Garland Law Offices, P.A.

Possible Pitfalls for Special Needs Planning for Parents

“Both the state and federal government, administered through the Social Security Administration (SSA) and Medicaid provide disabled individuals with a variety of life enhancing, and sometimes life sustaining, public benefits.”

Public benefits for disabled individuals include health care, supplemental income, and resources, like day programs and other vital services. Some benefits are based on the individual’s disability status, but others are “needs tested,” where eligibility is determined based on financial resources, as explained in the article “Planning for loved ones with special needs” from NWTimes.com.

“Needs testing” is something that parents must address as part of special needs planning, in concert with their own estate planning. This ensures that the individual’s government benefits will continue, while their family has the comfort of knowing that after the parents die, their child may have access to resources to cover additional costs and maintain a quality of life they may not otherwise have.

Families must be very careful to make informed planning decisions, otherwise their loved ones may lose the benefits they rely upon.

A variety of special planning tools may be used, and the importance of skilled help from an elder law estate planning attorney cannot be overstated.

One family received a “re-determination” letter from the Social Security Administration. This is the process whereby the SSA scrutinizes a person’s eligibility for benefits, based on their possible access to other non-governmental resources. Once the process begins, the potential exists for a disabled person to lose benefits or be required to pay back benefits if they were deemed to have wrongfully received them.

In this case, a woman who lived in California, engaged in a periodic phone call with California Medicaid. California is known for aggressively pursuing on-going benefits eligibility. The woman mentioned a trust that had been created as a result of estate planning done by her late father. The brief mention was enough to spark an in-depth review of planning. The SSA requested no less than 15 different items, including estate documents, account history and a review of all disbursements for the last two years.

The process has created a tremendous amount of stress for the woman and for her family. The re-determination will also create expenses, as the attorney who drafted the original trust in Indiana, where the father lived, will need to work with a special needs attorney in California, who is knowledgeable about the process in the state.

Similar to estate planning, the special needs process required by Medicaid and the SSA is a constantly evolving process, and not a “one-and-done” transaction. Special needs and estate planning documents created as recently as three or four years ago should be reviewed.

Reference: NWTimes.com (June 21, 2020) “Planning for loved ones with special needs”

Naming an Advance Designee for Social Security

“Now you can actually have a voice in who is chosen, but you need to do it while you have capacity.”

For many years, people have had the right to designate an agent to handle a number of different legal, business and medical matters. That includes finances, medical decisions, wills and even funerals. What Americans have not been able to do until now, says the article “Social Security and you: New Advance Designation for Representative Payee” from The Dallas Morning News, is designate an agent to handle Social Security benefits.

As of April 6, 2020, the Social Security Administration announced that there is a new option that lets a recipient make an Advance Designation that names a person to serve as your “representative payee.” This is a really big deal, but it hasn’t received too many headlines.

Maybe that’s because under this law, anyone could apply to be a representative payee, receiving someone else’s Social Security payment and using it to pay the recipient’s living expenses. There’s a lot of room for abuse.

The best way forward? Make a decision and name a person while you have capacity. The Advance Designation option is only available to “capable” adults and emancipated minors who are applying for or receiving Social Security benefits, Supplemental Security Income (SSI) or Special Veterans Benefits.

A Social Security recipient can name as many as three people, who could serve as a representative payee if the need arises. There’s a lot of flexibility: you can withdraw your choices, change the order of the three people and name new people at any time. Just in case anyone forgets who they named, Social Security is going to send a notice each year, listing advance designees for review.

How will it work? When the SSA believes a person needs help managing benefits, they will contact the advance designees. The SSA reserves the right to discard your choices and make its own appointment.

How do you make the designation? Go online to the SSA website, especially now when phone, in-person and in writing are all either backlogged or not possible to do right now. After you’ve created and successfully logged into the mysocialsecurity website, you’ll see a box titled “Advance Designation of Representative Payee.” It will be towards the bottom of the page. You’ll need the name, phone number and a description of the relationship you have with the person.

Who should you name? The SSA prefers family members, friends or qualified organizations. Your choices should be made carefully. The people you name need to be trustworthy, good with finances, organized and have no prior felonies. They will need to be able to maintain good records and receipts and be available and responsive, if the SSA requests an audit or an in-person visit.

When should you do this? How about now? Like having a will and an estate plan, this is not something that you should put off. And as you are likely at home, there’s no reason not to!

Reference: The Dallas Morning News (April 19, 2020) “Social Security and you: New Advance Designation for Representative Payee”

Protecting Adult Children with Disabilities

“Adults with disabilities are living much longer than in the past, which means their aging parents must plan for the day when their dependent children outlive them.”

One in four Americans has some kind of disability, and an increasing number of children are being diagnosed with some form of autism. The life expectancy for people with Down syndrome has increased from living to age 12 in the 1940s to nearly 60 today. Most children born with cerebral palsy live into their thirties. For parents of these children, it is more important than ever to create a plan and a community, says the article “How to build support system for adult children with disabilities” from The San Diego Union-Tribune.

Financial resources and support services need to be put into place, for when parents are no longer able to provide care. Here are the key points to address:

Preserving the child’s eligibility for government assistance programs, including Supplemental Security Income (SSI) and Medicaid, through the use of a Special Needs trust. Any amount of money can be placed in the trust, and the funds don’t count when determining eligibility. If parents leave money directly to a child, they will lose their ability to get SSI and Medicaid benefits.

Start early. A Third-Party Special Needs trust should be set up before the child turns 18. It doesn’t need to be funded, but it needs to be created.

Be a stickler for the rules. If the child receives SSI, money from the trust may not be used for food and housing, but it can be used for other costs, like therapies that are not covered by Medicaid, or even extras, like a cellphone or vacation. An experienced elder law attorney will be able to help the family with planning and learning the intricacies of these rules.

Name a trustee and a successor trustee. Selecting someone to manage the trust on behalf of the child is a critical decision, and not always an easy one. The trustee should be someone responsible who cares about your child’s well-being. It could be a sibling, if the relationship is good, or a family member. The person should be younger than the parents, so they will be around after the parents have passed.

Open an ABLE Account—Achieving a Better Life Experience account. These are accounts that work in much the same way as a 529 account. They can be established for a disabled person at any time, but the child must have the qualifying disability before age 26. Money from a Special Needs trust can be moved into an ABLE account, and the beneficiary can use it for any qualified disability expense.

Prepare a letter of intent or guidance. This is not a legally binding document, but rather a way of sharing information with others about your child: their preferences, routines, comfort levels and wishes. It can also be used to provide information about caregivers, medical providers and others who are a good fit with your child. You may also wish to share information about what and who they don’t like. Update the letter every year or two.

Power of Attorney. Having a power of attorney for a disabled individual is far more flexible and less costly than a conservatorship or guardianship.

Housing options. Where will your child live? That depends on what kind of disability the child has and the family’s financial resources. Ideally, the child can transition from the family home to another place while the parents are still living. If feasible, the parents could leave the family home to the child in the Special Needs trust, but they’ll also need to leave enough money for ongoing expenses and maintenance of the house. Some disabled adults live in group home settings, where counselors and other staffers help residents live on their own.

An elder care lawyer will be able to connect the family with many different resources and help with creating a Special Needs trust.

Reference: The San Diego Union Tribune (Jan. 9, 2020) “How to build support system for adult children with disabilities”

Is the Tradition of Mailing Social Security Statements Coming Back?

“A new proposal in Congress aims to resurrect an old tradition: mailing Social Security statements to your home.”

Years ago, the Social Security Administration mailed annual statements that detailed earnings and estimated future benefits. That stopped in 2011, and now paper statements are mailed only to those ages 60 and up who haven’t created an online account.

CNBC’s recent article, “Millions of Americans aren’t receiving Social Security statements in the mail. A new bill aims to change that,” says that a few Congressional lawmakers are advocating to reinstate those mailings for all workers ages 25 and up—unless they opt to access that information online instead. All workers have the ability to access the data in the statements, such as including earnings, contributions, and estimated future benefits, by creating an online account at the MySocialSecurity website.

A new piece of legislation, entitled the Know Your Social Security Act, wants to reinstate those statements for all workers ages 25 and up. The bipartisan legislation was introduced by Reps. John Larson, D-Conn., and Vern Buchanan, R-Fla., along with Sens. Bill Cassidy, R-La., and Ron Wyden, D-Ore.

However, the bill sponsors contend that online access is inadequate, because only 40% of those with MySocialSecurity accounts accessed their online statements last year. In 2019, statements were mailed to about 15 million people. There are currently more than 175 million workers with earnings that are covered by the Social Security program.

In addition to reinstating the tradition of mailed statements, the Act also seeks to clarify the procedures the SSA should follow in the digital age.

Under the bill, the agency wouldn’t have to send a paper statement to those who view that information online and actively decline to receive a mailed document for that year. Mailed statements would be sent out, if a worker requests it.

The legislation’s future is not clear. The bill hasn’t yet been considered by the House Ways and Means and Senate Finance Committees.

Larson also proposed the Social Security 2100 Act, which would be a broad overhaul of the program in order to restore its solvency to the year 2100.

Reference: CNBC (December 9, 2019) “Millions of Americans aren’t receiving Social Security statements in the mail. A new bill aims to change that”

What Can You Tell Me About a Special Needs Trust?

“If you have a loved one who deals with chronic illness or a disability of some kind, you want to be able to keep supporting them after you’re gone. However, you don’t want to disrupt their ability to collect funds from programs like Medicaid or disability payments. In these situations, you can use a special needs trust.”

A special needs trust is a specific type of trust fund that’s created to help a beneficiary with special needs but not jeopardize their eligibility for programs, like Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI) and Medicaid. KAKE’s recent article, “How a Special Needs Trust Works,” says that programs like SSDI and Medicaid can be vital supports for those dealing with disabilities or chronic illnesses.

These programs have income limits to ensure they’re serving those who need them the most. If you were to just give money to your beneficiary when you pass away, it could come in above this income limit.

A special needs trust works around this. That’s because the owner of the funds is technically the trust, not the beneficiary. You also name a trustee to be in charge of disbursing the funds in the trust. Therefore, while the beneficiary benefits from the trust, she doesn’t have control of its assets.

If you are creating a special needs trust for a beneficiary, you must do this before the beneficiary turns 65. And funds from the trust typically can’t be used to pay for food or shelter.

If a person could benefit from a special needs trust, but they themselves own the funds, you can create a first-party special needs trust in which you serve as both the beneficiary and the grantor. These can be complicated to draw up, and states have varying rules determining their validity. A first-party special needs trust has the money that belongs to its beneficiary.

With a third-party special needs trust, the trust holds funds that a beneficiary doesn’t directly own. These are generally used by grantors to allow the beneficiary to start getting money from the trust, even before their death. The funds never technically belong to the beneficiary, so they can’t be used for Medicaid payments. The trust can be used to save money for the beneficiary and future beneficiaries.

The third type of these trusts is the pooled special needs trust. Nonprofit organizations manage assets for a fee, and these organizations pool the funds of multiple trusts together and invest them. When it comes to payments, beneficiaries get an amount equal to their percentage of the pooled trust’s balance.

A special needs trust lets you write down what you wish your funds’ purpose to be, making it legally binding. Special needs trusts are irrevocable, so you can also protect your funds from creditors and lawsuits against the trust’s beneficiary. It lets you help your beneficiary deal with the expenses that come with illness or disability, without hampering their ability to get other assistance.

Reference: KAKE (September 30, 2019) “How a Special Needs Trust Works”

How Will New Legislation Update Social Security?

“Lawmakers in the U.S. House of Representatives are looking to significantly increase that ceiling, with a bill introduced this month that would raise SSI’s asset limit to $10,000 for an individual and $20,000 for couples.”

People with disabilities who receive Supplemental Security Income would be allowed to keep a few more assets and wouldn’t be penalized for marrying under a new proposal, according to Disability Scoop’s recent article, “Lawmakers Look To Update SSI Program.”

Right now, in order to retain benefits, SSI recipients generally can have no more than $2,000 to their name at any given time. However, Congress is looking to significantly increase that ceiling, with a bill introduced this month that would increase SSI’s asset limit to $10,000 for an individual and $20,000 for couples.

The Supplemental Security Income Restoration Act would also increase the amount of disregarded income that beneficiaries can collect monthly.

The bill would also repeal penalties for marrying or receiving financial, food, and housing assistance from family members.

Supporters of the Act say it’s time to update Social Security’s SSI program, which has remained largely static since 1972.

“This issue is one I have heard about directly from autism advocates and families in our district, particularly parents preparing for children with disabilities to transition into adulthood,” said Rep. Elissa Slotkin, D-Mich., who introduced the measure along with Rep. Raúl Grijalva, D-Ariz.

“This bill brings the Supplemental Security Income (SSI) program’s outdated limits up to speed with inflation—a common-sense adjustment that will make a huge difference for individuals and families caring for someone with disabilities.”

Reference: Disability Scoop (September 23, 2019) “Lawmakers Look To Update SSI Program”

What Changes Will Be Made to Social Security This Year?

“Here are five Social Security changes for 2020 that could impact your monthly take-home income.”

While Social Security now delivers benefit checks to more than 63 million people every month, the program is primarily designed to provide a financial foundation for our nation's retired workers. Nearly 45 million retired workers (70% of all beneficiaries) receive a benefit check monthly, with more than 60% of these seniors expecting their payout to make up at least half of their income.

Motley Fool’s recent article, “5 Social Security Changes in 2020 That Could Affect Your Take-Home Income” explains that with the relative importance of Social Security, it should come as no shock that the second week of October holds considerable importance to these tens of millions of Americans. That's because it’s when the Social Security Administration (SSA) announces changes to the program for the upcoming year. Any changes could directly affect what beneficiaries are paid on a monthly basis. These changes can also affect non-retirees who aren't getting a Social Security benefit Let’s look at some of these changes.

1. The most important figure in the October announcement from the Social Security Administration is the cost-of-living adjustment (COLA). Social Security's COLA is measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The average monthly CPI-W reading from the third quarter of the current year (July through September) is compared to the average monthly CPI-W reading from the third quarter of the previous year. If the average figure has risen from the previous year, then beneficiaries receive a "raise" that's commensurate with the percentage increase year over year, rounded to the nearest 0.1%.
2. Withholding thresholds. Early claimants who haven’t hit their full retirement age but are currently (or expected to begin) taking benefits, will be subject to the retirement earnings test. This test allows early filers to earn up to a certain amount of money, before the SSA is allowed to withhold a portion, or all, of their benefit. For those who won't reach their full retirement age in 2019, $1 in benefits can be withheld for every $2 in earnings above $17,640 ($1,470 a month). For those who’ll reach their full retirement age this year but have yet to do so, are allowed to earn $46,920 before the SSA begins withholding $1 in benefits for every $3 in earnings above the limit. Note that these withheld benefits aren't lost forever, because you get them back in the form of a higher monthly payout when you reach your full retirement age.
3. Maximum monthly payout. If you're currently claiming a retired worker benefit and have made a good deal of money on an annual basis over your working career, there's a chance that you'll be able to net more in monthly payouts in 2020. There’s a cap on the maximum monthly payout at full retirement age. In 2019, no individual at their full retirement age can take home more than $2,861 per month, even if they made millions of dollars each year throughout their working career.
4. Disability income thresholds. Even though 7 of 10 program recipients are retired workers, about 10 million people each month also get a check from Social Security Disability Insurance (SSDI). Approximately 8½ million are disabled workers, and the rest are spouses or children of these disabled workers. If the average CPI-W reading does increase on a year-over-year basis from the previous year (which appears likely), these SSDI income thresholds for the disabled and legally blind should go up a little in 2020.
5. A warning to the wealthy. Lastly, Social Security's changes for 2020 won't just impact those receiving a benefit. Wealthy workers can also anticipate paying more into the program, provided that inflation rises on a year-over-year basis, as measured by the CPI-W.

Reference: Motley Fool (July 28, 2019) “5 Social Security Changes in 2020 That Could Affect Your Take-Home Income”

Does a “Gray Marriage” Affect My Social Security?

“The Social Security Administration uses many factors to calculate benefit amounts for beneficiaries, including marital status.”

Widowed or divorced Social Security beneficiaries can run into issues, if they decide to remarry later in life. Those who remarry in their 50s or 60s should know about the ways your new marital status can impact your Social Security benefits.

Investopedia’s recent article, “How Remarrying Late in Life Impacts SS Benefits,” gives us some things to consider.

First, if either you or your intended is widowed and receiving Social Security benefits based on the deceased spouse’s work record, age is important. A surviving spouse who remarries prior to age 60, becomes ineligible to receive benefits on their late spouse’s record. However, after your first anniversary with your new spouse, you become eligible for spousal benefits, based on that person’s work record.

Decide whether to wait for marriage in order to keep a widow’s benefit for longer, or if the spousal benefit from their new union will offer more financial security. If you’re married at least nine months prior to one spouse’s death, the surviving spouse is eligible for spousal benefits based on the second marriage.

If one or both members of the new couple is divorced, things are trickier because the Social Security Administration does allow a divorced spouse to collect spousal benefits based upon the work records of their deceased ex-spouse, as long as the divorced beneficiary meets the following criteria:

• The original marriage lasted at least 10 years;
• The beneficiary applying for divorced spousal benefits has remained unmarried; and
• The beneficiary applying for divorced spousal benefits is at least 62.

If you are divorced from an ex who significantly out-earned you and your new fiancé, remarrying stops the ex-spousal benefits you’d otherwise receive. This can make a big difference in your finances, and cohabitating without getting hitched, may make more financial sense for some couples.

Beneficiaries who are receiving Social Security Disability Insurance (SSDI) may have the toughest calculations, as far as a second marriages are concerned. This is because SSDI beneficiaries are subject to a family maximum benefit (FMB) calculation. The FMB limits the amount of money available for auxiliary benefits, like the dependent child benefit. Figure out and compare these three amounts to determine FMB:

1. 85% of the worker’s average indexed monthly earnings (AIME).
2. The worker’s primary insurance amount (PIA), based on full retirement age.
3. 150% of the worker’s PIA.

If number three is the highest of these three calculations, then the FMB is the higher of number one or two. However, if number one is the highest of the three calculations, then the FMB is number three.

It’s important that later-in-life couples don’t forget that there can be some unanticipated consequences to their new unions. Know the potential effects that marriage can have on your Social Security benefits, before you walk down the aisle. While you’re at it, make sure to meet with your estate planning attorney to update your wills and your estate plan, especially if one or both of you have children from a prior marriage.

Reference: Investopedia (August 1, 2018) “How Remarrying Late in Life Impacts SS Benefits”

How Do I Get Disability Protection as a Gig Worker?

“Company benefits are great to have, but if you're a contractor, chances are that you're out of luck.  If you get injured or are too sick to work, you could quickly find yourself in hot water. However, those self-employment taxes you’re paying, come with a federal benefit ready to act as your safety net.”

The modern gig economy is dependent on contract workers. While it offers flexible jobs to millions of people, there are no benefits, says Kiplinger in the recent article, “If You're a Gig Worker, Here's How You Can Still Get Disability Protection.”

Most part-time employees do have one advantage over freelancers. That’s workers’ compensation benefits, provided that they earn a wage and have taxes deducted from their paychecks. On the other hand, employers typically aren’t required to provide workers’ compensation coverage to independent contractors. If these workers get injured on the job, they are out of luck, and certain small companies are also exempt from this requirement.

The Social Security Disability Insurance (SSDI) program is your disability safety net. It’s designed to help today’s part-timers and gig workers. SSDI is an income replacement insurance for former workers with disabilities, provided through the Social Security Administration. This “insurance” isn’t something you have to sign up for or buy—if you pay FICA or self-employment taxes, you’re already paying into it and are on your way to being covered. Workers who earn at least $1,360 (in 2019) per quarter get credit toward their disability insurance. Typically, to be covered you must have paid FICA payroll or self-employment taxes for five out of the last 10 years. These benefits are portable and available, if you meet eligibility requirements, regardless of the number of places you’ve worked.

When someone experiences a severe disability that prevents them from working for 12 months or more, SSDI also allows access to other important benefits, like Medicare prior to age 65, dependent benefits, and return to work support. SSDI continues until the individual is able to return to work on a regular basis or until retirement age, when old age benefits start. It has the added advantage of protecting future retirement benefit income.

To be eligible, you have to meet the work history requirements and be able to prove that your condition prevents you from working. If you meet the requirements, SSDI is a great resource, if you experience a disability without private long-term disability insurance or workers’ compensation protection.

Giggers: no matter which—or how many—companies you work for, SSDI can be your safety net to catch you.

Reference: Kiplinger (December 11, 2018) “If You're a Gig Worker, Here's How You Can Still Get Disability Protection”