fund an existing trust.[9] However, there is an exception for past due benefits, which meet dedicated account requirements. These past due benefits must be held in a savings account or checking account, or a money market account established in a financial institution. Representative Payee may pay a beneficiary’s disability payments to the trust, provided that:

            •           Establishing the trust is in the beneficiary’s best interest.

            •           The trust is established exclusively for the use and benefit of the beneficiary, to meet the beneficiary’s current and reasonably foreseeable needs. Trust expenditures for food, clothing, housing, medical care, recreation, and education are considered expenditures for the use and benefit of the beneficiary and in his or her best interest.[10] A trust with provisions prohibiting trust funds to be used specifically to meet the beneficiary’s current needs for food, clothing, housing, and medical care would not be in compliance.

            •           The trust is for the sole benefit of the disabled person during his or her lifetime.[11]

A provision in a trust directing disability payments to the trust is prohibited as a violation of the assignment of benefits provisions of the Social Security Act.[12]

 Payback

To qualify for the pooled trust exception, the trust must contain specific language that provides that, to the extent that amounts remaining in the individual’s account upon death of the individual are not retained by the trust, the trust pays to the state from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the individual under the state Medicaid plan. There is no payback required by a third-party pooled trust.

To the extent that the self-settled trust does not retain funds in the account, the state must be listed as a first payee and have priority over payment of other debts and administrative expenses, except as listed below.[13]

The following are allowable administrative expenses:

            •           Death taxes due to federal and state governments

            •           Reasonable fees for the administration of the trust estate[14]

The following expenses are prohibited:

            •           Payments of debts owed to third parties

            •           Funeral expenses

            •           Payment to residual beneficiaries [15]

The restriction on payments from the trust applies upon the death of the beneficiary. Payment of fees and administrative expenses during the life of the beneficiary are allowable as permitted by the trust document and are not affected by the state Medicaid reimbursement requirement.[16]

 

 

Thomas D. Begley, Jr., CELA

Begley, Begley & Bookbinder, PC

ATTORNEYS AT LAW

 

COMMITTED TO EXCELLENCE

Specializing in Elder & Disability Law

    

www.begleylawyer.com

 

(800) 533-7227

 

---

[1] HCFA Transmittal 64 §3259.7B.

[2] POMS SI 01120.203 B 2.c.

[3] Id. at B 2.d.

[4] Id. at B 2.e.

[5] Id. at B 2.f.

[6] 42 U.S.C. §1396p(d)(4)(A).

[7] POMS SI 01120.203 B 2.f.

[8] POMS GN 00602.075.

[9] Id. at A.

[10] Id. at D3.

[11] Id. at C1.

[12] Id. at C3.

[13] POMS SI 01120.203 B 2.g.

[14] Id. at B 3.a.

[15] Id. at B 3.b.

[16] Id. at B 3.c.