Why You May Want To Avoid Probate

Estate Administration, sometimes referred to as “probate”, is generally used when we need to change ownership or title to the assets of a decedent upon death.  There are several reasons why you may want to avoid this legal process, including the costs and fees, delays in transferring ownership of assets and potential creditor exposure. Probate makes public what should be done in a private manner. In addition, family contests are more likely to arise, especially with blended families.

Some tips and ideas to help avoid this process or at least mitigate the effects:

  1. Discuss your estate plan with your family. It may help if your family knows why you made the decisions you made regarding your estate plan.  They may not be happy with or agree with your decisions, but if they know about prior to death and have a chance to discuss the matter, the chances of contests later on may decrease. This obviously is a personal family decision as some families will not wish or choose not to discuss their private matters with family.
  2. Use transfer strategies.  In certain circumstances, you may be able to pass property directly to beneficiaries outside of the probate process by use of beneficiary designations or joint ownership. Although this is a simple way to avoid probate, it is something that should be discussed with an advisor or attorney before implementing as there are many pitfalls with this type of planning.
  3. Create a Trust. A common strategy used to avoid probate is to establish a trust.  As there are many different types of trusts, we will discuss the use of a revocable living trust to avoid probate for purposes of this post. Trusts used for Medicaid planning, tax or charitable planning or other strategies are beyond the scope of this article. The living trust can be established to hold property for minors, individuals with special needs and other family members with issues including divorce, substance abuse, and creditor protection.


Protecting Your Home From The Costs Of Long-Term Care

There are several planning options when it comes to protecting assets from the rising costs of long-term care.  For purposes of this article, we will focus on the use of an irrevocable trust to protect the home and other assets and whether it is still a viable option.  If you have started to think about, or are concerned about, the potential costs of long-term care, for yourself or an aging parent, you may want to investigate all options regarding advanced planning to protect your family’s financial and estate plan.

When someone requires skilled nursing or rehabilitation care, the first question usually asked is, “who is going to pay for this care?”  Medicare may cover costs at the onset of care, but only for a limited time.  If continuous care is needed, your options include privately paying out of your own funds, or applying for Medicaid benefits.  Applying for Medicaid comes with strict asset and income eligibility requirements.

Medicaid, administered in Massachusetts by MassHealth, is a joint federal and state program for impoverished people to cover the costs of long-term care.  As noted above, MassHealth has strict asset and income limits when determining eligibility. The rules also change depending on whether you are applying as a single individual/surviving spouse or as part of a spousal couple. This will have a direct impact on how your home will be viewed as part of your asset limit and potential estate recovery lien.

Generally speaking, an applicant can have no more than $2,000 of countable assets.  There are additional asset and income rules if there is a spouse living in the primary residence which are beyond the scope of this article.

Although there are several options to consider when discussing advanced planning for asset protection, we will be focusing on the use of an irrevocable trust as a strategy to protect assets from the costs of long-term care. These assets include real estate, investments, rental property and other liquid assets. Transferring your home or other assets to an irrevocable trust has advantages and disadvantages.  With a properly drafted trust, assets owned by the trust would avoid estate recovery following the five year look back period.  The transfer of assets to an irrevocable trust will provide protection from the grantor’s creditors as well as the children’s creditors.   There are also tax benefits that you retain by using an irrevocable trust that may not be available with outright transfers to children.

Although there are several reasons to consider asset protection planning, careful thought must be taken before utilizing this strategy.  As this is an irrevocable trust, control and management of trust assets is held by the trustee, which we recommend is not the grantor.  As a result, you will not enjoy the same control you have over assets as if the asset were owned and held outside of trust.  In addition, MassHealth may question and challenge the trust, therefore, we must ensure no more control is given then allowed. Tax benefits and ramifications must also be considered.

As this is a very specialized area of the law, it is highly recommended that you consult with a qualified estate planning and/or elder law attorney to discuss your personal situation.


Report Says Many With Disabilities Aren’t Protected From New State Medicaid Work Requirements

A new report suggests that many people with disabilities will unfairly lose Medicaid coverage as a result of a new requirement in some states that Medicaid recipients work for their benefits.

For millions of people with disabilities, Medicaid is a lifeline. Even short interruptions in coverage can have long-term physical and mental health consequences, exacerbate barriers to employment, and cause financial hardship.

While work requirements—requirements that beneficiaries report on an ongoing basis their work or work-related activities—have existed for years for unemployment insurance, federal cash assistance, and other federal and state programs, no such requirement has ever existed as a precondition for receiving Medicaid, until now.

In a 10-page guidance document released to state Medicaid agencies in January 2018, the Trump Administration announced a new policy where states can petition the Department of Health and Human Services (HHS) for waivers permitting them to impose work requirements on Medicaid beneficiaries.

The guidance document specifically exempts people classified as “disabled” under federal Medicaid law, meaning they receive Social Security disability benefits or certain types of institutional care. Although HSS provided little further guidance, exemptions also apply where people are “medically frail” or have “acute medical conditions validated by a medical professional that would prevent them from complying with the requirements.”

Arkansas’ Medicaid work-requirement program, the nation’s first, went into effect at the beginning of June. HHS has also approved waivers for Kentucky, Wisconsin, Indiana, and New Hampshire.

In Arkansas, Medicaid beneficiaries must report 20 hours of work or work-related activity weekly. People who fail to report 80 hours monthly for three straight months automatically lose coverage. As a result, Arkansas’ Medicaid program dropped more than 8,400 beneficiaries in September and October 2018. Nearly one-quarter of Medicaid beneficiaries were out of compliance in September alone, according to a new report, released November 14, 2018, by the Center on Budget and Policy Priorities.  The report is titled “Medicaid Work Requirements Don’t Protect People With Disabilities.”

“It appears likely that people with disabilities who face barriers to work are among both those who have already lost coverage and those at risk of losing it,” the report states. “More Arkansans are losing Medicaid coverage than the presumed target group of people who are not working and do not qualify for an exemption.

“It’s likely that many of them are already working or should be exempt, including people with disabilities who may have particular challenges navigating the additional bureaucracy to claim an exemption or report their work activities.”

The report criticizes the state for failing to implement any kind of screening program to ensure that exempt beneficiaries are not subjected to the work requirements. It also argues that the notices violate basic due process rights by being ambiguous and failing to inform people with disabilities of their rights under the Americans with Disabilities Act, which, among other things, permits people to request reasonable modifications of public programs.

The U.S. District Court for the District of Columbia has blocked Kentucky’s program from going into effect, finding that HHS did not consider how the work requirements “would help the state furnish medical assistance to its citizens, a central objective of Medicaid.” Rather than appealing the decision, HHS opened a new public comment process and approved a new waiver for Kentucky on November 20.

To read the Center on Budget and Policy Priorities’ report, click here.

IRA Distributions to Special Needs Trusts: Minimizing Income Taxes

For many parents, the majority of their savings is held in some kind of a retirement account, often an Individual Retirement Account (IRA). At age 70 1/2, an IRA account holder faces the Required Beginning Date, when he or she must take mandatory distributions from the IRA. These payments are determined by the government and are known as Required Minimum Distributions.

If the parents have a child with special needs, it is often important for the parents’ estate plan to direct Required Minimum Distributions following the parents’ death into a special needs trust (SNT) that has been set up for the child. For income tax purposes, it is usually best to stretch these distributions out over as long a period as possible, particularly if the IRA is a large one.

How long the distributions can be stretched out depends. Typically, if an IRA account holder names a “designated beneficiary,” the designated beneficiary’s age determines the amount of the distributions. If there is no designated beneficiary, the account must either be paid out in full within five years after the account owner passed away (the “five-year rule”) or over the owner’s remaining life expectancy (the “life expectancy rule”), depending on whether the owner died prior to age 70 ½. If the owner died prior to reaching age 70 ½, the five-year rule applies.  If the owner dies after reaching age 70 ½ , the life expectancy rule applies..

Unfortunately, a poorly drafted SNT may not qualify as a “designated beneficiary” under the IRS rules. As long as all of the SNT’s remainder beneficiaries are individuals, required distributions are allowed to be made based on the age of the eldest potential beneficiary of the trust. The problem is that sometimes SNTs are drafted so that entities that don’t have life expectancies — such as a charity — are potential beneficiaries. In such cases, either the five-year rule or the life expectancy rule applies and the SNT will have to face the income tax consequences of an expedited payout of the IRA.

This is one of the potential IRA pitfalls for “third-party SNTs,” trusts set up and funded by someone other than the child. But when the person with special needs has his or her own assets, a “first-party” or “self-settled” SNT may be more appropriate.

Through careful and complicated tax planning, it may be possible to minimize the income taxes that would otherwise be paid by the SNT on distributions from an IRA into a first-party SNT so long as the trust qualifies as a “grantor trust” — a trust where all income and expenses from the trust count as the grantor’s for income tax purposes. In a first-party SNT, the “grantor” for income tax purposes is the beneficiary.   In such a case, the beneficiary will generally pay the income taxes at a lower tax rate than if the income was taxed to the SNT directly.

If a first-party SNT does not meet the requirements for a grantor trust but the beneficiary meets the definition of being disabled under the Social Security rules, the trust may still be able to take advantage of an additional income tax exemption if the SNT qualifies as a “qualified disability trust.” But a trust can lose this exemption if the beneficiary loses his or her benefits, for whatever reason.

As you can see, the rules governing IRA distributions to SNTs are exceedingly complicated. This is all the more reason to consult with your special needs planner.

Three Big Differences Between SSI and SSDI

Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) are both federal programs that provide cash payments to people who meet the federal definition of “disabled.”  But the similarities between the two programs end there.  Here are the three main differences between them.

SSI Is a Means-Tested Program, SSDI Is an Entitlement Program

Although both SSI and SSDI are administered by the Social Security Administration, the two programs have vastly different financial requirements.  SSI is designed to meet the basic needs of elderly, blind and disabled individuals who would otherwise have a hard time paying for food and shelter.  Because SSI is narrowly tailored for this particular set of people, it has a very strict set of financial requirements, making it what is known as a “means-tested” benefit.

SSDI, by contrast, is an entitlement program that is typically available to any person who has paid into the Social Security system for at least ten years, regardless of his current income and assets.  (Younger beneficiaries and disabled adult children of retired or deceased workers may have to meet different requirements.)  In theory, all qualified workers are potential SSDI recipients, even high-income earners.

SSI Beneficiaries Typically Receive Medicaid, SSDI Provides Access to Medicare

In most cases, a person who receives SSI immediately qualifies for Medicaid benefits.  Because Medicaid is a joint state and federal health care program that typically provides very comprehensive coverage for its beneficiaries, many people may apply for SSI primarily because of the health care that comes with it.

On the other hand, SSDI beneficiaries are eligible to receive Medicare two years after they are deemed eligible for SSDI benefits.  Medicare is a federal health insurance program that covers routine hospital services and most but not all primary medical care.  Medicare is not as comprehensive as Medicaid, and many Medicare beneficiaries purchase what are known as private “Medigap” policies to fill in the holes in their primary Medicare coverage.

The Financial Benefits Can Be Very Different

Finally, SSI and SSDI benefits vary widely when it comes to the amount of money provided.  In 2018, the federal SSI payment standard will be $750 per month for an individual (with most states adding a small supplementary payment), while the average SSDI payment for 2017 is $1,171 a month.  Since SSDI is based on the beneficiary’s earnings record, some SSDI recipients can receive much more than this.  In addition, SSI benefits are reduced by any other income received by an SSI beneficiary, so many SSI recipients will receive less than the $750 payment standard.  In most cases, if a person receives an SSDI benefit that is higher than the maximum SSI payment, she won’t be eligible for SSI at all.

Individuals With Disabilities Education Act (IDEA) – Special Education Law

The Individuals with Disabilities Education Act (IDEA) is arguably the most important federal law for children with special needs.  The law mandates that all eligible children and youth ages 3 through 21 years old be provided with a “free and appropriate public education” in the “least restrictive environment.”

To be eligible for services under the IDEA, a child must be identified as having a disability. A child is considered to have a disability if she has been diagnosed with:

  • Brain injury or mental impairment
  • Speech or language impairment
  • Hearing impairment including deafness
  • Visual impairment including blindness
  • Serious emotional issue
  • Orthopedic impairment
  • Autism
  • Identifiable Learning disability
  • Other serious health issues

There are approximately 6.6 million children and youth with disabilities in public schools across the United States, which is 13 percent of all public school students, according to the National Center for Education Statistics’ 2014-15 data.  Before the IDEA was enacted in 1975 as the Education for All Handicapped Children Act (EHA), only one out of five children with disabilities went to public schools.  Many lived in state institutions where they received little or no education.

The Law’s Key Components

There are several key components to the IDEA that every parent should know about.  They are: a free and appropriate public education (FAPE), least restrictive environment (LRE), and individual education program (IEP).

FAPE: The IDEA guarantees every child a free and appropriate public education. States must offer special education and related services to children with disabilities at no cost to the families in a public school setting (whenever possible) that meets the state’s educational standards and conforms to the child’s individual education plan.  If a public school cannot offer this, it will offer an alternative, such as the network of educational collaboratives or possibly a private institution, and the government will pay for it.

The U.S. Supreme Court recently expanded the meaning of “appropriate” in the case Endrew F. vs. Douglas County School District, holding that a “minimal educational benefit is not sufficient.”

LRE: Least restrictive environment refers to the educational setting. The IDEA says that “to the maximum extent appropriate” children with disabilities must be educated in a typical classroom with typical peers. Children may be educated in a special or separate class (whether in a district school or in an out-of-district program or facility) only when the nature or severity of the child’s disability prevents the child from being successful in a traditional classroom, even with special accommodations and services.

IEP: An Individual Education Program is a plan that includes: a statement of the child’s present level of performance in academics and functional skills, a list of measureable goals in these areas, a schedule of progress reports, the type and frequency of additional therapies and services, transportation, and any necessary accommodations. The IEP is developed by a team of people including a parent, the child’s teacher, a school district representative, any therapists or other professional who works directly with the child, and sometimes the child as well. The team meets at least once a year to prepare the IEP, but parents may request a team meeting to discuss a particular issue at any time. Parents must also receive regular progress reports on their child.

Other important components of the IDEA include: requirements that schools conduct appropriate evaluations of students with disabilities and that parents be included in all decisions regarding their child’s placement and education program; procedural safeguards that outline parents’ rights under the law; and a process for providing transition services to children to help prepare them for further education, employment and independent living.

If parents are not satisfied with the education program offered by the school, there is a process for resolving disagreements outlined in the procedural safeguards section. Parents can request a review by the state’s educational agency or request the services of a mediator, an unbiased person. If an agreement is not made, parents have the right to file a due process complaint and request a hearing to resolve the issue.

Further Information

The IDEA has four main parts: A, B, C and D.  Part A covers general provisions of the law. Part B outlines how children and youth ages 3 through 21 receive special education and related services.  Part C covers early intervention services for infants and toddlers, birth through age 2, with disabilities.  Part D focuses on the national program to support and improve special education for children with disabilities.

The full text of the IDEA is available online at Department of Education – IDEA website. Click on “Law and Policy” and “Statute/Regulations,” then scroll down to “View the Complete IDEA statute.”

For further information, visit U.S. Department of Education website.

What Expenses Can ABLE Accounts Pay For?

In passing the Achieving a Better Life Experience (ABLE) Act in 2014, Congress created a new way for potentially millions of people with special needs to save for disability related expenses without jeopardizing their eligibility for federal public benefit programs.

In fact, these savings plans, popularly known as ABLE accounts, may be used for an even broader array of products and services than many beneficiaries may realize – including housing expenses, bus fare, financial management services or even, potentially, a smart phone.

The ABLE Act itself defines “qualified disability expenses” as “expenses related to the eligible individual’s blindness or disability which are made for the benefit of an eligible individual who is the designated beneficiary.” It then goes on to list a range of categories of potential uses for funds set aside in ABLE accounts, including:

“Education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and other expenses, which are approved by the Secretary under regulations and consistent with the purposes of this section.”

In subsequent proposed regulations released in June 2015, the Treasury Department and Internal Revenue Service (IRS) reiterated that the term “qualifying disability expenses” should be “broadly construed” to include any benefit related to the designated beneficiary “in maintaining or improving his or her health, independence, or quality of life.”

This means that there is no requirement that the benefit be medically necessary, such as is the case when determining health care services covered by Medicaid, or that it benefit no one but the designated individual. As an example, the regulations specify that a smart phone could qualify as a covered expenses, provided that it serves as “effective and safe communication or navigation aid for a child with autism.”

Originally, the proposed regulations would have also required states to establish safeguards for ensuring that ABLE funds are only used for qualifying expenses, presumably by requiring beneficiaries to obtain pre-approval before distributing funds. In response to a backlash from disability advocates, many who feared that such requirements would be unduly burdensome, the Treasury Department and IRS rescinded this requirement in a notice issued November 2015 So as things stand now, you don’t need to get approval to withdraw funds and pay for a qualified disability expense.

The Obama administration, however, never issued final regulations, although the IRS has stated that “[u]ntil the issuance of final regulations, taxpayers and qualified ABLE programs may rely on these proposed regulations.”

To protect against future inquiries from the IRS, the ABLE National Resource Center recommends that beneficiaries maintain detailed records of expenses paid for by ABLE account assets, as well as how these expenses relate to their disabilities in case the expenditures are ever questioned by the IRS. Misuse of ABLE account funds could result in tax penalties and possible loss of public benefits.

For help in setting up an ABLE account or to find out whether something you want to use the account for is a qualified disability expense, contact your special needs planner.

Can I Apply For Disability With Spinal Stenosis?

Spinal stenosis is a narrowing of the open spaces within your spine, which can put pressure on your spinal cord and the nerves that travel through the spine to your arms and legs. Spinal stenosis occurs most often in the lower back and the neck.

Spinal stenosis symptoms are often characterized as:

  • Developing slowly over time, or slow onset
  • Coming and going, as opposed to continuous pain
  • Occurring during certain activities (such as walking for lumbar stenosis, or biking while holding the head upright) and/or positions (such as standing upright for lumbar stenosis)
  • Feeling relieved by rest (sitting or lying down) and/or any flexed forward position.

The goals of treatment for spinal stenosis are to relieve pain, numbness, and weakness in the legs, to make it easier for you to move around, and to improve your quality of life.

Treatments include:

  • Home treatment, such as exercising, using over-the-counter pain medicines, and losing extra weight.
  • Prescription medication.
  • Physical Therapy;
  • Epidural steroid injections;
  • Surgery, although most cases don’t need this treatment.

You may meet the criteria for disability if you meet the requirements of one of Social Security’s official disability listings.  Social Security publishes the criteria for a number of common illnesses to qualify for disability, and if you meet the criteria for your particular condition, you automatically qualify for benefits.

The listing for Spinal Stenosis is 1.04:

1.04 Disorders of the spine (e.g., herniated nucleus pulposus, spinal arachnoiditis, spinal stenosis, osteoarthritis, degenerative disc disease, facet arthritis, vertebral fracture), resulting in compromise of a nerve root (including the cauda equina) or the spinal cord. With:

A. Evidence of nerve root compression characterized by neuro-anatomic distribution of pain, limitation of motion of the spine, motor loss (atrophy with associated muscle weakness or muscle weakness) accompanied by sensory or reflex loss and, if there is involvement of the lower back, positive straight-leg raising test (sitting and supine);


B. Spinal arachnoiditis, confirmed by an operative note or pathology report of tissue biopsy, or by appropriate medically acceptable imaging, manifested by severe burning or painful dysesthesia, resulting in the need for changes in position or posture more than once every 2 hours;


C. Lumbar spinal stenosis resulting in pseudoclaudication, established by findings on appropriate medically acceptable imaging, manifested by chronic nonradicular pain and weakness, and resulting in inability to ambulate effectively, as defined in 1.00B2b.

If you do not meet or equal the above listing, you can still qualify for disability benefits if the impairment prevents you from doing your past relevant work or other work based on your residual functional capacity that exists in significant numbers in the national economy.

Please call our office at (508) 421-4610 if you have any questions about applying for disability with spinal stenosis or the application process in general.

Am I Eligible For Disability With Sciatica?

What is sciatica?  Sciatica is a symptom that consists of pain caused by irritation of the sciatic nerve.  You might feel weakness, numbness, or a burning or tingling (“pins and needles”) sensation down your leg, possibly even in your toes.  Sciatica might be a symptom of a “pinched nerve” affecting one or more of the lower spinal nerves.

What Causes Sciatic Nerve Compression?

Several spinal disorders can cause spinal nerve compression and sciatica or lumbar radiculopathy. The 6 most common are:

  • a bulging or herniated disc
  • lumbar spinal stenosis
  • spondylolisthesis
  • trauma
  • piriformis syndrome
  • spinal tumors

Although it may be difficult to qualify for disability benefits with sciatica alone, most times the sciatica is caused by a condition listed above and an application is filed due to a combination of several conditions.  In addition, claimants will want to document their pain and any other limitations caused by these back injuries when applying for benefits.

You may qualify for disability benefits if you are not performing substantial gainful activity and if the impairment prevents you from doing your past relevant work or other work that exists in significant numbers in the national economy.

Why Life Insurance Is Important For Families With Special Needs

Although financial planning is important for every family, families with special needs family members may require more attention than the average family to maintain a stable lifestyle.  Planning for a family with a disabled child or other member with special needs requires traditional planning plus additional strategies to ensure your family member is financially secure and their needs are met.

Planning is critical to ensure your child is financially secure for their lifetime, especially after a parent is gone.  Life insurance is commonly used to provide the necessary funds to ensure these goals are met.  Care must be taken to make sure the appropriate type of policy is used.  Second-to-die policies are often used during this planning.  Care must also be taken to ensure beneficiary designations are appropriate and special needs trusts are established especially if eligibility for government benefits must be maintained.