Maximizing Services For Individuals With Disabilities

I. Overview

§1.1Attorneys wanting to assist families and individuals with disabilities (commonly called “special needs” attorneys) typically start with estate planning. Estate planning is obviously important. Ensuring that families have the right estate planning documents in place is an essential foundation towards maximizing the potential government services that an individual may be eligible to receive.

But a holistic special needs practice requires an attorney to go further and be able to at least advise individuals on how to navigate the maze of services that an individual may be entitled to receive. After all, ensuring that an individual receives services is the main point of doing a special needs plan. Andwhen an individual is having trouble getting those services, an attorney should be capable of doing hands-on advocacy to secure those services.

In addition to getting services, an attorney must also be able to advise an individual and family on how a special needs plan works with those services. After all, a plan is only as good as the person administering it. Even the best plan is of little use if it is administered in a way that makes an individual ineligible for services.

The focus of this webcast is on maximizingthe services for which an individual with disabilities may be eligible. Although we will mention Social Security and Medicaid, the webcast’s primary focus is on receiving services from Community Mental Health (CMH). CMH services often have the greatest monetary value and can most directly improve an individual’s quality of life. Yet in our experience, practitioners have limited understanding of Community Mental Health services.

II. The Three Key Components To Maximizing Services

§1.2There are three key components of a special needs plan: (1) Ensuring the right planning documents are in place; (2) Applying for and maximizing benefits and services; and (3) Administering the plan properly.

A. Ensuring The Right Documents Are In Place

§1.3The foundation to any special needs plan is ensuring that an individual and his or her family have the right planning documents in place. This most commonly involves the creation of a special needs trust. While a full discussion of special needs trusts is beyond the scope of this webcast, it is important to quickly summarize the basics. If you preparing a special needs trust, it is essential that you at least read Chapter 10: Special Needs Trusts: Planning, Drafting, and Administration of ICLE’s Advising the Older Client or Client with a Disability written by Amy Tripp.

A special needs trust (increasingly referred to as a supplemental needs trust) allows an individual to set aside assets above the asset limits for various government benefit programs (typically $2,000) that can be used to supplement an individual’s government benefits. The most crucial features of a special needs trust are: (1) the individual with disabilities cannot be trustee and cannot compel distributions and (2) the trustee must be given wide discretion (ideally, complete discretion) regarding what distributions can be made.

There are a number of types of special needs trusts, but the essential question is this: Are the funds that need to be placed into a special needs trust the individual’s own funds (“first-party” or “self-settled) or do the funds belong to somebody else (“third-party”)?

The funds belong to someone other than an individual with disabilities.

Ideally, you are planning for a family member or friend (anyone other than the individual with disabilities) who wants to leave funds to an individual who is receiving or may receive government benefits. Most commonly, the trust will be funded on the death of the third-party settlor (e.g., a parent) by that person’s will, trust, or asset with a beneficiary designation.

In this situation, you want to create what is commonly called a third-party special needs trust. Unlike the statutory trusts discussed below, third-party trusts are backed by longstanding common law (similar to spendthrift trusts) and offer the greatest peace of mind to a family member planning for an individual with disabilities. They also allow the settlor to leave any funds remaining in a trust after the death of the individual with disabilities to whomever he or she chooses without paying anything back to the state. Also, anecdotally, third-party special needs trusts tend to receive less scrutiny from government benefit programs than the self-settled trusts discussed below.

A sample third-party special needs trust is included as an exhibit in Chapter 10 of ICLE’s Advising the Older Client or Client with a Disability.

Practice Tips:

  • When drafting, less is more. Increasingly, the best special needs trusts are extraordinarily simple (just a few pages) and often simply give the trustee complete discretion over distributions. This is not the place for creative trust drafting. The more you include, the more ammunition you are giving government agencies to potentially find that the trust assets are available to the beneficiary.
  • Do stand-alone special needs trusts whenever possible. For a long time, it was common practice to put a special needs trust within a living trust. However, this also gives government agencies more to scrutinize and can often cause confusion and delay trust reviews. If you know a family member is disabled, always do a separate trust document for that individual. It will make applying for services much easier.
  • Don’t forget the letter of intent! Arguably, the most important document is one that special needs practitioners rarely insist that families do. The letter of intent is a not a legal document, but provides crucial information and instructions about a loved one with disabilities. A sample letter of intent is included as an exhibit in Chapter 10 of ICLE’s Advising the Older Client or Client with a Disability.

The funds belong to an individual with disabilities.

Generally, particularly when working with individuals with developmental disabilities, the goal of special needs planning is to plan so that the individual with disabilities never receives funds directly. Whenever possible, we want to get funds into a third-party trust (discussed above).

However, there are situations where you cannot avoid funds first reaching the individual. Some common scenarios where this is unavoidable are: (1) a personal injury or other lawsuit settlement; (2) an inheritance where the deceased individual did not do ideal estate planning; and (3) an individual becomes disabled later in life and now needs government benefits.

If the funds belong to an individual with disabilities, you must use a trust that complies with 42 USC 1396p(d)(4). Within that federal code section, there are two types of trusts : a (d)(4)(A) Medicaid Payback Trust or (d)(4)(C) Pooled Trust.

  • D4A Medicaid Payback Trust. These trusts are commonly called D4A trusts because they must comply with 42 USC 1396p(d)(4)(A). They are also called self-settled payback trusts and Exception A trust under Michigan’s Medicaid program.

The key requirements: (1) the individual must be under age 65; (2) the individual must meet the Social Security definition of disabled; (3) the trust must be for the sole benefit of the individual beneficiary; (4) the trust can only be established by the beneficiary’s parent, grandparent, or guardian or by court order (i.e., it cannot be established by the individual); and (5) the trust must provide that at the death of the beneficiary “the State will receive all amounts remaining in the trust...up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan.”

The primary advantage to a d4A trust over a pooled trust is that an individual can pick his or her trustee (often a family member) and that individual will often provide trustee services for little or no compensation. Additionally, if the state is paid back and there is money left over, an individual can designate a beneficiary of remaining funds. However, particularly if an individual receives CMH services, the amount that has to be paid back to the state will often be much greater than the trust balance and there will never be a situation where money will be leftover for named beneficiaries.

A sample d4A trust is included as an exhibit in Chapter 10 of ICLE’s Advising the Older Client or Client with a Disability.

  • D4CPooled Trusts. These trusts are commonly called pooled accounts trusts or pooled special needs trusts because they must comply with 42 USC 1396p(d)(4)(C). They are also referred to as Exception B trusts under Michigan’s Medicaid program. These trusts are established and typically managed by nonprofits and many have some connection to a disability-focused nonprofit organization. With a pooled trust, there is one “master trust” and an individual executes a joinder agreement (essentially a contract) to place funds in that trust. All of the funds are typically invested together for investment efficiency, but the organization maintains records of each individual’s account balance and allocates investment returns to each sub-account.

The key requirements: (1) the master trust must be established by a nonprofit association; (2) the individual must meet Social Security’s definition of disabled; (3) each account for each individual must be managed solely for the benefit of the disabled beneficiary; (4) the sub-account must be established by the disabled individual (if competent), a parent, a grandparent, legal guardian, or by a court; and (5) any funds remaining in the beneficiary’s account at the death of the beneficiary must either be retained by the nonprofit or be used to repay the state for any medical assistance it paid on the beneficiary’s behalf.

Under certain circumstances, an individual age 65 or over may be able to fund a pooled trust. However, funding a pooled trust may be considered a “divestment” if the individual needs long-term care Medicaid services within the next five years. Thus, this needs to be done with extreme care and thought.

The primary advantage of a pooled trust is that it is fast, easy, and (usually) cheaper to set up. You get professional administration from individuals who know all the ins and outs of the government benefit rules. Also, the individual with disabilities can establish the trust him or herself, which in many instances will avoid the need to go to Court. The primary disadvantages are that distribution decisions are made by someone that an individual may not know (and non-routine distributions can take longer) and the administration fees are probably more than if the trustee was a family member or friend.

All of the panelists on this webcast have worked extensively with pooled trusts and believe that too many practitioners use d4A trusts when a pooled trust would be more appropriate for that individual. Pooled trusts are an important and underutilized tool available to special needs planners.

B. Applying For And Maximizing Benefits And Services

§1.4Unfortunately, too many special needs practitioners stop after preparing the estate planning documents and do not advise clients on the benefits and services that an individual could receive. A trust itself is not a special needs plan. A special needs plan includes identifying and maximizing the government services that an individual is entitled to receive.

Creating a circle of support and support services for someone is a lot of work. Estate planning is only component of a complete special needs plan. An individual with disabilities and his or her family may be working with the Department of Human Services, the Social Security Administration, the probate court, the local community mental health, various contracted providers, a housing authority, a private physician and/or therapist, and so forth! It is important to understand how benefits coordinate and conflict with one another to help a family make the best choices as they move forward.

Consider the complicated maze of services and agencies that an individual with disabilities must deal with:

Education /  / School System (Special Education)
Food /  / DHS (Bridge Card/Food Stamps)
Rent, Utilities, Additional Food, and Cash /  / Social Security
Medical /  / Department of Human Services (Medicaid); Social Security and CMS (Medicare).
Community Supports (e.g., Employment, Skill Development, Care) /  / Community Mental Health
Housing /  / Public Housing Authorities (Vouchers (formerly Section 8) and Subsidized Housing); Community Mental Health
Guardianship / Conservatorship /  / County Probate Court

This is a complicated web of programs for even the sophisticated disability advocate, let alone an individual with disabilities and his or her family. It is important to know the basics of each of these programs: (1) what services are available; (2) where to apply, (3) what advocacy organizations might assist an individual in obtaining these services; and (4) how to appeal if an individual is not receiving entitled services.

Most individuals do not want to pay attorneys’ fees for you to do every aspect of applying for services. This is why it is important to know what local advocacy organizations will assist a family in obtaining services. But clients will be looking to you for coaching advice and will most commonly come back to you when benefits are either not awarded or are terminated.

Practice Tip:

  • Creating a circle of support for someone is a lot of work. Consider that estate planning is only a small part in the life of a person with disabilities. He may be working with the Department of Human Services, the Social Security Administration, the probate court, the local community mental health, various contracted providers, a housing authority, a private physician and/or therapist. It is important to understand how benefits coordinate and conflict with one another to help a family make the best choices as they move forward.
  • Know which agencies handle which supports and services (e.g., the Department of Human Services handles Adult Home Help, food stamps, home heating credits, Medicaid, MIChild, and the list goes on). It is a lot of information and we are sending families to various stops. Ideally, things should work a “certain” way. Practically, until you have had to visit one or more of these agencies, it is hard to fathom their quirks and frustrations. Never assume it is easy for someone who is also acting as a caretaker.
  • The easiest way to learn? Start by assisting one family through the entire process. You may have to reduce your fees (or may not get paid at all), but there is no better way to learn than actually doing it.
  • Attached as Appendix A is the Ten Practical Tips Regarding Public Benefits. If you do nothing else, we recommend that you review this list.

C. Administering the Plan Properly.

§1.5Once proper documents are in place and the individual is receiving services, your job is not yet done. A special needs plan requires continuous advocacy. Even the best-made plan can go astray because a person executing the plan violated a rule that then disqualifies an individual for a crucial government benefit.

Administering a special needs plan requires constant monitoring of many things, including:

  • Keeping an individual’s funds (outside of a trust) below the asset limits for government programs (usually $2,000).
  • Ensuring that trust distributions will not disrupt an individual’s benefits (and keeping up with the ever-changing rules regarding when trust distributions can impact an individual’s benefits).
  • Monitoring to ensure an individual’s wages do not inadvertently or disproportionately impact an individual’s crucial benefits.
  • Providing required reports to government agencies in a timely manner (usually on an annual basis).
  • Tracking changes to government programs (e.g., the health insurance exchange and subsidies, Medicaid expansion, and food assistance cuts in just the past year alone!).
  • Updating an individual’s person-centered plan (PCP).
  • Hiring and monitoring an individual’s caregiver and/or other support persons.
  • Understanding how benefits and services may change as an individual ages.

As you can see, the estate plan is the easy part! The best special needs practitioners should at least be able to advise clients regarding all of these various issues.

III. Special Education As It Relates To Adult Services

§1.6The first government benefit that most individuals with disabilities receive is special education. By federal law, schools have a duty to provide free appropriate public education (FAPE) to all individuals. Appropriate public education includes instruction that is tailored to the student’s needs. Additionally, in Michigan, special education services may be maintained until an individual reaches age 26. (Nationally, most states end special education services at age 21.)

A full discussion regarding special education is beyond this webcast’s scope. Rather, for our purposes, we are going to focus briefly on how special education relates to adult services.

Every special education student must have an Individualized Educational Plan (IEP). The IEP sets out goals and identifies the programs and services necessary to reach those goals. Beginning at age 16, a student’s multi-disciplinary evaluation team must include transition goals for the individual in his or her IEP. The IEP process should include practical tools for implementing a plan that will ensure a successful transition from school. This includes possibly beginning community mental health services while still attending school.