The Impacts of Trusts on Public Benefits for Disabled Persons
| Publication year | 2017 |
| Pages | 43 |
TRUST AND ESTATE LAW
By DAVID W. KIRCH AND LINDA MOON.
This article discusses the impacts of various kinds of trusts on public benefits for disabled individuals.
Contrary to popular belief, establishing a trust for a disabled person does not always result in die loss of die disabled person's eligibility for public benefits. If a trust is drafted carefully and properly administered, it can provide significant benefits to a disabled person while maintaining eligibility for public benefits. Thus trusts can be a useful tool to increase a disabled person's quality of life.
This article addresses some of the most common benefits available and general considerations concerning the impacts of various types of trusts on such benefits. The appropriate use of trusts is fact-specific and practitioners must take care to consider all applicable laws and regulations, including die Social Security Administration's Program Operations Manual System (POMS).[1] (See accompanying Sidebar for abbreviation/acronym key.)
Social Security Programs Based on Disability
To be eligible for Social Security based on disability, a person must be unable to engage in any substantial gainful activity (SGA) "by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months."[2]
SGA is determined when a person is able to work and earn at least SI,170 (2017) per month for a period of nine months (months are not required to be consecutive) after the date of disability onset.[3] If this occurs, the person is no longer considered disabled by Social Security.
Social Security Disability Income
Social Security Disability Income (SSDI) is a benefit provided to adults under age 65 who have worked and paid into Social Security from earned income or self-employment income for a certain period of time before the date of disability onset.[4] To qualify, a disabled person must be fully insured, which means that die person has sufficient earnings or work credits consisting of 20 full quarters (1 quarter = 3 months), or 5 years, within die full 40 quarters (10 years) preceding the date of disability.[5] Alternatively, a person can meet the quarters of coverage criteria if he earned a sufficient amount of wages or self-employment income.[6] For 2017, one work credit is received for each SI,300 of income earned up to a maximum four credits per year, or S5,200.[7]
There is a five-month waiting period that generally begins die first of die month following die date of disability onset, but no earlier than 17 months from die date an application is filed.[8] This waiting period was established to allow an individual with a short-term disability an opportunity to recover.[9]
ABBREVIATIONS AND ACRONYMS
-
ABLE
Achieving a Better Life Experience Act
ACA
Patient Protection and Affordable Care Act
ADL
Activities of Daily Living
BI Waiver
Brain Injury Waiver
COBRA
Consolidated Omnibus Budget Reconciliation Act
CWA Waiver
Children with Autism Waiver
DD Waiver
Developmental Disabilities Waiver
DRA
Deficit Reduction Act
EBD Waiver
Elderly Blind and Disabled Waiver
HCBS
Home and Community Based Services
ISM
In-Kind Support and Maintenance
LIS
Low Income Subsidy
LTC
Long Term Care
Ml Waiver
Mental Health Waiver
MSP
Medicare Savings Program
PMV
Presumed Maximum Value
POMS
Program Operations Manual System for Social Security
QDWI
Qualified Disabled and Working Individual
QI
Qualified Individual
QMB
Qualified Medicare Beneficiary
SGA
Substantial Gainful Activity
SLMB
Specified Low Income Medicare Beneficiary
SSDI
Social Security Disability Income
SSI
Supplemental Security Income
VTR
Value of One-Third Reduction
SSDI is based on disability and the person's average lifetime earnings.[10] It is not a needs-based program with income or asset restrictions. The monthly amount payable is based on the person's average lifetime earnings with a maximum benefit of $2,687 per month (2017).[11]
A disabled adult child can qualify for SSDI based on her parent's work record, but only if the adult child was completely disabled before age 22, the parent has a qualified work record and is deceased, permanently disabled, or receiving retirement benefits.[12]
SSDI benefits are not available to minor children (who have no work record), but they can qualify for and receive "auxiliary benefits," such as disabled widow's benefits or childhood disability benefits.[13] A minor child under age 18, disabled or not, can qualify for auxiliary benefits only if the parent receives retirement or SSDI benefits or was entitled to one of those benefits before the parent's death.[14]
Medicare
A disabled person under age 65 receiving SSDI benefits will be eligible for Medicare health coverage after a two-year waiting period (in addition to the five-month waiting period) from the date of eligibility.[15] The basis for this waiting period is to require recipients to use any other health insurance coverage that may be available, including coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA).[16] Medicare benefits are subject to the usual period limitations and payment of premiums, deductibles, and co-payments.[17]
Under programs referred to as Medicare Savings Programs (MSPs),[18] Medicaid will pay the Medicare premiums, deductibles, and co-payments for individuals or couples who meet the eligibility criteria. The benefits and eligibility criteria for these programs in 2017 are:
Qualified Medicare Beneficiary (QMB) Program
Eligibility: Must receive or be eligible to receive Medicare and meet Medicaid income and resource limits
Benefits: Pays Medicare Parts A and B premiums, deductibles, and co-pays
Income Limits:
Individual, $1,025; Couple, $1,374
Resource Limits:
Individual, $8,890; Couple, $14,090[19]
Specified Low Income Medicare Beneficiary (SLMB) Program
Eligibility: Must receive or be eligible to receive Medicare and meet Medicaid income and resource limits
Benefits: Pays Medicare Part B premium only
Income Limits:
Individual, $1,226; Couple, $1,644
Resource Limits:
Individual, $8,890; Couple, $14,090[20]
Qualified Individual (QI) Program
Eligibility: Must receive or be eligible to receive Medicare and meet Medicaid income and resource limits
Benefits: Pays Medicare Part B premium only
Income Limits:
Individual, $1,377; Couple, $1,847
Resource Limits:
Individual, $8,890; Couple, $14,090[21]
Qualified Disabled and Working Individual (QDWI) Program
Eligibility: Must receive or be eligible to receive Medicare and meet Medicaid income and resource limits
Benefits: Pays Medicare Part A premium only
Income Limits:
Individual, $2,030; Couple, $2,727
Resource Limits:
Individual, $4,000; Couple, $6,000[22]
Low Income Subsidy (LIS) Program
Eligibility: Receive both SSDI and Medicare; or receive SSI; or eligible for QMB, SLMB, or QI benefits; and meet Medicaid income and resource limits
Benefits: Pays Medicare Part D premium only (prescription drug plan)
Income Limits:
Individual, $1,508; Couple, $2,030
Resource Limits:
Individual, $13,820; Couple, $27,600[23]
Supplemental Security Income
Supplemental Security Income (SSI) is a needs-based Social Security program that provides financial assistance to persons who are blind, disabled, or over age 65 and who meet certain income and asset standards.[24] To be eligible for SSI, an individual cannot have more than $2,000 in countable resources[25] and must meet the income standards. The standard maximum SSI benefit is $735 per month for 2017.[26] (SSI benefits are also available to qualified minors under certain circumstances, but this article focuses primarily on benefits for single, unmarried adults.) All assets count toward the $2,000 limitation except certain exempt assets, such as a home, a car, household goods and personal effects, minimal life insurance, a burial plot, and an irrevocable burial/funeral plan.[27] In determining income eligibility, Social Security considers three types of income:
Earned income. Earned income is money that is paid to the individual in exchange for services performed (wages).[28] Earned income is counted by first excluding $65, then one-half of the remaining a mount is counted on a dollar- for -dollar basis. For example, if a disabled person earns $1,500 per month, countable earned income is calculated as follows:
$1,500
-__65
$1,435 H-2 = $717.50
Therefore, $717.50 is deducted from the standard of $735. If no other countable income is received, the SSI benefit would be $735 - $717.50 = $17.50 per month. If earned income is the only income received and it exceeds $1,535 gross per month, the person is ineligible for SSI.
Unearned income. Unearned income is money received that is not related to services performed by the individual, such as interest, pensions, gifts, personal injury settlements, and some types of royalties.[29] Unearned income is counted on a dollar-f or-dollar basis, with the first $20 excluded. An individual receiving only unearned income can receive up to $755 before losing eligibility ($735 + $20 = $755).
In-kind support and maintenance (ISM) income.[30] ISM income is a non-monetary benefit an...
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