Some families must assume special responsibilities in order to care for a loved one who will require help through adulthood due to physical or mental challenges. To help these families, The Probate Pro offers Special Needs Planning. This planning uses state and federal Trust Laws to protect the assets of a person with disabilities.
Such planning can be used to effectively coordinate your loved one’s care needs and to enhance the quality of your loved one’s life. Sometimes called a “Supplemental Needs Trusts,” Special Needs Trusts can help preserve assets to care for an individual with special needs after becoming eligible for government benefits, including Medicaid.
A Supplemental Needs Trust (frequently called a Special Needs Trust, or simply an “SNT”) is an important estate planning tool. The purpose of a Supplemental Needs Trust is to safeguard certain assets (generally a settlement or an inheritance) without disqualifying the individual from eligibility for public benefits. Understanding permissible distributions is critical to the effective administration of the Trust.
One of the duties of the Trustee of a Supplemental Needs Trust is to understand what public benefits programs might be available to the beneficiary and how the receipt of income, or a provision of food or shelter, might affect eligibility. Once the Supplemental Needs Trust is created by a qualified estate planning attorney, the Trustee has the responsibility to use the Trust funds for the benefit of the individual without violating the many complicated and often changing rules of Social Security and Medicaid.
Conceptually, the idea is that permissible distributions from the Supplemental Needs Trust must be “supplemental” to those need-based benefits being provided by the government.
Home improvements, repairs and maintenance (not covered by Medicaid), including tools to perform home improvements, repairs and maintenance by homeowner.
Home Purchase (to the extent not covered by benefits)
House cleaning / maid service
Insurance (automobile, home and/or possessions)
Linens and towel
Musical Instruments (including lessons and music)
Non-food grocery items (laundry soap, bleach, fabric softener, deodorant, dish soap, hand and body soap, personal hygiene products, paper towels, napkins, Kleenex, toilet paper, any household cleaning products)
Over the counter medications (including vitamins and herbs, etc.)
Personal Assistance Services not covered by Medicaid
Paying for a service already paid for by another source
Distribution not in the best interest of the beneficiary (made primarily for the benefit of another person)
As with other trusts, the trustee of a special needs trust is prohibited from self-dealing. That means no investment of trust assets in the trustee’s business or assets, no commingling of trust and personal assets, no borrowing from the trust, no purchase of goods or services (by the trust) from the trustee, and no sale of trust assets to the trustee.
Special Needs Trust Definitions
For most of my clients, discussing whether a Special Needs Trust is the appropriate strategy for them requires a basic understanding of some terms.
The following are the Special Needs Trust Definitions of the most commonly used terms:
The beneficiary is the person whose benefits the Special Needs Trust is established to protect. The beneficiary of a Special Needs Trust will generally be a low-income individual who is either disabled, blind, or elderly, and have limited income and few assets.
The trustee is the person (or entity) responsible for managing the trust assets and administering the trust provisions. In the event that there are two or more trustees acting at the same time, each is referred to as a co-trustee. The beneficiary can never serve as the trustee of their own Special Needs Trust. The trustee may also be a professional trustee, such as a corporate bank trustee or a lawyer.
The grantor of the Special Needs Trust is the person whose assets funded the trust. The grantor is often referred to as the “settlor” or “trustor.” There can be more than one grantor for any given trust. The term grantor becomes confusing for a Special Needs Trust because often the actual grantor (the one whose assets funded the trust) is often not the same person that signs the Special Needs Trust.
Supplemental Security Income, better known by the initials “SSI,” is a federal government benefit program available to low-income individuals who are disabled, blind, or elderly, and have limited income and few assets. SSI eligibility rules form the basis for most other government program rules.
Social Security Disability Insurance, better known by the initials “SSDI” or “SSD” is a federal government benefit program available to individuals with a disability who either have sufficient work history prior to becoming disabled, or who are entitled to receive benefits by virtue of being a dependent or survivor of a disabled, retired, or deceased insured worker. There is no “means” test, which means that eligibility is not based on limited income or assets. If you qualify for SSDI you may also be eligible to qualify for SSI and/or Medicaid benefits.
Medicare is a health-care program operated by the federal government. Medicare benefits are afforded to all those age 65 and over (provided that the person would be entitled to receive Social Security benefits if they chose to retire, whether or not they actually retired), and those under 65 who have been receiving SSDI for at least two years.
A Patient Advocate Designation, which is commonly referred to as a Health Care Power of Attorney, is a document that allows you to nominate an individual to make health care decisions on your behalf if you are unable to do so. This document also allows you to express your wishes regarding life-sustaining treatment if you become comatose or terminally ill.
Having a Patient Advocate Designation in place is vitally important to individuals of all ages and is a part of any comprehensive estate plan. To ensure that you are adequately protected, The Probate Pro includes a Patient Advocate Designation in each estate plan we draft.
A Durable Power of Attorney, like a Patient Advocate Designation, is a document that allows you to nominate someone to make decisions on your behalf. But, instead of healthcare decisions, the Durable Power of Attorney allows the named individual to make decisions regarding your finances, property, and other beneficial interests. A Durable Power of Attorney can become effective immediately upon signature or upon your incapacity, depending on your specific needs.
The Social Security Administration (SSA) manages the Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) programs. While both of these programs offer cash benefits for people with disabilities, the eligibility requirements for each are different.
SSDI is funded through payroll taxes. To get SSDI, you must be an adult between the ages of 18 and 64 and have earned a certain number of “work credits” by working and paying into the Social Security system for a certain amount of time. After you receive SSDI for two years, you’ll become automatically eligible for Medicare.
Under SSDI, the spouse and children of a person with a disability are eligible to receive partial dependent benefits even if they don’t have a disability themselves.
Social Security disability benefits are paid after you have been disabled continuously throughout a period of five full calendar months. Disability benefits are paid beginning with the sixth full month after the date your disability began. You’re not entitled to benefits for any monthduring this five-month waiting period. The amount of the monthly benefit after the waiting period is based upon how much you’ve earned while working.
Be a U.S. citizen or national or in one of certain categories of aliens
Live in the U.S. or Northern Mariana Islands.
The monthly payment is based strictly on financial need and varies up to the maximum federal benefit rate. Some states add money to federal SSI payments. Approval for benefits generally takes three to six months. Once you’re approved for SSI, you’ll get benefits retroactive to the date of your application.
If you have a disability which prevents you from working, and you appear to meet all other eligibility requirements, it is possible to get SSI earlier. Sometimes on the day you apply.
In most states (including Michigan), people who get SSI are automatically eligible for Medicaid.
A general power of attorney is unlimited in scope and duration, and permits the named individual to act as your legal representative in relation to financial matters until such time as it is revoked.
A specific power of attorney imposes limits upon the named representative, and may restrict the scope of that person’s powers to a single type of conduct or a single transaction. For example, the person could be granted the power to engage in financial transactions from a specific checking account, or to sign the closing documents for a specific real estate transaction.
A power of attorney may become effective at the time it is signed. In the alternative, it may become effective at a future date described within the document, or it may become effective upon the occurrence of a specific future event or contingency (such as your becoming disabled).
A power of attorney that becomes effective at a future date is sometimes called a “springing power of attorney”.
A Patient Advocate Designation is a document in which the patient appoints another individual to act as their Patient Advocate. The Patient Advocate makes decisions for the patient concerning their care, custody, and medical treatment if the patient becomes incapacitated. The document often sets forth the client’s wishes concerning medical treatment, care, and whether to withhold or withdraw life-sustaining treatment.
The Patient Advocate makes decisions concerning care, custody and medical treatment in the event that the patient is unable to do so. The Patient Advocate may decide to withhold or withdraw life-sustaining treatment if the patient has expressly authorized this and acknowledged that death could result.
A Living Will, also called a Medical Directive, sets forth the patient’s wishes concerning life-sustaining treatment if they are terminally ill and treatment would only artificially prolong the dying process.
Michigan statutory law does not recognize the so-called Living Will, or Medical Directive.
An advance directive is a written document in which you specify what type of medical care you want in the future, or who you want to make medical decisions for you, should you lose the ability to make those decisions for yourself.
No. The decision to have an advance directive is purely voluntary. No family member, hospital, or insurance company can force you to have one, or dictate what the document should say if you decide to write one. A hospital, nursing home, or hospice organization cannot deny you service because you do or don’t have an advance directive.
Your wishes cannot be followed if no one is aware of them. It can also be a burden for your advocate to make a decision for you without guidance. If you have specific desires, make these clear to your patient advocate in talking to him or her. Also consider including these wishes in the document.
Yes. A patient has the right to inspect and copy his or her hospital or nursing home records. Your patient advocate has the same right you have, once you are unable to participate in treatment decisions.
A do-not-resuscitate declaration (DNR declaration) is a written document in which you express your wish that if your breathing and heartbeat cease, you do not want anyone to attempt to resuscitate you.
Yes. A Michigan law provides these documents are valid in settings other than hospitals or nursing homes.
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