Special Needs Law

Financial-Planning.com published an article by Ed Slott entitled, "When you should establish an IRA as a trust" (May 31, 2017). Provided below is a brief summary of the article published at Financial-Planning.
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Wickedlocal.com published an article by Leanna Hamill entitled, "PLANNING MATTERS: Why you need an Estate Plan" (Feb 7, 2017). Provided below is a brief summary of the article published at Wickedlocal.
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How should I protect my special needs child in my estate plan?

Sadly, there will always be some children with special needs, whether they are born with congenital defects or develop disabilities through accident or disease. The astonishing increase in the number of cases of autism, the  Zika virus, with its potential for the catastrophic congenital defect of microcephaly, and the discovery of lead in the water of Flint, Michigan have combined to make the general population particularly uneasy about the possibility that one day some member of their own family will have special needs. While distressing to consider, it is a reality for a growing percentage of families. Families of moderate means, as well as those who have substantial estates, should consult with

The Americans with Disabilities Act (ADA), signed into law in 1990, recognized the civil rights of a large class of citizens with physical and mental disabilities by making it illegal to discriminate against them in employment, transportation or public services and accommodations. Since its enactment, much progress has been made, enabling people with disabilities to obtain an education, pursue a career, live independent lives and fulfill their dreams. 

Despite this progress, people with disabilities who have children are more likely to have their parental rights terminated or lose custody after a divorce. 

Discrimination in the Courts

These discriminatory actions are often justified on the grounds that the courts are protecting the best interests of the child, but there is little research to support the assumption that someone who is disabled is incapable of being a good parent. In fact, according to advocacy groups there are likely more than 4 million parents with physical disabilities currently raising children. 

Most family courts work diligently to provide services and support to ensure that children maintain contact with their parents whenever possible. This is not always the case when disability is involved. There have been cases where disabled parents have not been allowed to bring their newborns home and the state subsequently filed to have their parental rights revoked, even in the absence of evidence of abuse or maltreatment. The presumption is that the disability endangers the welfare of the child. Currently, two thirds of the states have laws permitting the removal of children based on the disabled status of the parent.

Disadvantage in Custody Cases

Parents with disabilities are also at a disadvantage in custody cases, particularly if the ex-spouse does not have a disability. Competent parents with special disabilities require knowledgeable advocates who can demonstrate that they are able to effectively carry out their parenting duties in their own adaptive ways.

Fighting Discriminatory Practices

Advocates for the legal rights of parents with disabilities are waiting for a landmark trial that halts the discrimination suffered by parents with disabilities and protects their rights to have and raise children. While everyone agrees that children should not be exposed to a hazardous environment, decisions to remove children from homes where a parent is deaf or has a low IQ are often made by individuals who fail to grasp the remarkable capabilities of such parents despite their significant handicaps. More education on disability issues is needed at all levels of the child welfare and family court systems. At the same time, parents with disabilities must have better access to fair legal representation and support services. 

Law assumes a person with disabilities lacks the equality or mental capacity to enter into a contract.

By Michael J. Amoruso, Esq.

Have you ever witnessed the distress of dignity being stripped from a person simply due to a physical disability that prevents the person from entering a store because her or his wheelchair cannot go up a step that leads into the building?

All Citizens Deserve Dignity and Equality
With the passage of the Americans with Disabilities Act of 1990 (ADA), Congress made a big leap forward in providing a means for individuals with disabilities to gain access and accommodations to give them the dignity and equality they deserve as citizens. Yet, even to this day, those of us with disabilities must continue to erase the historic, age-old stereotype that a person with a disability is a lesser individual than her or his able-bodied neighbor. Not a day goes by that my routine is not disrupted because I must advocate for my right to allow my Seeing Eye dog to guide me through the corridors of public buildings - and I am a lawyer. Can you imagine how difficult and demoralizing that would be for someone who doesn’t have the legal training and/or assertiveness that I possess?

You are probably wondering why I am sharing with you these daily challenges. Well, I have identified one inequity that can be fixed. Merely one year after the ADA went into effect, Congress made what appears to be a legislative drafting error that has the profound effect of codifying an unimaginable presumption in our country – the presumption that a person with disabilities lacks the equality or mental capacity to enter into a contract. We would not make that presumption about President Franklin D. Roosevelt, Helen Keller, Ray Charles or our wounded veterans!

What Are Supplemental Needs Trusts?
Specifically, in 1993, Congress added a wonderful concept called a “Supplemental Needs Trust” to the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993). This concept permits an individual with disabilities under age 65, who relies on Medicaid for health benefits and/or Supplemental Security Income (SSI) to survive, to have a Supplemental Needs Trust (SNT) established to hold his or her savings.

The benefit of the SNT is that it allows this individual to have supplemental funds to pay for daily living items that such benefits do not cover, such as:

• shampoo and other toiletries,
• haircuts,
• magazine subscriptions,
• tickets to the movie theater,
• clothing,
• hobbies,
• furniture for the home, and
• computers.

These items can make the difference between simply existing and enjoying life. The SNT can also pay for health care not covered by Medicaid, such as experimental or alternative medical treatments. The funds put in the SNT are often provided by a loved one or from a legal settlement.

In order to qualify for Medicaid or SSI, a person must meet financial thresholds. The SNT hedges against the risk of complete impoverishment and the inability to meet what most of us consider to be basic living needs. In exchange for that protection, upon the disabled individual’s death, the state is reimbursed from the trust assets for Medicaid benefits paid to the individual during his or her lifetime. Following in the footsteps of the ADA, this concept has helped advance the quality of life and opportunities for those with disabilities.

There are various kinds of SNTs that disabled individuals can chose from, depending on a variety of factors, such as the disabled individual’s age and the amount of assets that will be placed into the trust. A (d)(4)(C) pooled trust is administered by a nonprofit organization, where each disabled individual has a separate subaccount within the trust and the trust assets are pooled together for investment and management purposes.  Unlike (d)(4)(C) pooled trusts, (d)(4)(A) trusts are not administered by a nonprofit organization but rather the trust is managed by a trustee, sometimes a family member, for the sole benefit of the disabled individual.

In addition to the provisions established by OBRA 1993, USC §1396p(d)(4)(A) further provides that, to have the benefit of the SNT, the trust must be established by a parent, grandparent, legal guardian of the individual, or a court. Let’s revisit that point: The SNT must be established by the parent, grandparent, legal guardian of the individual or a court. Now, can the reader identify who is missing from this list of eligible individuals? That’s correct …the individual. Evidence of this unfortunate oversight can be seen in the very next sentence of the statute that offers protections to a similar SNT known as a “pooled trust.” In particular, that provision authorizes the pooled trust to be established by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.

Denying a Basic Right
Aside from the mistaken presumption that such individuals lack capacity to establish their own SNT, this omission results in inequitable and unnecessary legal costs and time for the individual with disabilities. Imagine the impact on a person who does not have the luxury of a living parent or grandparent and does not lack mental capacity that requires the appointment of a legal guardian. That person’s sole option is to hire a lawyer to petition the court to exercise a fundamental right that the person is born with in our country. Depending on one’s geographic location, this cost could range from $1,500 to more than $6,000.

This dilemma was recently experienced by a 62-year-old client of mine who was the victim of medical malpractice, which rendered her paralyzed and confined to a nursing home that charges over $100,000 per year for her care. She not only has the mental capacity to direct her care in the facility, but she also was the star witness in her lawsuit, testifying in court as to her ordeal. When it came time to set up her SNT, I had to inform her that she could not simply sign the SNT, but instead, since she did not have a parent, grandparent, or legal guardian, she had to petition the court to authorize it. My words cannot convey the shock on her face. My words also cannot convey the shock on the faces of the legislative assistants in Congress when I informed them that I, a blind and moderately deaf attorney who has drafted thousands of SNTs for clients, would not even be able to sign my own SNT in the future.

Congress Must Act
NAELA is working to change this injustice. NAELA will join forces with the Leadership Council of Aging Organizations and theConsortium for Citizens with Disabilities in lobbying efforts, as well as individual members of these coalitions. NAELA members are also taking individual action by calling on their Congressional Representatives and Senators to make this justified and cost neutral change to USC §1396p(d)(4)(A) to insert the phrase by such individuals so that those of us who have disabilities can regain the dignity we deserve and remove the misplaced presumption that we lack capacity due to our disabilities.

About the Author
Michael J. Amoruso, Esq., is managing partner of Amoruso & Amoruso, LLP, Rye Brook, N.Y. He is a member of the National Academy of Elder Law Attorneys Board of Directors. Mr. Amoruso has had hearing loss since he was young. As a young adult, he learned he was going blind. When he was a newly admitted attorney, one of his first assignments was to draft a Supplemental Needs Trust. This experience helped him decide to focus on Elder and Special Needs Law.

Attorney Karnardo Garnett of the LegalJourney Law Firm will be presenting an online seminar titled "Special Needs Law: Estate Planning for Parents with Special Needs Children" on Saturday, October 29th 2011 at 9am.

During the one hour free web broadcast, Attorney Garnett will cover the basics of Estate Planning, including but not limited to:

Register Online Today.

Special needs trusts allow individuals with disabilities to qualify for need-based government assistance while maintaining access to additional assets which can be used to pay for expenses not covered by such government benefits. If the trust is set up correctly, the beneficiary will not risk losing eligibility for government benefits such as Medicaid or Supplemental Security Income (SSI) because of income or asset levels which exceed their eligibility limits.

Special needs trusts generally fall within one of two categories: self-settled or third-party trusts. The difference is based on whose assets were used to fund the trust. A self-settled trust is one that is funded with the disabled person’s own assets, such as an inheritance, a personal injury settlement or accumulated wealth. If the disabled beneficiary ever had the legal right to use the money without restriction, the trust is most likely self-settled.

On the other hand, a third-party trust is established by and funded with assets belonging to someone other than the beneficiary.

Ideally, an inheritance for the benefit of a disabled individual should be left through third-party special needs trust. Otherwise, if the inheritance is left outright to the disabled beneficiary, a trust can often be set up by a court at the request of a conservator or other family member to hold the assets and provide for the beneficiary without affecting his or her eligibility for government benefits.

The treatment and effect of a particular trust will differ according to which category the trust falls under.

A self-settled trust:

• Must include a provision that, upon the beneficiary’s death, the state Medicaid agency will be reimbursed for the cost of benefits received by the beneficiary.
• May significantly limit the kinds of payments the trustee can make, which can vary according to state law.
•  May require an annual accounting of trust expenditures to the state Medicaid agency.
• May cause the beneficiary to be deemed to have access to trust income or assets, if rules are not followed exactly, thereby jeopardizing the beneficiary’s eligibility for SSI or Medicaid benefits.
• Will be taxed as if its assets still belonged to the beneficiary.
• May not be available as an option for disabled individuals over the age of 65.

A third-party settled special needs trust:

• Can pay for shelter and food for the beneficiary, although these expenditures may reduce the beneficiary’s eligibility for SSI payments.
• Can be distributed to charities or other family members upon the disabled beneficiary’s death.
• Can be terminated if the beneficiary’s condition improves and he or she no longer requires the assistance of SSI or Medicaid, and the remaining balance will be distributed to the beneficiary.