Issues for the Elderly and Disabled Client-part Ii: Estate and Health Care Planning

• Publication year: 2001
• Pages: 5

30 Colo.Law. 5 Colorado Lawyer 2001.

2001, March, Pg. 5. Issues for the Elderly and Disabled Client-Part II: Estate and Health Care Planning

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Vol. 30, No. 3, Pg. 5

The Colorado Lawyer
March 2001
Vol. 30, No. 3 [Page 5]

Articles

Issues for the Elderly and Disabled Client - Part II: Estate and Health Care Planning
by Susan G. Haines, John J. Campbell

This is the second part of a two-part article concerning an overview of selected elder and disability law issues. Part I of this article appeared in the September 2000 issue at page 5. Part II comprises an overview of the following: Social Security; Social Security Disability Insurance ("SSDI"); Supplemental Security Income ("SSI"); the Foster Care Independence Act ("FCIA"), a new SSI statute; recently adopted Medicaid rules and regulations; parental appointment of guardians and Colorado Rules of Probate Procedure ("C.R.P.P.") 16 proceedings; Medicaid liens Medicare secondary payer claims; the probate process; and insurance for the elderly and disabled. This two-part article is intended to be a broad overview for the general practitioner. Nevertheless, because some areas of elder law are complex, the article attempts to provide a general understanding without sacrificing technical accuracy

SOCIAL SECURITY BENEFITS

Social Security benefits are available for retired workers who have worked and paid social security taxes.1 Persons born in 1929 or later need forty qualifying quarters (up to four qualifying quarters per year)2 to receive Social Security retirement benefits.3 A person can retire and receive full benefits at age 65,4 but can delay receipt of benefits to as late as age 70 and, as a result, receive a higher monthly benefit.5

People who retire and begin receiving benefits at or after age 65 may work and still receive Social Security benefits However, if the person elects to receive benefits before age 65, earnings from employment must be limited to avoid a reduction in benefits.6 Benefits also may be available to the person's spouse, divorced spouse, children under age 18, or disabled children.7 The spouse or divorced spouse of an eligible individual may qualify for Social Security, provided the spouse is at least 62 years of age or older.8 In the case of divorced spouses, the marriage must have lasted ten years or more.9 If the once-eligible individual is deceased, his or her spouse may qualify, provided the spouse is 60 years old or older.10 Minor children or children whose disability began before age 22 also may qualify for benefits from an eligible parent.11

Social Security Disability Insurance

SSDI is income from Social Security for a blind or disabled person under age 65.12 "Disability" is defined as the inability to engage in substantially gainful employment for a period of at least twelve months or a disability that is expected to end in death.13 Benefits begin five months from the onset of disability.14 Medicare is available twenty-four months after the receipt of SSDI benefits.15 SSDI benefits will convert automatically to Social Security retirement benefits when the individual reaches age 65.16

If a disabled individual chooses to work, earnings are capped. More than $740 per month is considered to be engaging in substantially gainful employment.17 However, the Ticket to Work and Work Incentives Improvements Act ("Incentives Act"), passed on December 17, 1999, contains incentives that allow disabled individuals to return to work and keep SSDI.18 Previously, disincentives such as earning too much income and losing Medicare coverage discouraged disabled individuals from seeking employment. Thus, prior to passage of the Act, fewer than one-half of one percent of SSDI and SSI claimants ever returned to work.19

The Self-Sufficiency Program (to be fully implemented by December 17, 2002) encourages disabled individuals to access a comprehensive employment network.20 The network provides support services, vocational rehabilitation, and employment services. These services, created by the Incentives Act, help a disabled individual develop and implement an individual work plan. Further, if the disabled individual does return to the work force, he or she is allowed to keep Medicare A, which covers hospice and hospitalizations, without paying a premium, for the next eight and one-half years.21

During the initial phase of the trial work plan, the individual can earn more than his or her disability benefit without losing SSDI.22 However, following those first nine months, disability benefits can be stopped if earnings exceed the substantial gainful activity limit of $740 per month. If benefits are terminated, the individual may request that SSDI be reinstated without filing a new application.23 The individual must file a request for reinstatement within sixty months of termination of benefits and have his or her doctor certify that he or she is unable to return to work for the same or a related condition.24 During the review period, the individual may receive temporary SSDI as well as Medicare for up to six months.25 In the event benefits are terminated, the temporary benefits do not have to be repaid.26

While the SSDI program is intended to provide disability insurance for injured workers, benefits also may be available to a person's spouse, divorced spouse, or children.27 Provided the individual is eligible for benefits, the spouse or divorced spouse, age 62 or older, also is eligible for SSDI benefits.28 If the disabled individual has minor children or adult disabled children, they too are eligible for SSDI benefits.29 Moreover, minor children or "adult disabled children" whose disability began before age 22 are entitled to benefits, provided their parents are deceased, disabled, or retired.30

Supplemental Security Income

SSI is a needs-based welfare program that provides income to the elderly, blind, or disabled.31 SSI does not pay for medical care; Medicaid does. Any person who is eligible for SSI benefits is categorically eligible for Medicaid.32 Because SSI is a welfare program, receipt of SSDI benefits will reduce an individual's SSI benefit.33 Generally, an individual "wealthy" enough to qualify for SSDI is not eligible for SSI. The monthly income limits for SSI are identical to the maximum benefit: $530 per month for an individual and $760 for a married couple.34 With some exceptions, individuals qualifying for SSI must have nonexempt income below $530 per month. Resources are equally restricted. While an individual may keep a house, a car, personal property, and a few inconsequential exempt assets,35 cash assets are restricted to $2,000 for individuals and $3,000 for married couples at any given time.36

In 1999, Congress passed the Foster Care Independence Act ("FCIA").37 While the title of the act focuses on foster care, the great significance of the statute lies in its contribution to SSI law. The FCIA imposes penalties for SSI recipients who give away their assets and imposes restrictions regarding the treatment of trusts. The importance of the act is that while an individual in Colorado, with very few exceptions, must be eligible for SSI to be eligible for Medicaid, the FCIA imposes eligibility and transfer rules that are at variance with the Medicaid rules.38

Transfer Penalties

The FCIA provides for the imposition of a penalty during a thirty-six-month "look back period" prior to the filing of an SSI application.39 The penalty is a period of ineligibility equal to the uncompensated value of the transfer, divided by the federal SSI benefit and any state supplement.40 The "period of ineligibility" is the period during which the individual does not receive SSI benefits. Unlike the Medicaid penalty provisions for transfers, the SSI penalty period cannot exceed thirty-six months.41

Existing Medicaid law and the new FCIA differ on transfers. Medicaid law penalizes transfers of assets;42 the FCIA penalizes transfers of resources.43 The FCIA draws a distinction between assets and resources.44 "Assets" consist of all income and resources of the individual and the individual's spouse.45 "Resources" consist of nonexempt assets, but not those that fall within the definition of "income."46 Because the FCIA only penalizes transfers of resources, the new SSI statutes would appear to permit uncompensated transfers of income without imposing a penalty period.47 Certain excluded transfers between the FCIA and Medicaid rules are essentially the same.48 The outstanding difference is that all of these exclusions are exclusions of resources, and the new SSI rules do not appear to penalize transfers of income:49

A somewhat surprising anomaly of the new provisions is that they do not disturb existing SSI provisions that lump sums (such as inheritance or settlement proceeds) are considered to be income in the month received and as such may be transferred without penalty during the calendar month of receipt. Any portion of the lump sum retained into the next calendar month, however, becomes a resource. Thus preserved is an existing conflict between SSI and Medicaid provisions, since for Medicaid transfer penalty purposes, asset is defined by OBRA '93 to include income and thus there are Medicaid transfer penalties for transferring a lump sum.50

Further examination will help to clarify this point. Medicaid law imposed penalties on the transfer of assets with the implementation of the Omnibus Budget Reconciliation Act ("OBRA '93").51 That statute defined "assets" to include both resources and income.52 The FCIA imposes penalties on the "disposition of resources."53

While Medicaid law defines assets to include both income and resources and each is under the umbrella of...