This document discusses planning for individuals with special needs or who are elderly. It covers government benefits programs like Medicaid, SSI and SSDI. It explains special needs trusts and how they allow beneficiaries to protect eligibility for needs-based benefits while enjoying supplemental benefits. The document also discusses elder law planning topics like long-term care insurance, Medicaid eligibility and asset protection trusts. Special needs and elder law planning requires understanding the complex rules around government assistance programs.

1. Special Needs and Elder Law
Planning
Lori I. Wolf, Esq.
Mary W. Browning, Esq.

2. I. Government Benefits
A. Four Critical Government Benefit
Programs
1. Supplemental Security Income (SSI)
2. Medicaid
3. Social Security Disability Insurance (SSDI)
4. Medicare

3. A. Means-Based Programs

4. 1. Supplemental Security Income (SSI)

5. a. Federal income program administered by Social
Security Administration and funded with general tax
revenues that pays benefits to disabled adults and
children who have limited income and resources and
people age 65 and older who are not disabled but
have limited financial resources
i. Benefit amount for single person per month -
$698 from federal government and additional
minimal amount from New Jersey
ii. Any earned income reduces SSI

6. a. $2,000 resource limit for single person ($3,000
for couple)
b. The receipt of SSI (any amount) automatically
qualifies the SSI recipient for Medicaid in
New Jersey
c. Definition of “disabled”

7. 1. Medicaid

8. a. Funded jointly by the federal and state
government for the aged, blind and disabled who
are indigent and meet certain eligibility
requirements
b. State administered program

9. – New Jersey’s eligibility requirement for
Medicaid:
i. Asset Test – No more than $2,000 of
countable assets for an applicant or $3,000 for
a couple where both are applying for
Medicaid

10. 1) Community Spouse Resource Allowance
(CSRA) – the greater of 50% of the
applicant’s countable resources or $22,728,
up to $113,640 unless increased by a
judge’s order

11. – Available Assets Counted in the asset test,
whether owned by the applicant or the
applicant’s spouse, or owned by either of
them jointly with someone else:
a) Checking accounts
b) Savings accounts
c) Brokerage accounts
d) CDs
e) Stocks and bonds
f) U.S. savings bonds

12. a) Primary residence if applicant does
NOT intend to return home or if equity
in home is greater than $786,000
b) Retirement funds

13. – Excluded Assets Not counted in the asset limit:
a) Primary residence if equity is less than or equal
to $786,000 and applicant intends to return
home
b) Primary residence, regardless of equity, if
spouse, child under age 21, or blind or disabled
child of any age lives there
c) One vehicle
d) Life insurance with no cash value or cash value
less than or equal to $1,500
e) $2,000 worth of household goods plus a
wedding ring and engagement ring

14. i. Income Test
1) Applicant cannot have more than $2,094 of
income per month for 2012
a) Social Security
b) Pension, including Veterans Administration
(VA) pension
c) Annuity payments
d) Retirement accounts
e) Interest
f) Alimony
g) Rental income
h) Life insurance proceeds

15. 1) Community spouse - Minimum Monthly
Maintenance Needs Allowance (MMMNA) -
$1,839 plus excess shelter amount up to $2,841
2) There are some limited exclusions from income,
including VA allowance for Aid and Attendance or
Housebound Allowance (but VA pension is
included as income).

16. • Non-Means Based Programs (Benefits that
do not have to be protected from an
inheritance or personal injury recovery)

17. 1. Social Security Disability Insurance
(SSDI)
a. disability income based on work history,
under age 65
b. a child who is disabled prior to age 22 can get
SSDI benefits beginning at age 18 based on
that child’s parents prior earnings (continues
as long as child is disabled)

18. 1. Medicare – health insurance for those
over 65 or disabled

19. I. Special Needs Planning

20. A. Planning by the Parents of a Child with
Special Needs

21. 1. Third Party Special Needs Trust (“SNT”) or
Supplemental benefits trust
a. Set up by a third party who is seeking to help a
beneficiary while maximizing government benefits
b. Trust assets can supplement but not replace
government benefits

22. – Can be an inter vivos trust to receive gifts or
inheritance from parents or others during the
parents’ lifetimes, or can be a testamentary trust
created under the parents’ Wills
– Consider appropriate trustees
– Can be revocable or irrevocable

23. a. Create flexibility where the needs of a beneficiary are
unknown
i. Example – lifetime discretionary trust that is
convertible to a special needs trust if necessary.
ii. Can terminate special needs trust if beneficiary
recovers and/or no longer needs government benefits
– For a lifetime trust, consider ability to fund the trust with
out triggering a gift tax or use of applicable exclusion

24. 1. Benefits of a Special Needs Trust
a. Protects eligibility for government benefits
b. Provides for a higher quality of life
c. Provides framework for care and management of
assets
d. Allows the parent to express their desires
e. Protects assets from creditors and predators

25. 1. Use of a Special Needs Trust avoids many of the
costly mistakes people make when planning for
their child with special needs, such as:
a. Disinheriting the child
b. Relying on your other children to provide for
the child with special needs

26. 1. Funding of Special Needs Trust
a. Allocation to SNT before other children receive
assets or divide assets equally among all children
b. Cap amount to child with special needs
c. Consider funding necessary amount with
insurance
d. The disabled individual can have no control or
access to the trust funds

27. 1. What are we trying to protect?
a. A beneficiary’s current Medicaid or SSI benefits
b. The possibility of needing these benefits in the
future

28. 1. Coordination of Assets with Special Needs Trust
a. Retirement Plan Assets
b. Life Insurance
c. Annuities

29. 1. Distributions from Special Needs Trust

30. a. Permissible Distributions
i. Purchase of home or condo, as long as rent is
paid
ii. Home improvements
iii. School tuition, books and supplies

31. i. Vacations
ii. Entertainment
iii. Insurance premiums
iv. Transportation (such as purchase of a car or
train tickets)

32. i. Telephone expenses
ii. Dental care and other medical costs not
covered by any benefit program
iii. Medical equipment

33. a. Distributions Which May Reduce or Eliminate
Government Benefits

34. i. Shelter expenses, such as mortgage payments,
utilities, etc., if rent is not paid by occupants
ii. Food
iii. Clothing
iv. Cash paid directly to the special needs person

35. 1. Typical Mistakes People Make

36. a. §529 Plans
b. Custodial Accounts
c. Bonds
d. Coordination of Parents’ and Siblings’ Planning
with the Special Needs Trust

37. 1. Letter of Intent

38. A. Planning for the Child with Special Needs

39. 1. First Party Special needs trust (for those under
65)
a. Set up by parent, grandparent, legal guardian or a
Court
b. To or for the sole benefit of a person who is disabled
(as defined and determined by the Social Security
Administration) and under age 65
c. Protects disabled person’s Medicaid or SSI benefits
d. Established with the disabled person’s own money

40. a. Payback provision - Medicaid lien at death
b. Bond requirement
c. No expenditure over $5,000 without notice
d. Review of trust by state agencies

41. 1. Pooled Trusts
a. Alternative to a special needs trust
b. Can be self-settled or contain assets of a
third-party
c. The trust is maintained and established by
a non-profit association

42. a. Separate accounts, pooled investments
b. Pooled trusts typically retain a certain amount of
the beneficiary’s account at death (usually 50%,
but could be more)
c. Reimbursement to Medicaid

43. 1. Durable power of attorney
2. Health care proxy and health care
directive
3. Guardianship
a. Full guardianship
b. Limited guardianship
– Process to Attain Guardianship
– When to Apply

44. I. Elder Law Planning (for those
over 65)

45. A. Long term care insurance

46. A. Plan for Medicaid eligibility – 5 year
lookback on gifts
1. Community Spouse
a. CSRA
b. MMMNA

47. 1. Gifts made within the 5 year period are subject
to a transfer penalty period. To determine
penalty period upon transfer, determine value of
assets transferred and divide by penalty divisor
($7,282)
a. Penalty period starts when the donor:
i. Is in a nursing home
ii. Has no more than $2,000 of assets
iii. Has submitted an application for Medicaid
• If Penalty period is longer than five years, simply
wait five years before applying for Medicaid and then
apply for Medicaid

48. 1. Medicaid Asset Protection Trust

49. a. Create trust to be the owner of some or all of an
elderly person’s assets
b. In NJ, grantor cannot be a beneficiary of this
trust (differs from many other states)

50. a. Beneficiaries are typically children or other
family members
i. Need to ascertain creditor problems and other
issues of the beneficiaries
ii. Family dynamics
b. If home is transferred to trust, prepare a right to
reside agreement

51. 1. Can retain exempt assets, but may be subject
to estate recovery
a. Medicaid lien

52. 1. Outright gifting

53. 1. Spenddown
a. Caregivers Agreements
b. Retain five years worth of expenses
c. Purchase exempt automobile
d. Make repairs to home if retaining home outside
of trust
e. Pay off existing debt
f. Purchase prepaid funeral plan

54. 1. If income is in excess of the Medicaid limit
(currently, $2,094 per month), consider
eligibility under the Medically Needy
Program

55. a. Resource Test of $4,000

56. a. Maximum monthly income of $367 after
spending down excess of income on medical bills
and health insurance premiums

57. a. Medically Needy Program covers most medical
costs and in-home and institutionalized care.
*It does not cover the cost of hospitalization or
prescription drugs

58. 1. New Jersey Elder Care Limitations

59. a. Spousal refusal

60. a. Qualified Income Trust (Miller Trust)

61. 1. Downside of Elder Care Planning

62. a. Reliance on family

63. a. Exposure of assets to creditors of the recipient if
not in a trust

64. a. Need to recognize income tax on pre-tax monies
before transfer of funds

65. a. Medicaid is not always the best alternative

66. Lori I. Wolf, Esq.
loriwolf@coleschotz.com
201-525-6291
Mary W. Browning, Esq.
mbrowning@coleschotz.com
201-525-6247