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CPT Special Needs Trusts meet criteria for POMS SI 01120.225

April 27, 2012 in General, POMS

SI 01120.225 Pooled Trusts Management Provisions

Citations: Social Security Act (Act) as amended, Section

1917(d)(4)(C)(42 U.S.C. § 1396p(d)(4)(C))
.

A. How to determine when to apply the policies in this section

1. New trusts and trusts that have not been previously excepted under section 1917(d)(4)(A) or (C) of the Act

A trust that is either newly formed or not previously excepted from resource counting must meet all of the criteria set forth in SI 01120.199 through SI 01120.203 and SI 01120.225 through SI 01120.227 to be excepted under section 1917(d)(4)(A) or (C). Do not except such a trust from resource counting unless the trust meets all of these requirements.

2. Trusts that previously met the requirements to be excepted under section 1917(d)(4)(A) or (C) of the Act

A trust that was previously determined to be excepted from resource counting under section 1917(d)(4)(A) or (C) continues to be excepted from resource counting, provided the trust is amended to conform with the requirements of this section within 90 days. That 90-day period begins on the day the recipient or representative payee is informed that the trust contains provisions that must be amended in order to continue qualifying for the exception under section 1917(d)(4)(A) or (C). Do not count a previously excepted trust as a resource during the 90-day amendment period.

If the trust still fails to meet the requirements of this section after the expiration of the 90-day amendment period, begin counting the trust under normal resource counting rules.

NOTE: Each previously excepted trust is permitted only one 90-day amendment period.

B. Background of pooled trusts management

To qualify for exception under the provisions of section 1917(d)(4)(C), a pooled trust must be managed by a non-profit association. By law, each trust beneficiary must have a separate account, but the non-profit manager can pool these funds with the funds of other members of this communal trust. In some instances, the non-profit manager(s) may employ the services of a for-profit entity to manage some of the financial activities of the trust.

C. Case processing alert

Trusts are often complex legal arrangements involving State law and legal principles that a claims representative may not be able to apply without obtaining the advice of legal counsel. Therefore, the following instructions may only be sufficient to recognize that an issue is present that you should refer to the regional office (RO) for possible referral to the Regional Chief Counsel. When in doubt, discuss the issue with the RO staff. You can resolve many issues by phone.

D. Policy on use of for-profit entities

If a non-profit association employs the services of a for-profit entity, the non-profit association must maintain ultimate managerial control over the trust. The for-profit entity may handle certain trust functions on behalf of the non-profit association; however, the use of a for-profit entity must always be subordinate to the non-profit managers of a pooled trust under section 1917(d)(4)(C).

For example, the non-profit association must be responsible for:

  • determining the amount of the trust corpus to invest;
  • removing or replacing the trustee; and
  • making the day-to-day decisions regarding the health and well-being of the pooled trust beneficiaries.

NOTE: This list is not intended to be exhaustive. These are a few examples of the type of authority that must vest in the non-profit association.

E. Procedure for determining management control of the pooled trusts

Do not routinely question the relationship between the non-profit association and for-profit entities used by the pooled trust.

However, before excepting a pooled trust under section 1917(d)(4)(C), review the trust for any provisions that indicate the non-profit association has not retained sufficient authority over the pooled trust to meet the criteria in section 1917(d)(4)(C).

For example, a pooled trust may not meet the criteria in section 1917(d)(4)(C) if the trust includes a provision that allows the for-profit entity to determine whether to make discretionary disbursements from the trust.

Refer the pooled trust document to the regional office for evaluation if it appears that the non-profit organization may not have sufficient control over the management of the trust for the trust to be excepted under section 1917(d)(4)(C).

 

Use this Link to view the original article on the Social Security Administration website

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As the baby boomer population ages

March 9, 2012 in General

As the baby boomer population ages, we find ourselves with an increase percentage of clients who have smaller awards and or are over the age of sixty-five so a traditional Individual Special Needs Trust cannot be used.  Especially those who are seriously injured and require continued eligibility for Medi-Cal and Supplemental Security Income (SSI).  As experts in protecting the injured you already use the following primary indicators to determine then your client will need a Special Needs Trust:

  • Client qualifies or receives Medi-Cal and/or Supplemental Security Income (SSI)
  • Client has a dependent that has or is qualified for Medi-Cal and/or SSI
  • Client is permanently unable to work and meets Social Security Administration definition of disabled

So what do you do when settling a case for an individual over the age of sixty-four. As you know Federal law permits Special Needs Trust to hold assets of a person while preserving your clients needs-based public benefits as identified in 42 USC §1396p (d)(4)(A) & (d)(4)(C).   There are two First-Party Special Needs Trusts options available to your client. An Individual Special Needs Trust or  a Pooled Special Needs Trust. The diagram below will help you differentiate the two First-Party trusts available.  This article will focus on how you can utilize the First-Party Pooled Special Needs Trusts to serve the baby boomer generation.

First Party Special Needs Trust Comparison

Pooled Trusts use a state approved master Special Needs Trust administered by a non-profit rather than an individual or a bank.  Fortunately in California Medi-Cal allows the transfer of settlement funds into a Pooled Trust or (d)(4)(C) trust for individuals of any age.

Charities Pooled Trust (CPT) of California offers comprehensive prompt support to consumer attorneys. They use a one-page trust application that can be submitted online. Trust documents are provided within three business days.  They do not have minimum funding requirement.  CPT also has a probate compliant master trust so they can accept cases that are court supervised.  In addition, CPT will hold Medicare Set-asides funds so they will remain uncountable to Medi-Cal & SSI.  The MSA funds are still professionally administered by your MSA vendor

Now you have a way to process cases of any size for clients of any age while still protecting Medi-Cal & SSI eligibility.

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CA resident eligible for Medi-Cal/Medicare while getting SS payments?

March 2, 2012 in Frequently Asked Questions, General

Can an injured California resident still be eligible for Medi-Cal and Medicare benefits while receiving structured settlement payments?

Yes.

Federal law permits a first party Special Needs Trusts (SNTs) to hold assets (such as structured settlements) of injured parties under age 64 while preserving their needs-based public benefits such as California’s Medi-Cal, Medicare and SSI. However, under federal law, individual Special Needs Trusts cannot be used by individuals age 64 and over without disqualifying the injured parties from receiving public benefits. A plaintiff who, for example, is eligible for Medi-Cal and receives a litigation recovery will lose Medi-Cal benefits until the litigation recovery is spent below $2,000 for an individual or $3,000 for a couple (the resource limits for Medi-Cal). Fortunately, a first party Pooled SNTs can overcome these disqualifying hurdles.

However, within days an injured party of any age or settlement amount can combine a Pooled SNT with structured settlement assets to preserve government benefits while receiving income for nonmedical needs. Pooled SNTs are a state approved master trust that is established and managed by a charity. Because they are created through a nonprofit entity, support a “pool” of individuals, not a single individual, and the settlement money remains in the trust and is not owned by the plaintiff until distributed, the income from these trusts is not counted against needs-based public benefits.

When the trust is terminated and the state lien has been paid, the remainder passes to heirs just as it would with an individual SNT. Because the Pooled SNT is a state approved master trust the trust documents are created and provided within three business days.

Pooled SNTs can be used for an individual of any age, but this is the only type of special needs trust available to people age 65 or older.

Much like the SNT used to preserve a plaintiff’s eligibility for Medi-Cal, a Medicare Set Aside Arrangement (MSA) is used to preserve a plaintiff’s future eligibility for Medicare. When the plaintiff is receiving (or soon will receive) both Medi-Cal and Medicare, an MSA is placed inside a Pooled SNT but must be professionally administered.

Currently, only one California Pooled SNT has the ability to provide plaintiffs’ protection of their settlement recovery from both Medi-Cal and Medicare: the California Charities Pooled Trust (CPT).

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WA resident eligible for Medicaid/SSI while getting SS payments?

February 24, 2012 in Frequently Asked Questions, General

Can an injured party living in Washington State still be eligible for Medicaid and Supplemental Security Income (SSI) benefits while receiving structured settlement payments?

Yes

Federal law permits the use of first party Individual or Pooled Special Needs Trusts (SNTs) to hold assets (such as structured settlements) of injured parties under age 65 while preserving their needs-based public benefits such as Medicaid and Supplemental Security Income (SSI).

“A plaintiff who, for example, is seriously injured may be eligible for Medicaid and/or SSI, they receive a litigation recovery, they will lose benefits until the litigation recovery is spent below $2,000 for an individual or $3,000 for a couple (the resource limits for Medicaid).”

However an injured party can combine a Pooled SNT with structured settlement assets to preserve government benefits while receiving income for nonmedical needs. A Pooled SNTs is a state approved master trust that is established and managed by a charity. Because they are created through a nonprofit entity, support a “pool” of individuals, not a single individual, and the settlement money remains in the trust and is not owned by the plaintiff until distributed, the income from these trusts is not counted against needs-based public benefits.

When the trust is terminated and the state lien has been paid, the remainder passes to heirs just as it would with an individual SNT. There is no minimum funding requirement and the trust documents are provided to Plaintiff firm within three business days.

Currently, the CPT Special Needs trust program of Washington State offers an automated prompt solution to provide plaintiffs’ protection of their settlement recovery from both Medicaid and Supplemental Security Income (SSI). Contact us to learn more.

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Notifying the Social Security Administration When Life Changes

February 17, 2012 in General

While the Social Security Administration (SSA) frequently conducts reviews to make sure that people who receive Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) are still eligible for those programs, there are also times when a beneficiary is responsible for notifying the SSA of a change. These mandatory reporting events usually occur around major life changes and can often be overlooked.

One of the most important notification requirements is for beneficiaries to tell the SSA if they move. The SSA needs to know where beneficiaries live in order to send important notifications that could affect benefits. If a beneficiary misses a notification that calls for action, it could result in a loss of benefits. In addition, out-of-state moves can radically change the amount of a beneficiary’s SSI award because states have different methods of calculating benefits. If a beneficiary moves from a state with a lower cost of living into a state with a higher cost of living and doesn’t tell the SSA, the beneficiary could be leaving money on the table.

The death of a beneficiary also triggers an automatic reporting requirement. But on top of this, beneficiaries must also report the deaths of people living with them because the size of an SSI beneficiary’s family and the earning power of the people in that family can affect SSI benefits. In certain cases, a beneficiary can receive an increased SSDI benefit when a parent or spouse passes away.

There are some other, less obvious changes that require a beneficiary to file an immediate report. Beneficiaries must report changes in income and assets, including reporting if any assistance the beneficiary was receiving to help pay for bills or housing changes. Marriage and divorce also need to be reported because the SSA factors in spousal income and resources when calculating benefits.

Beneficiaries must also tell the SSA if they become the beneficiary of a special needs trust. This could happen suddenly (when a relative dies and leaves money to the beneficiary in a trust that was previously unfunded) or it could be expected (at the conclusion of a lengthy negotiation over a personal injury settlement). Either way, the SSA should hear about the trust and receive a copy of the document.

According to the SSA’s internal rules, a beneficiary is responsible for notifying the SSA in writing of these important changes within 10 days from the end of the month in which the change occurred. So, if a beneficiary moves in January, the beneficiary has until February 10th to let the SSA know. It’s important to keep track of correspondence with the Social Security Administration, so the notification should always be sent with some kind of tracking system that requires a signature, like certified mail or express service with a signature.

The actual monetary penalty for failing to file the report itself is very small and is not always assessed, but a much larger problem looms in the background. If the SSA learns of a change in circumstances that would have reduced the benefit received by a person with special needs, then the SSA can recoup the improperly paid benefits from the recipient, and there is no limit to the amount that can be recovered. So, if a beneficiary fails to report a change in circumstances that would have resulted in a $100 reduction in his monthly benefit and the SSA finds out about the change five years later, that beneficiary owes the government $6,000, which can be almost impossible to repay. The end result is a further loss of benefits because the government will garnish the beneficiary’s award in order to recover the improperly paid funds. On top of this, the bureaucratic nightmare that ensues when the SSA attempts to calculate the amount owed can take months, or even years, to sort out while the beneficiary is left twisting in the wind, unsure of what the monthly benefit will be moving forward.

Your special needs planner can help make sure that you comply with all of the SSA’s reporting requirements. Contact your planner immediately if you have experienced, or expect to experience, any changes like the ones discussed above.

Reprinted by permission: Special Needs Answers

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Upcoming Seminar on Administering the CA Special Needs Trust

February 10, 2012 in General

Kevin Urbatsch will be presenting with Susan Katzen a seminar on Administering the California Special Needs Trust. The seminar will last six hours (eligible for both Continuing Legal Education credit and Professional Fiduciary Continuing Education credit). The seminar will cover essential public benefits, appropriate SNT distributions, understanding the different types of special needs trusts, and much more.

The seminar will be held on February 25, 2012 from 10 am to 5:30 p.m.

It will be located at:

One City Boulevard West (Kondaur Capital Building) Suite 135,Orange California
Contact Abbie Villaneuva at (415) 896-1500 to RSVP, seating is limited.

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Paying for food, shelter and utilities while on SSI or Medi-Cal

February 3, 2012 in General

The following is an excerpt from Kevin Urbatsch’s book – Administering the California Special Needs Trust: A Guide for Assisting a Person with a Disability as Trustee of a Special Needs Trust

What Is the Effect of Paying for a Beneficiary’s Food, Shelter, and Utilities If Receiving SSI or Medi-Cal?

It depends. If the beneficiary is an SSI recipient, his or her monthly SSI benefit will this be reduced (or possibly eliminated) by the application of SSI in-kind support and maintenance (ISM) income and the presumed maximum value (PMV) calculation. See chapter 4 for a more thorough description of ISM and PMV.

 If the beneficiary is a Medi-Cal only recipient (meaning eligible for Medi-Cal without also receiving SSI) then, if done correctly, the payment of food, clothing, and shelter will have no impact on public benefits. If done incorrectly, it could create an increase in the share-of-cost paid to Medi-Cal. See chapter 4 for a more thorough description of share-of-cost Medi-Cal.

Beneficiary Receives SSI:

 SSI counts as ISM both payments from an SNT of the beneficiary’s food and shelter. SSI shelter is defined as mortgage payments (including property insurance required by the mortgage holder); real property taxes (less any tax rebates or credits); rent; heating fuel; gas; electricity; water; sewer; and garbage removal.

Example: A beneficiary is receiving $854.40 of SSI per month and has been paying for all of his food or shelter from his SSI check. He wants to move to a safer neighborhood but to do so his rent will increase to $1,200 per month. It is obvious he cannot afford to pay it from his SSI check and asks the SNT trustee to pay the rent. The payment of rent by the SNT will be counted as ISM. ISM reduces the beneficiary’s SSI check by the PMV rule. This rule would reduce the beneficiary’s SSI check by a maximum of $252.66 per month in year 2012 (1/3 of the federal portion of the SSI check + $20 any income exclusion). Meaning, the beneficiary will continue to receive $601.74 per month from SSI, pay no rent, and live in a safe apartment in a nice neighborhood. This is a good result.

However, if the beneficiary had been receiving SSI in the amount of $220 per month before receiving payment of food and shelter from the SNT, then the trustee’s payment of rent would completely eliminate the beneficiary’s SSI eligibility under the PMV rules. This is because the deduction of $252.66 for PMV applies in full and would reduce the SSI check to zero. This means that the loss of SSI will also cause a loss of SSI eligible Medi-Cal[1] and that paying food or shelter may not be in the beneficiary’s best interest in this scenario.

Beneficiary Receives Medi-Cal (but not SSI):

 If the beneficiary is receiving Medi-Cal (but not SSI), then it is still possible for the SNT trustee to pay for a certain percentage of the beneficiary’s food, clothing, shelter, and utilities without interfering with Medi-Cal eligibility. If the SNT trustee pays the entire amount of need for these items, DHCS will count that as Medi-Cal in-kind income which would create an increase in the share-of-cost owed by beneficiary.[2] Share of cost is like a co-pay for private health insurance.

Example: SNT beneficiary is receiving Medi-Cal (but not SSI) and wants the SNT trustee to pay for his food, utilities, clothing, and rent, which total $2,500 per month. If the SNT trustee pays the entire $2,500, it would be counted as in-kind income by Medi-Cal and increase the beneficiary’s share-of-cost by $2,500. This would result in the beneficiary having to pay $2,500 for his medical care covered by Medi-Cal before it would begin to pay covered medical services—generally not a good result. If however, the SNT trustee pays for some (but not all) of the beneficiary’s food, clothing, utilities, or rent, then there is no effect on the beneficiary’s Medi-Cal.

Practitioners differ in their advice on how much the trustee should pay. Technically, it is possible to pay up to 99.99 percent of the cost. However, it may be more prudent to pay something around 75 percent—not for any legal reason, but just because it looks better.

The ability to pay for a beneficiary’s food or shelter will depend on the type of distribution standard the SNT has. If the distribution standard is discretionary, meaning distributions can be made that may reduce or even eliminate public benefits, and the beneficiary is on SSI, then it is possible for the trustee to make a distribution for food or shelter. If the distribution standard is supplemental, meaning a distribution cannot reduce or eliminate public benefit eligibility and the beneficiary is on SSI, then the trustee cannot make such a distribution. See chapter 2 to determine which type of distribution standard the SNT has.

Example: A beneficiary is receiving $854.40 of SSI per month and has been paying for all his food or shelter from his SSI check. He wants to move to a safer neighborhood, but to do so will increase his rent $1,200 per month. It is obvious he cannot afford to pay it from his SSI check and asks the SNT trustee to pay the rent. The SNT trustee reviews the SNT distribution standard and determines it is a supplemental standard, meaning that the trustee is prevented from making any distributions that would reduce or eliminate public benefit eligibility. Because the payment of rent would reduce or eliminate SSI, the trustee is prohibited from making this distribution. If living in a safer neighborhood is of great importance, the SNT trustee may wish to petition a court to modify the distribution standard to allow a discretionary distribution standard. A description of this procedure is described in chapter 11 of Kevin’s book, available on Amazon.

[1] It is possible that the beneficiary could receive another type of Medi-Cal, so even paying food or shelter here may be appropriate. It is best to review these types of situations with a special needs planning attorney or benefits counselor.

[2] 22 C.C.R. §50509.

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Special Needs Trusts And Child Support

January 17, 2012 in Frequently Asked Questions, General

Obligation to Pay Child Support Not Eliminated for Creation of Special Needs Trust (SNT) (N.J. App.)

The appeal addressed the issue of whether the creation of a special needs trust can justify the elimination of the obligation to pay child support to the primary residential parent of a special needs child. The appellate court concluded that while a party may utilize a special needs trust to take advantage of government programs to lessen the burden on the parent to provide support and medical assistance, the facts of the case did not support a concurrent application to eliminate child support. The court denied the ex-husband’s request to eliminate child support payable to the defendant and to establish a special needs trust for the educational and living expenses of the parties’ autistic son. The parties had entered into a property settlement agreement (PSA) relevant to their divorce which had child support provisions and acknowledged the future needs of their son.

The court held that, despite the purpose of the special needs trust (entitlement to governmental benefits for the son), plaintiff had entered into the PSA with a full understanding of his son’s needs and with the further understanding that his day-to-day needs would be provided by defendant through child support. The amount struck by the parties of $50,000 per year in child support reflected that understanding. Moreover, plaintiff, who was very financially sound, understood that he would remain responsible for the cost of the son’s special education as well as the retention of a large life insurance policy. The parties could have established a special needs trust in the PSA but chose not to. The facts and circumstances had not been altered such that there were changed circumstances sufficient to warrant a finding that the PSA was unfair and unjust.

Bond v. Bond*, Unpub. Opinion, N.J. Super., A.D., 2011 WL 6412137 (December 22, 2011)

*A copy of the full case can be obtained with the permission of the Superior Court of New Jersey, Appellate Division.

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Court Blocks Cuts To California IHSS

December 30, 2011 in General

Governor Jerry Brown recently announced $100 million in cuts to In-Home Supportive Services that were included in the state budget “trigger cuts” that authorized $1 billion in automatic spending reductions.

In-Home Support Services and the Developmental Service budget are not the only budgets greatly impacted by the cuts. Major reductions were also seen in Higher Education. K-12 was impacted, but less than education advocates had feared.

$100 million in cuts in spending to the overall Developmental Services budget was also included. Certain services within 21 non-profit regional centers and 4 state operated developmental centers for eligible children and adults with developmental disabilities would be impacted by those cuts.

These budget cuts were to take effect at some point after January 1, 2012, the exact date depending on the reduction. Currently, a Federal Court Order has halted the 100 million dollar cuts to the In-Home Support Services. Details have not been released about the Developmental Services cuts at this time.

Programs that affect persons with disabilities or mental health needs, as well as seniors and low income families would not be affected by the “trigger cuts”. However, Medi-cal managed care would see a $15 million reduction.

A non-partisan Legislative Analyst released his mid-year report in mid November on the 2011/2012 State Budget and revealed a 13 billion dollar shortfall unless the problem is corrected by the Legislature and Governor. The revised State budget that was presented by Governor Brown and Department of Finance Director Ana Matosantos showed revenue below what was anticipated when the State budget was passed last June because of the state of the economy.

Governor Brown warned that his proposed 2012-2013 State Budget that he will release on January 10th will contain more proposed reductions. Governor Brown doesn’t anticipate proposing more cuts mid-year other than what will be implemented by the “trigger cuts”  and is hopeful that the state’s economy will continue to improve and hopeful that voters will approve his proposed temporary tax increases.

“These cuts to the universities, to In-Home Supportive Services…are not good. But we have to live within our means,’ said the Governor.

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