Special Needs Trusts in 2014 for the Personal Injury Attorney
Dennis McAndrews, Esq.
A variety of policy and legislative changes have recently occurred with respect to Special Needs Trusts. These changes, while important, retain the high level of need for Special Needs Trusts for the overwhelming majority of individuals with disabilities who receive Medical Assistance, Supplemental Security Income, Mental Health/Intellectual Disabilities programs, and food stamps. A review of these changes and their impact follows.
The Affordable Care Act (ACA) now allows individuals with disabilities to obtain private health coverage as of January 1, 2014. Prior to that date, such individuals could rarely, if ever, obtain private health coverage on the open market due to disqualifying preexisting medical conditions, and then often at a substantial financial cost. For these individuals, Medical Assistance was generally the only health coverage available to them, thus making the use of a Special Needs Trust essential. Going forward, individuals with disabilities who receive a personal injury recovery must decide whether the limited private insurance available on the open market would adequately replace Medical Assistance which they can maintain through the use of a Special Needs Trust. In the vast majority of cases, Medical Assistance will remain far superior coverage for individuals with disabilities when compared to private insurance which can be purchased under the Affordable Care Act for several reasons.
First, Medical Assistance is free or virtually free to the individual with disabilities, and is provided without premiums, co-pays, or deductibles. Private insurance through the Affordable Care Act will involve such premiums, deductibles, and co-pays regardless of the quality of the private insurance selected under the ACA.
Second, the breadth of Medical Assistance coverage will, in most cases, be substantially greater than through private insurance. In Pennsylvania, Medical Assistance must cover all “medically necessary services”, and therefore generally provides far greater coverage for most therapies, in-home services, skilled nursing services, and residential programs. And perhaps most critically, Medical Assistance pays for nursing home services, intermediate care facilities for the intellectually disabled, behavioral health programs, and a wide array of community-based “waiver programs” for persons with emotional disturbance, intellectual disability, traumatic brain injury, and physical disabilities. These “waiver programs” all have resource and income limitations, and acceptance of a personal injury settlement without the use of a Special Needs Trust would disqualify the individual for these waiver programs and all other Medical Assistance benefits.
Finally, the loss of Supplemental Security Income of up to about $730.00 per month and food stamps can also be significant benefits lost through outright acceptance of a personal injury settlement and which can be avoided by the use of a Special Needs Trust.
Other less significant, but still important, changes in policies of the Social Security Administration and the Department of Public Welfare must be considered in 2014. On a positive note, the Social Security Administration had modified its policies to allow direct reimbursement to third parties for purchases on behalf of the disabled beneficiary of the Trust, so long as those purchases do not involve shelter or general nutrition expenses. The Social Security Administration has also withdrawn a previous policy statement which suggested that payments to a close family member for travel to visit a disabled beneficiary are not allowable expenditures from a Trust. The SSA also clarified its rules regarding the “payback” to the state upon termination of a SNT (typically upon the death of the beneficiary) for Medical Assistance provided during the lifetime of that beneficiary. Finally, the Department of Public Welfare has informally adopted a policy which requires bonding of individual Trustees for larger Trusts where a corporate fiduciary is not utilized; in most cases, the use of a corporate fiduciary to serve as Trustee of a Special Needs Trust is a sound practice to ensure appropriate control, tax filings, and investment strategies.
PAJ Member Dennis C. McAndrews is the founder and managing partner of McAndrews Law Offices, P.C., Berwyn.