Special Needs Trusts
Planning for Disabled Beneficiaries
Facing the Challenges
Raising a child who is disabled, either due to mental illness, mental retardation, or physical disabilities, is filled with challenges and rewards that only parents truly understand. Planning for that child’s well-being, both during the parent’s lifetime, and after the parent’s death, involves a complex array of social, financial, and legal issues. At R. F. Meyer & Associates, our trusted attorneys can help families with the following:
Myriad types of trusts
At R. F. Meyer & Associates, our trusted attorneys can help families with the following types of trusts:
Private created special needs trust for individual with assets exceeding the asset cap for Social Security Supplemental Income (SSI) and or Medicaid
Private created special needs trust for individual with assets exceeding the income cap for Social Security Supplemental Income (SSI) and or Medicaid
Private created special needs trust for individual with assets exceeding the income cap for Social Security Supplemental Income (SSI) and or Medicaid in a pooled environment
Court created special needs trust for individual with assets exceeding the asset cap for Social Security Supplemental Income (SSI) and or Medicaid
Court created special needs trust for individual with assets exceeding the income cap for Social Security Supplemental Income (SSI) and or Medicaid
Court created special needs trust for individual with assets exceeding the income cap for Social Security Supplemental Income (SSI) and or Medicaid in a pooled environment
Reformation of old non compliant special needs trusts pursuant to the Ohio Uniform Trust Code
Creation of new wholly discretionary trusts in parent planning or Court supervised circumstances
Presentation and defense of special needs trusts in Social Security Supplemental Income (SSI) or Medicaid applications
Planning for Social Security Supplemental Disability Income recipients’ and their families
Medicaid likely a necessity
In most circumstances, the disabled child retains healthcare insurance through graduation from high school or age twenty-two, or so long as a guardianship is in place. It is in the child’s best interest for the parent to maintain employer-sponsored healthcare insurance for as long as possible. However, either upon obtaining some level of independence, upon obtaining a certain age, or upon the death of the parent, private healthcare insurance will no longer be available. For most disabled individuals, Medicaid benefits are a necessity.
SSI vs. SSD Distinction
For disabled individuals who have been employed and obtained the necessary “quarters,” they will be eligible for Social Security Disability should they at some point be unable to continue working. Social Security Disability payments are based upon their income while they were employed and are not based upon need. Social Security Disability also includes Medicare eligibility, usually twenty-five (25) months after Social Security Disability eligibility is established.
In contrast, Supplemental Social Security Income (SSI) is needs-based, and therefore, the individual must have less than $2,000. SSI eligibility is usually teamed with Medicaid eligibility for purposes of healthcare. A verification of the disability is required.
Special Needs Trusts
When planning for a disabled child, we give the Trustee several trust options for the beneficiary. Each Trust option has a specific purpose and provides benefits tailored to the child’s needs.
Discretionary Trusts
These Trusts provide the Trustee with unlimited discretion pursuant to the Ohio Supreme Court cases of Young vs. Ohio Dept. of Job and Family Services (1996) and Pack v. Osborn (2007) and recently enacted ORC § 5111.151(G). Under this option, the beneficiary retains Medicaid eligibility and the Trustee can make expenditures for supplemental needs that the Trustee believes are appropriate, with the exception of food and rent. Since a Discretionary Trust is a Third Party’s money, it does not require Medicaid payback at the disabled beneficiary’s death.
Medicaid Payback Trusts
The Medicaid Payback Trust allows for a Trust to be created by the disabled person, a parent, grandparent, court, or Guardian. This Trust’s assets are not counted for Medicaid assistance or SSI and can include assets that belong to the Medicaid recipient. At the death of the beneficiary, however, the state may make a claim against the Trust of up to the total amount expended by the state on behalf of the recipient for medical care. Any amount remaining can be distributed to other beneficiaries named in the Trust document. This is a safe option for a disabled beneficiary for SSI purposes. The Trustee is permitted to make expenditures on behalf of the beneficiary so long as the expenditures are not on items that would otherwise be covered under the Medicaid program or that pay for food or lodging under SSI.
Ohio Revised Code § 5815.28 Trusts
These are very similar to the Medicaid Payback Trusts mentioned above. The primary differences are (1) the Trustee’s discretion on expenditures is more limited, (2) the state’s right of recovery is limited to one-half of the Trust Estate, and (3) the funding is limited to $248,000 (for 2018). Upon the death of the beneficiary, the state would be permitted to make a claim for up to one-half of the remaining Trust balance. For those who are more restricted by their disability and are not reliant upon SSI, this may be a better choice.
The Ohio Catholic Social Services Pooled Trust is a “Pooled Trust” that has been established by the Ohio Knights of Columbus and allows the multiple beneficiaries/assets to be retained in a single Trust. There are two other “Pooled Trusts” in Ohio, one in Dayton and one in Cleveland. This Trust, established under federal and state law, is well suited for circumstances where there is no extended family or children, or where the amounts to be retained are rather modest. This type of Trust is also very beneficial should there be a shortage of potential Trustees in the family. The funds are retained in the Trust in a separate account for the beneficiary and are accessible through the Trustee for purposes of “supplemental needs.” If that child’s account is exhausted, that share is then terminated. If any funds remain upon the beneficiary’s death, the monies are retained by the Trust and are utilized to improve care given to disabled individuals throughout the State through Catholic Social Services. The primary benefits of this approach are decreased administrative costs, protection in the likelihood of future litigation, and finally, the philanthropic component of improving care for other disabled and elderly individuals.