ABA American Bar Association GP|Solo Elder Law Committee Newsletter • Summer 2009
Kenneth Vercammen (Edison, NJ)
Jay Foonberg (Beverly Hills, CA)
In this issue:
1. Wrapping Up the Personal Injury Settlement
2. When Do I Need a Self-Settled Special Needs Trust?
3. Elder Law, Estate Planning & Probate Seminar- New Ideas to Expand & Excel Your Practice
4. Voting- House of Delegates ABA
5. Pooled Trusts – Statutory Requirements
1. Wrapping Up the Personal Injury Settlement + Future Medical Insurance Issues
By Thomas D. Begley, Jr., Esquire
Once a personal injury settlement has been achieved or a judgment obtained, the plaintiff begins a new life. There are many considerations that should be addressed prior to or at the time of settlement. These include the following:
Does the client have the best medical insurance available? The fact that a client receives Medicare, for example, does not mean that coverage is adequate. According to government studies, Medicare pays only about 50% of a Medicare beneficiary’s actual medical bills. In cases involving a catastrophically injured plaintiff requiring considerable home health assistance, that percentage is sharply lower.
Medicare Supplements, Medicare Advantage Programs, Medicaid, private insurance from high risk pools, COBRA coverage, and continuing Worker’s Comp coverage should all be considered.
Medicaid Waiver Programs
Most medical insurance including Medicare and private insurance are designed to pay for acute care. They do not provide coverage for chronic care. There are many Medicaid Waiver Programs that are designed for chronic care including significant home and community-based services that may be required by personal injury victims.
Non-Medical Public Benefits
In many cases, injured plaintiffs are entitled to SSI, SSDI, Section 8 Housing, Group Homes and other public benefits, but have not considered them or applied for them.
Where there is a significant recovery, federal and state estate and inheritance taxes should be considered. Currently the exemption from federal estate tax is $3.5 million. It is likely that before the end of calendar year 2009 Congress will revisit the federal estate tax. Many states, such as New Jersey, have state estate taxes. Currently the exemption from New Jersey estate tax is $675,000, and that exemption is not likely to increase. Other states, such as Pennsylvania, do not have a state estate tax, but do have significant inheritance taxes. In Pennsylvania these taxes can be as high as 15%.
In many cases, even with severely injured persons, life insurance is available to pay all or part of the tax. The availability of this insurance should be explored and discussed with the client.
Estate Planning Documents
Many injured parties have no Will, Living Trust, Living Will, Power of Attorney or other estate planning documents. Some of those plaintiffs do have documents but are outdated, perhaps even because of the personal injury settlement. These documents should be reviewed and modified or replaced, if needed.
Estate Planning Documents – Parents
If the plaintiff is a minor child who is likely to be receiving public benefits, it is important that the parents’ estate planning documents not leave any assets to the child with disabilities, but rather to a third party special needs trust.
It is often advantageous to purchase a structured settlement for a portion of the settlement or award. A structured settlement offers a number of advantages to the injured party including creditor protection, tax benefits and often makes it more difficult for the injured party to squander the settlement.
There are also disadvantages to structured settlements. If a structured settlement is to be used, an analysis should be made as to how much should be structured and how much should be retained as a lump sum to pay for immediate cash needs, repayment of debt, emergency funds, and cash for investment in the appropriate equity portion of the injured party’s portfolio. COLAs and commutation riders should be considered.
The client should be introduced to an investment advisor to assist in investing the settlement proceeds. In some instances, the investment manager can be a professional trustee, if a trust is appropriate.
Special Needs Trust
An analysis should be made as to whether a special needs trust is required. In many instances, such a trust is not necessary. If a special needs trust is required, will it need to be established by a court order? It is important to understand that, except in the case of a pooled trust, a special needs trust cannot be established by the disabled person. The long-term success of a special needs trust often depends on the skill and experience of the trustee. Care should be taken in the selection of an appropriate trustee.
Is a support trust appropriate for a minor or incapacitated beneficiary? The support trust usually results in better money management of the settlement. In the case of a minor, the support trust can be designed to retain the award past age 18. Absent a support trust, a minor can usually access the settlement funds at age 18 when most individuals do not have sufficient maturity to handle significant financial assets.
Medicare Set-Aside Arrangement
An analysis should be made as to whether or not a Medicare Set-Aside Arrangement (MSA) is required. If an MSA is required, a further analysis needs to be made as to whether the MSA can be self-administered, a custodial arrangement, a special needs trust or a pooled trust. Arrangements must be made for an MSA calculation and submission of the calculation to CMS for approval.
An elder and disability lawyer is often useful as a participant in mediation. The lawyer is familiar with public benefits, which often are useful in bridging the gap between the plaintiff’s demand and the defendant’s offer.
Qualified Settlement Fund
In many cases, a Qualified Settlement Fund (QSF) is useful. The defendant can “pay and go.” The plaintiff has time to sort out issues such as allocation between the parties, resolution of Medicare, Medicaid, ERISA and other liens, purchase of structured settlements, and other issues that may take time. The defendant gets an immediate tax deduction upon funding the QSF.
An elder and disability lawyer can be of assistance in reducing Medicaid and Medicare liens.
Copyright 2009 by Begley & Bookbinder, P.C., an Elder & Disability Law Firm with offices in Moorestown, Stone Harbor and Lawrenceville, New Jersey and Oxford Valley, Pennsylvania and can be contacted at 800-533-7227. The firm services southern and central New Jersey and eastern Pennsylvania.
Tom Begley Jr. is one of the speakers with Kenneth Vercammen at the NJ State Bar Association's Annual Nuts & Bolts of Elder Law & Estate Administration and co-author with Kenneth Vercammen, Martin Spigner and Kathleen Sheridan of the 500 plus page book on Elder Law.
Begley & Bookbinder, provides services in connection with protecting assets from nursing home costs, Medicaid applications, Estate Planning and Estate Administration, Special Needs Planning and Guardianships. If you have a legal problem in one of these areas of law, contact Begley & Bookbinder at 800-533-7227.
2. When Do I Need a Self-Settled Special Needs Trust?
By Thomas D. Begley, Jr., Esquire
In the settlement of litigation, the plaintiff is often receiving public benefits. The question then arises as to whether a special needs trust is required. There are certain types of public benefits that are means-tested. Others are not. Generally, means-tested public benefits require that the individual have assets of less than $2,000 and have certain limits on income. The following types of public benefits are means-tested and a special needs trust is generally required:
TBI – A Medicaid Waiver Program for persons suffering from traumatic brain injury
CRPD – A Medicaid Waiver Program providing home care
Section 8 Housing
Certain DDD Benefits
Means-Tested Public Benefits
If the plaintiff is receiving any means-tested benefits or is likely to apply for them, then a self-settled special needs trust should be considered. Assets in the trust are not counted for public benefit eligibility purposes. Distributions from the trust can be made in such a way as not to count for income eligibility for public benefit purposes.
To be eligible for a special needs trust, the plaintiff must be under age 65. If the plaintiff is over age 65, there are Medicaid planning strategies that can be employed, but a self-settled special needs trust will not be a viable option.
To be eligible for a self-settled special needs trust, the person must be “disabled.” To be considered disabled, the person must generally have a disability determination by the Social Security Administration (SSA). It is possible, however, to receive a disability determination from a Medicaid physician. If a person has not yet received a disability determination from SSA, the trust can be established pending the disability determination. Good practice is to obtain an opinion letter from a law firm that specializes in Social Security Disability appeals.
Assets of Individual
No assets other than the assets of the disabled plaintiff may be placed in the trust.
Copyright 2009 by Begley & Bookbinder, P.C
3. Elder Law, Estate Planning & Probate- New Ideas to Expand & Excel your Practice
Sat. August 1, 2009 2:00pm – 3:30pm
ABA Annual Meeting Chicago
Speakers: Jay Foonberg, Esq. - Author of Best Sellers "How to
Start and Build a Law Practice" and "How to get and keep good clients', Beverly Hills, CA
Kenneth A. Vercammen, Esq. - co-author "Nuts & Bolts of Elder Law", Edison, NJ
Deborah Cole, Chicago Contributing Author, Your Life, Your Legacy: The Fundamentals of Effective Estate Planning, Publisher's ExpressPress
Elder Law program Primary Sponsors: General Practice Section
Co-sponsors: ABA Commission on Law & Aging, Health Law Section,
YLD, Senior Lawyers Division, Real Probate & Trust Section, Tax Law Section
Forms you can use
"Representing seniors- Doing well by doing good.-Do you know how?
Marketing with written fee agreements
-Ethics and marketing without violating the Rules of Professional Conduct
Elder Law may be the biggest practice area of your career. There are 50,000 baby boomers/ day turning 60 and soon to be on Social Security and will need legal advise. Elder Law is one of the biggest growth fields.
[Contact Kenneth Vercammen, Esq. for program information 732-572-0500]
Contact American Bar Association's CDS/Travel Planners at 800-915-9801 for ABA meeting registration
4. Voting – House of Delegates ABA
The Election will be held at the ABA Annual Meeting in Chicago. All ABA lawyer members who have registered at the Annual Meeting are entitled to vote for Delegates- at-Large. Voting will be at ABA Registration July 30- August 3: (voting across from registration area)
Hyatt Regency Chicago
Riverside Center, Purple Level, East Tower
8am-6pm Thursday, Friday and Saturday
8am-5pm Sunday, Monday, Tuesday
Six Delegates–at–Large are elected at each Annual Meeting to serve a three-year term in the House of Delegates. Any member of the Association is eligible to be a Delegates–at–Large, although of the six elected each year; no two may be accredited to the same state, territory or possession. Nominations for Delegates at Large are made by written petition. At this Annual Meeting, there will also be two Delegates–at–Large elected to fill vacancies. All ABA lawyer members who have registered at the Annual Meeting are entitled to vote for Delegates–at–Large.
Voting will take place in the registration area of the Hyatt Regency. The polls will be open during the same hours as registration, except on the last day the polls will close at 10:00 a.m.
Contact American Bar Association's CDS/Travel Planners at 800-915-9801 for ABA meeting registration.
5. Pooled Trusts – Statutory Requirements
By Thomas D. Begley, Jr., Esquire
A self-settled pooled trust is defined as a trust containing the assets of an individual who is disabled that meets the six conditions discussed in the following sections.
The trust is established and managed by a non-profit association. A non-profit organization is an organization defined in § 501c of the Internal Revenue Code (IRC) and also has tax-exempt status under § 501(a).
Separate accounts must be maintained for each beneficiary of the trust. For purposes of investment and management of funds, the trust may pool the funds in the individual accounts. The trust must be able to provide an individual accounting for the individual. Each individual sub account gets its own EIN number. Each self-settled sub account is taxed to the beneficiary as a grantor trust.
Solely for the Benefit Of
The trust account must be maintained for the sole benefit of the individual with disabilities. The trust account must be established for the sole benefit of the disabled individual. If the account provides a benefit to any other individual, this exception to the trust transfer rules does not apply.
The trust may be established by a parent, grandparent, or legal guardian of such individual, or by such individual, or by a court. The fact that the individual may establish the trust himself is different from a self-settled special needs trust under (d)(4)(A). If a third party establishes a trust account on behalf of the individual, the third party must have legal authority to act with regard to the assets of the individual. This requirement refers to the individual who physically took action to establish the trust, even though the trust was established with assets of the SSI claimant/recipient. Since the pooled trust has already been established, this provision applies to the sub account within the pooled trust.
A Pooled Trust can also be established by a Representative Payee. The POMS permit the transfer of disability benefits to establish a trust or to fund an existing trust. However, there is an exception for past due benefits, which meet dedicated account requirements. These past due benefits must be held in a savings account or checking account, or a money market account established in a financial institution. Representative Payee may pay a beneficiary’s disability payments to the trust, provided that:
Establishing the trust is in the beneficiary’s best interest.
The trust is established exclusively for the use and benefit of the beneficiary, to meet the beneficiary’s current and reasonably foreseeable needs. Trust expenditures for food, clothing, housing, medical care, recreation, and education are considered expenditures for the use and benefit of the beneficiary and in his or her best interest. A trust with provisions prohibiting trust funds to be used specifically to meet the beneficiary’s current needs for food, clothing, housing, and medical care would not be in compliance.
The trust is for the sole benefit of the disabled person during his or her lifetime.
A provision in a trust directing disability payments to the trust is prohibited as a violation of the assignment of benefits provisions of the Social Security Act.
To qualify for the pooled trust exception, the trust must contain specific language that provides that, to the extent that amounts remaining in the individual’s account upon death of the individual are not retained by the trust, the trust pays to the state from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the individual under the state Medicaid plan. There is no payback required by a third-party pooled trust.
To the extent that the self-settled trust does not retain funds in the account, the state must be listed as a first payee and have priority over payment of other debts and administrative expenses, except as listed below.
The following are allowable administrative expenses:
Death taxes due to federal and state governments
Reasonable fees for the administration of the trust estate
The following expenses are prohibited:
Payments of debts owed to third parties
Payment to residual beneficiaries
The restriction on payments from the trust applies upon the death of the beneficiary. Payment of fees and administrative expenses during the life of the beneficiary are allowable as permitted by the trust document and are not affected by the state Medicaid reimbursement requirement.
Copyright – Tom Begley Jr.
We Publish Your Forms & Articles
To help your practice, we feature in this newsletter edition a few forms and articles PLUS tips on marketing and improving service to clients. But your Editor and Chairs can't do it all. Please mail articles, suggestions or ideas you wish to share with others in our Committee. Let us know if you are finding any useful information or anything you can share with the other members. You will receive written credit as the source and thus you can advise your clients and friends you were published in an ABA publication. We will try to meet you needs.
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General Practice, Solo and Small Firm Division:
Elder Law Committee and the ESTATE PLANNING, PROBATE & TRUST COMMITTEE
Who We Are
The Elder Law Committee of the ABA General Practice Division is directed towards general practitioners and more experienced elder law attorneys. The committee consistently sponsors programs at the Annual Meeting, the focus of which is shifting to advanced topics for the more experienced elder lawyer.
This committee also focuses on improving estate planning skills, substantive law knowledge and office procedures for the attorney who practices estate planning, probate and trust law. This committee also serves as a network resource in educating attorneys regarding Elder Law situations.
To help your practice, we feature in this newsletter edition a few articles and tips on marketing and improving service to clients. But your Editor and chairs can't do it all. Please send articles, suggestions or ideas you wish to share with others.
Let us know if you are finding any useful information or anything you can share with the other members. You will receive written credit as the source and thus you can advise your clients and friends you were published in an ABA publication. We will try to meet you needs.
We also seek articles on Elder Law, Probate, Wills, Medicaid and Marketing. Please send your marketing ideas and articles to us. You can become a published ABA author.
Jay Foonberg, Co-Chair, Author of Best Sellers "How to Start and Build a Law Practice" and "How To Get and Keep Good Clients", Beverly Hills, CA JayFoonberg@aol.com
We will also provide tips on how to promote your law office, your practice and Personal Marketing Skills in general. It does not deal with government funded "legal services" for indigent, welfare cases.
Kenneth Vercammen, Esq. Chair
KENNETH VERCAMMEN & ASSOCIATES, PC
ATTORNEY AT LAW
2053 Woodbridge Ave.
Edison, NJ 08817
Central Jersey Elder Law Law www.centraljerseyelderlaw.com
NJ Elder Blog http://elder-law.blogspot.com/