Western Region Transition Planning
Home > Health & Legal Care > Government Benefits
The purpose of this presentation is to provide you with the information
about government
benefits that will be helpful to you and your lawyer in planning for your
child's future. In addition
to trust and estate planning skills, your lawyer needs to have an understanding
of the problems of
disabling conditions, the interests of the person with a disability, and
a familiarity with state and
federal entitlement programs upon which the person may depend for lifetime
care.
The estate planner needs to develop an estate plan that is flexible and able
to respond to
future changes in the family member's condition as well as changes in federal
and state entitlement and reimbursement regulations. Nowhere is this analysis
regarding future impact more important than in the actual selection of method
used in one's estate plan. For example, the selection of an outright gift
as opposed to an absolute discretionary spendthrift trust may have a lifetime
effect on the person's welfare. This is due to his or her need to remain
eligible for government benefits. The primary goal of estate planning is
usually to avoid federal and local estate taxes. This goal becomes secondary
when planning the estate of a family with a dependent who is disabled who
will need state and federal benefits for his/her lifetime care. The need
to avoid the loss of state and federal benefits and the need to protect the
family's assets from state reimbursement claims for providing services to
the person are the primary goals for estate planning for families with members
who are disabled. It is likely that at some point in his or her life, a person
with a disability will need government benefits such as SSI, Medicaid, residential,
training or support services. Parents need to plan their estate so that their
child does not become ineligible for government benefits that have minimum
income and resources eligibility requirements. Parents need to realize that
without careful planning, an inheritance may make their child ineligible
for disability benefits which can be far more valuable than the inheritance.
In some cases, the more a person inherits, the worse off he or she may be!
Government benefits are important because it is seldom possible for the average family to leave sufficient funds to care for their dependent's lifetime care. The cost of care will vary tremendously depending on the area in which the individual lives and the nature and degree of the individual's disability. It is difficult to predict what the costs of care will be twenty or thirty years from now. To ensure that the beneficiary will not risk his or her eligibility for government benefits should he or she need them, it is important for the estate planner to become familiar with and understand the various means tests and reimbursement requirements for services in their state. These eligibility requirements are discussed in the following sections.
A. Government Benefit Programs
There are basically three categories of governmental benefits which should
concern the estate
planner.
1. Government Benefits Not Based On Financial Need
The first category includes insurance programs which are not based on financial
need. The
major insurance programs in this category are Social Security Disability
Income (SSDI) and
Medicare. A child of a person who is retired, disabled or deceased can collect
monthly cash benefitsbased on the parent's earnings provided that his or
her disability began before the age of 22, he or
she is unmarried and is dependent for support on the parent who is retired,
disabled or deceased.
Disability is defined as "the inability to engage in any substantial
gainful activity 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 twelve months." Your child need not have worked under Social
Security to be eligible. A person who receives Social Security disability
benefits for two years is entitled to Medicare hospital and medical coverage.
The advantage of Social Security benefits is that the benefits are not reduced
or affected by the person's assets.
2. Programs Based on Financial Need
The second category of programs is based upon the individual's financial
need. The two most
important programs in this category are Supplemental Security Income (SSI)
for the aged, the blind, and persons with disabilities and Medical Assistance,
which is referred to as Medicaid.
It is important for parents to realize that eligibility for SSI and Medicaid
may be critical to
an individual who is disabled because SSI and Medicaid eligibility is often
necessary to be entitled for other services. For example, group homes and
community residences are funded in several states by SSI benefits or by Medicaid
benefits. Some parents may feel that they do not have to be concerned with
federal medical assistance because their adult child is covered with a private
health insurance policy. Often the coverage in programs that insure persons
who are disabled is minimal and the cost for private medical coverage may
be prohibitive in the future. In some cases, the child presently has medical
insurance, but upon the death or retirement of the parent, his or her medical
coverage may terminate. Many parents are not aware that they can continue
their group plan health care coverage for their dependent adult child after
their child graduates or leaves school. You will need to check with your
personnel department to see if your company health insurance plan has this
option available. Most companies require that you notify them within 3 months
of your child's 19th birthday that s/he is disabled and is dependent on you
for care. If you do not notify your health insurance carrier of your child's
special needs, they may drop your child from your coverage.
Medicaid is used to fund group homes and some rehabilitation services.
In
1971, Congress
added Intermediate Care Facilities (ICFs) to the list of optional services
that states could offer under their Medicaid programs. Other benefits covered
include independent case management, individual and family support services
including respite and attendant care, specialized vocational services, protection
and advocacy services, and residential services. Given the range of services
that are presently available through SSI and Medicaid and those which may
be available in the future, it is important for the estate planner to be
aware of the financial need criteria to qualify an individual for these two
programs. Eligibility for SSI requires that the person be aged, blind or
disabled and that the individual have limited income and resources according
to the guidelines of the program. All assets, not just earnings, as with
Social Security benefits, count against the amount of SSI an individual receives.
Income is defined as "the receipt by an individual of any property or
service which he can apply, either directly or by sale or conversion, to
meet his basic needs for food and shelter." The SSI regulations specifically
include inheritance and gifts as income. SSI regulations further state that
property is considered a resource if the claimant has the right, authority
or power to liquidate the property. An individual is allowed up to $2,000
of nonexcludable resources before he is disqualified from receiving benefits.
The recipient is also allowed to own the home s/he is living in, one car,
regardless of its value, if it is used to transport the recipient or a member
of the recipient's household, reasonable household goods and personal effects
and a life insurance policy if the total face value does not exceed $1,500.
Resource is defined as cash, liquid assets or any real or personal property
that the individual owns and could convert to cash to use for his support.
Property which cannot be liquidated by the SSI recipient will not be considered
a resource. In some states, individuals who qualify for SSI will automatically
qualify for Medicaid. This is not the case in Illinois, where a separate
application must be made for Medicaid through the Department of Healthcare
and Family Services (formerly Department of Pubic Aid). States are allowed
to have stricter restrictions on assets and income for Medicaid which may
disqualify the SSI recipient from receiving Medicaid funds. In states that
do not follow the SSI eligibility requirements for Medicaid, the parent should
be extremely cautious that his/her estate plan be constructed in such a manner
that funds left to the child are not considered a resource for purposes of
either SSI or of Medicaid eligibility. The method to protect a child's inheritance
will be discussed later. Other financial need based benefits which the parent
may want to protect in the estate plan include food stamps, public housing
and legal aid. Eligibility requirements for these benefits vary
from state to state. A program which is of great assistance to parents of
children with disabilities and not well known is Services for Children with
Special Health Needs. This program provides medical treatment to children
who are disabled up to age 21. Services include transportation to clinics,
testing for health problems, diagnosis, evaluation and full treatment of
those problems. All developmentally disabled children are eligible for
the diagnostic services. The evaluation and
treatment services are only available to families who meet certain income
guidelines. These
guidelines vary depending on the state you live in. To apply for these services,
contact your local
health department or the social worker in the hospital your child is treated.
3. Fee For Service Programs
The third type of program that estate planners need to be familiar with is
the 'fee for service'
program. These include state institutions for persons who are mentally retarded
or mentally ill,
outpatient psychiatric centers, homemaker services, vocational rehabilitation
services, and
community outpatient services. Fees are based upon the individual's ability
to pay and are charged
to the parent of the minor child or to the disabled adult who is receiving
services. Some states even have a responsible relative liability for adult
children and will charge the parents.
The above information is a brief introductory summary of government benefits.
DO NOT
assume that your lawyer is familiar with these benefit programs ... the training
received by most
lawyers rarely provides the requisite background for estate planning for
families with a dependent
who has special needs. Parents with a disabled child often find it difficult
to locate an attorney who is experienced and knowledgeable in both estate
planning and in the special problems and laws and government benefits concerning
persons with disabilities. Be sure that the lawyer you select is familiar
not only with basic estate planning techniques, but is knowledgeable of the
methods used to prevent the state from taking your child's inheritance upon
your death.