Chapter 8: Estate Planning For Special Needs Families

A life insurance policy held by an ILIT is exempt from the resource test of the Medicaid rules if the insured has made no disqualifying transfers to the trust within the look-back period.

True

A transfer of a special needs child's funds back to his or her parents is generally problematic as a spend-down technique.

True

A van specially equipped for transportation of a disabled individual is an exempt resource.

True

An individual is not eligible for an ABLE account if their disability occurred after age 26.

True

One disadvantage of the self-settled SNT is the requirement that the state be reimbursed for Medicaid expenditures made on behalf of the beneficiary after the beneficiary dies.

True

Supplemental Social Security (SSI) and Medicaid are needs-based programs.

True

The ILIT created for use as a third-party supplemental needs trust for a special needs beneficiary should not provide a Crummey withdrawal power for the special needs beneficiary if qualification for SSI or Medicaid is a concern.

True

The look-back period for the purposes of SSI & Medicaid disqualification is 36-60 months regardless of whether the transfer was outright or in trust.

True

The purchase of a computer for the special needs beneficiary of a self-settled SNT is an appropriate action by the trustee.

True

The transfer of funds to a self-settled payback special needs trust (SNT) cannot be done for an individual over age 65.

True

There is both an income limitation and a resource limitation under the rules for Supplemental Security Income (SSI).

True

Which of the following statements concerning the definition of a disability for Social Security purposes is (are) correct? I. The definition includes a requirement that the individual be unable to do any substantial gainful activity by reason of a medically determinable physical or mental impairment. II. The definition includes a requirement that the physical or mental impairment can be expected to result in death or has lasted or can be expected to last for a continuous period of not more than 12 months. (A) I only (B) II only (C) Both I and II (D) Neither I nor II

(A). II is incorrect because the requirement is that the impairment can be expected to result in death or has lasted or can be expected to last for a continuous period of not less than 12 months.

Which of the following statements regarding eligibility for an ABLE account is (are) true? I. Only individuals (or families of individuals) who incurred a significant disability before age 26, and who meet SSI eligibility criteria may establish an ABLE account. II. Individuals receiving SSI, SSDI, or Medicaid are automatically disqualified from establishing an ABLE account. (A) I only (B) II only (C) Both I and II (D) Neither I nor II

(A). Individuals are eligible for an ABLE account if their disability began before age 26 and they meet the SSI eligibility criteria related to significant limitations. II is incorrect because individuals receiving government benefits are not disqualified from establishing an ABLE account; rather, the accounts were meant to supplement the resources provided by government programs.

Assets held in a joint account between the special needs individual and another family member will be treated as exempt resources for SSI or Medicaid qualification purposes.

False. The funds in a joint account held by a special needs individual who applies for SSI or Medicaid will be treated as his or her funds, but this amount can be reduced to the extent the contribution of the other joint tenant can be established.

An UGMA or UTMA account held for a special needs individual by a custodian can be maintained beyond the age of majority for the special needs individual without SSI reduction if the special needs individual is legally disabled.

False. The funds in an UGMA or UTMA are treated as income for SSI or Medicaid purposes when the beneficiary of the account reaches the age of majority.

A self-settled SNT will be of little use for the purposes of the receipt of damages from a personal injury case because the full amount of the settlement will be deemed a resource for Medicaid purposes.

False. The purpose of a self-settled SNT is to protect the excess assets of a special needs beneficiary and the contribution of damages from a personal injury case is one of the methods used to fund the SNT.

The use of an ILIT as a third-party supplemental needs trust for a special needs beneficiary holds the disadvantage that the trust funds remaining at the time of the beneficiary's death will be required to reimburse the state for expenditures made by Medicaid on the beneficiary's behalf.

False. The purpose of the third-party supplemental needs trust is to avoid having the trust funds treated as an available asset for the purposes of eligibility for government benefits. Generally, only the self-settled SNT is required to reimburse the state for Medicaid expenditures at the death of the special needs beneficiary.

The resources of a parent are not counted in determining eligibility for SSI with respect to a minor child.

False. The resources of a parent are counted under the deeming rules under these circumstances.

The state must be the sole remainder beneficiary of the self-settled SNT or the assets of the trust will be deemed available to the state for Medicaid purposes.

False. The state must be reimbursed for Medicaid expenditures from a self-settled SNT, but the rules require that a remainder beneficiary from the family be named for any trust funds remaining after such reimbursement.

Advantages of an ABLE account over a special needs trust include: reduced costs to maintain the account, more control over distribution of funds, and tax-free income.

False. Though an ABLE account provides more flexibility, less costs, and tax-free income compared to a special needs trust, more control can be exercised over the funds disbursement through a special needs trust because the disbursement can be controlled through the trust document terms.

Which of the following statements regarding living arrangements for the special needs individual is correct? (A) Placement on a wait list may accelerate the move of a special needs individual from his home. (B) Intermediate care is only for the severely disabled. (C) Institutional care is only for the mildly disabled. (D) Group homes are owned by the state.

(A). Securing alternative living arrangements often entails joining a "wait list." Should an opening develop, the family of the special needs individual is faced with the decision of moving before the death of the parents. (B) is incorrect because intermediate care provides housing alternatives for people who are not severely disabled, but who are able to perform many functions independently. (C) is incorrect because institutional care is intended for the severely disabled. (D) is incorrect because group homes are not required to be owned by the state. Active Goals

All of the following statements concerning a self-settled special needs trust (SNT) are correct EXCEPT: (A) The SNT is prohibited from making distributions to the special needs beneficiary during the beneficiary's lifetime. (B) The SNT is used to receive the excess assets of a special needs beneficiary and permit the beneficiary to qualify for Medicaid. (C) The SNT can only be created and funded by a beneficiary under the age of 65. (D) The remainder of the SNT's assets at the death of the special needs beneficiary must first be used to reimburse the state for expenditures from Medicaid.

(A). The SNT holds the assets during the lifetime of the special needs beneficiary and is intended to make distributions for the benefit of the beneficiary for items or services that will not disqualify the beneficiary from Medicaid.

Which of the following statements is (are) correct concerning applying for and maintaining government benefits? I. An individual who has established the existence of a disability under the Social Security definition will be considered to be disabled for life. II. There is an appeal process available for individuals whose initial claims for SSDI benefits are rejected. (A) I only (B) II only (C) Both I and II (D) Neither I nor II

(B). I is incorrect because the existence of the individual's disability will be subject to periodic reviews.

Which of the following would NOT constitute a significant change in the life of a special needs individual meriting revision to the letter of intent? (A) An allergic reaction to a previously effective medication for brain seizures. (B) Recertification of qualification for employment at a sheltered workshop. (C) Receipt of a medical malpractice award for the benefit of the special needs individual. (D) Desire of the special needs individual to expand her recreational alternatives.

(B). The events listed in (A), (C), and (D) are all significant enough to merit a revision to the letter of intent. Recertification of qualification for employment, while arguably a change, would not be significant.

Mr. and Mrs. Foley have a child with severe disabilities. The child will incur significant medical and long-term care expenses for the rest of his lifetime. Which of the following statements concerning the wills for Mr. and Mrs. Foley is correct? (A) The Foleys should provide direct bequests to the special needs child to cover his medical and long-term care expenses. (B) The Foleys should disinherit the child and rely on his siblings to expend funds for his benefit. (C) The Foleys should fund a supplemental needs trust with their probate assets to provide discretionary benefits to the special needs child. (D) The Foleys should fund a mandatory support trust for the special needs child.

(C). (A) is incorrect because the direct bequest would potentially eliminate the special needs child from government benefit programs. (B) is incorrect because there is significant risk in attempting to provide for the special needs child at the discretion of siblings. (D) is incorrect because a mandatory support trust would make the entire trust fund an available asset of the special needs beneficiary for the purposes of the SSI and Medicaid tests.

All of the following assets will be excluded from the calculation of the resource limitation for purposes of eligibility for Supplemental Security Income (SSI) EXCEPT: (A) a home owned and occupied by the person with a disability (B) cash value of life insurance up to a specified amount (C) the ownership interest in a business owned by the person with a disability (D) equipment required by the individual as a result of his or her disability

(C). The value of such an interest is not excluded from the calculation of the resource limitation.

An ABLE account may be established only if the individual qualifies under the means and resource tests for SSI and Medicaid.

False. An individual is eligible for an ABLE account if they have a significant disability that began before the individual turned age 26 who also: Is currently receiving SSI and/or SSDI benefits; or Meets the SSI criteria regarding significant functional limitations

SSDI is available to adult children of retired Social Security participants and pays benefits based on the parents' work record regardless of the age at which the child developed his or her disability.

False. If a child develops a disability after reaching age 22, Social Security disability income benefits will not be available based upon the parents' work record, but only if the child had a significant employment history before becoming disabled.

Social Security and Medicare are needs-based programs.

False. Social Security and Medicare are social insurance programs and are not generally based upon financial need.