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SSI, Medicare, Maine Care Questions

Is there a connection between public benefits, such as SSI and Medicaid (called Maine Care in Maine), and income or assets owned?
Individuals with disabilities often receive Supplemental Security Income (SSI) and Medicaid. SSI provides the individual with a modest monthly support check to pay for living expenses, and Medicaid pays for the health services for people with disabilities. Children who are minors are eligible for SSI and Medicaid if they have “marked and severe functional limitations” from a physical or mental condition. Adults are eligible for SSI and Medicaid if they have a disability that prevents them from working and earning a self-sufficient wage. However, to qualify for SSI and Medicaid, the disabled individual cannot have more than $2,000 in cash or assets that can be converted to cash. SSI and Medicaid coverage is often referred to as “means-tested” because the person’s means (that is, their income and assets) are part of the eligibility criteria they must satisfy to qualify for SSI and Medicaid.
If I give my child with a disability money while I am alive or under my Will after I die, is it going to cause problems with my child's SSI or Medicaid coverage?
As earlier mentioned, if your child is covered by SSI or Medicaid and then later receives assets from you that exceed $2,000 in value, then as a general rule your child will lose eligibility for SSI and Medicaid until he or she “spends down” the funds to less than $2,000. Therefore, if you or other relatives make large gifts to the child, it will disqualify him or her from SSI and Medicaid until the child pays down the funds to under $2,000. The gifts you make to your child will almost certainly not have the intended benefit but instead will have to be used to cover expenses that otherwise would have been covered by SSI or Medicaid.

Some parents who are aware of this problem do not leave an inheritance to their child with a disability. Instead, they give the child’s share to a brother, sister or other family member with an informal understanding that it will be used to benefit the disabled child. Unfortunately, the assets intended to benefit the disabled child might not be used for that purpose. For example, if the family member who receives the disabled child’s share should become divorced or dies early or goes into bankruptcy, the funds intended to be used for the disabled child might be lost. Even if such terrible things do not occur, there is also the possibility that the family member who holds the funds might not know about the eligibility requirements for SSI and Medicaid and might mistakenly disqualify the disabled child for SSI and Medicaid in the course of giving the child too much money or paying for services or goods for the child.

What services are not provided by public benefit programs?
As of 2014 the maximum SSI benefit is $721 to cover all of a beneficiaries needs, excluding medical needs. This SSI covers all housing, food, clothing and other similar costs.
Families who have a disabled child often must use their own money to pay for extra items and services their child needs, even if their child is an adult. For examples, SSI and Medicaid generally will not pay for vacations, entertainment, special training, dentistry, many home-related expenses, etc. that can enhance the individual’s quality of life.
How can I provide my child with some money for financial security and not jeopardize his SSI or Medicaid benefits?
There are ways that you can help ensure a disabled child’s financial security without risking the possible loss of SSI and Medicaid. The best tried-and-true method is to use a Special Needs Trust, such as an account in the Maine Trust for People with Disabilities. An account in the Maine Trust for People with Disabilities can hold funds that the parent contributes for the benefit of a disabled child. Unlike making a lifetime gift or leaving an inheritance directly to the disabled child, placing funds in an account with the Maine Trust for People with Disabilities means that the funds will not be seen as “owned” by the disabled child and thus will not disqualify the child from SSI or Medicaid. In other words, the funds in an account at the Maine Trust for People with Disabilities are protected and can be used to provide supplemental support for a disabled child.
Can I establish an account with the Maine Trust for People with Disabilities if my child currently is too young to qualify for SSI or Medicaid?

An account in the Maine Trust for People with Disabilities can be established for someone who is not currently receiving SSI or Medicaid, but who eventually may need to qualify for those programs in the future. For example, sometimes the needs of a disabled child may be taken care of by parents in their home so that no governmental assistance is currently needed. However, after the parents die or go to a nursing home, the disabled child might have to qualify for SSI or Medicaid to replace the services the parents were providing. An account in the Maine Trust for People with Disabilities could be set up for the disabled child now with the anticipation that it would eventually be needed.

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Tax Questions

What are the gift tax and estate tax consequences to me if I set up an account with the Maine Trust for People with Disabilities for my child with a disability and fund the account during my lifetime?
When a parent funds an account with the Maine Trust for People with Disabilities for a disabled child, there may be gift tax and estate tax consequences. For this reason, it is important to consult with an estate planning attorney regarding how to complete a Joinder Agreement when opening a new MTPD Account #1.
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MTPD Alternatives

Other than establishing an account in the MTPD, what are my options for setting up a Special Needs Trust for my child with a disability?
Prior to the establishment of the Maine Trust for People with Disabilities in 2005, the only way to establish a Special Needs Trust in Maine for a disabled child was to set up an individual Trust for the benefit of the disabled individual. This can still be done if the parents are willing to incur the set-up and ongoing costs of establishing their own individual Special Needs Trust. As a general matter, the cost of hiring an attorney to prepare an individual Special Needs Trust may range from $500 to $5,000. In addition, the trustee of the Trust and other parties who provide services to the individual Trust often charge fees, which typically range from 1% to 3% of the Trust’s assets each year. For example, most banks that will serve as trustee of an individual Special Needs Trust have a minimum annual trustee fee that may range from $500 to over $1,000. Nevertheless, for a family that must have a Trust with unusual features in order to provide for an uncommon situation, an individual Special Needs Trust may be the best option.

Since 2005, the Maine Trust for People with Disabilities has been an alternative way to establish and fund a special needs account for a disabled child. The Maine Trust for People with Disabilities provides a wide range of services that meets the needs of the vast majority of families who have a disabled member. Unlike an individual Special Needs Trust, the Maine Trust for People with Disabilities is managed by a non-profit corporation dedicated to the running of the Trust. The Maine Trust for People with Disabilities is structured to provide the lowest possible overall cost for opening and managing a special needs account.

What are the primary advantages of opening an account with the Maine Trust for People with Disabilities as opposed to setting up an individual Special Needs Trust?
Commitment. The Maine Trust for People with Disabilities is run entirely by volunteers drawn from social service agencies, law, business, accounting, finance, banking, etc. Many members of the Board of Advisors have sons, daughters and siblings who are disabled and who face the daily issues that are encountered by the families who open accounts with the Trust. The Trust’s volunteers bring to their work a strong personal commitment to see that the Trust is run in compliance with applicable laws and in a way that effectively addresses the needs of disabled individuals in Maine.

Lower Cost. The cost of establishing and annually maintaining an account with the Maine Trust for People with Disabilities generally is less expensive than setting up an individual Special Needs Trust. A significant reason for the lower cost is that the Maine Trust for People with Disabilities is an all-volunteer organization that does not pay a salary to any member of the organization. The lower cost of having an account with the Maine Trust for People with Disabilities means that there will be more assets available to pay for the supplemental needs of the disabled beneficiary.

Knowledge of Government Programs. An individual or bank who serves as the trustee of an individual Special Needs Trust must have a detailed knowledge of the eligibility requirements of the government programs that disabled beneficiaries rely on for support, especially SSI and Medicaid. Individuals and banks that serve as trustees of individual Special Needs Trusts often lack this knowledge, but it is part of the ordinary routine of the Maine Trust for People with Disabilities.

Continuity. The Maine Trust for People with Disabilities is sponsored and run by a Maine non-profit corporation, known as the “Maine Trust for People with Disabilities, Inc.” As a corporation, it is able to remain in existence for an indefinite period of time. Similarly, the formal trustee of the Maine Trust for People with Disabilities is Norway Savings Bank, which serves as a directed trustee and also can remain in existence for an indefinite period of time. By comparison, when an individual Special Needs Trust is established and has an individual serve as the trustee, it is possible that the individual trustee may die, become disabled or resign as trustee before the disabled beneficiary has died.

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MTPD Information

If I am an individual with a disability who has received an inheritance, insurance settlement, lottery winnings, or other funds, can I establish an account in the MTPD so that I can continue to qualify for SSI and Medicaid?
If you qualify to receive SSI or Medicaid, you can establish your own account in the Maine Trust for People with Disabilities and fund it with your own assets. Self-funded accounts are known as MTPD Trust #2 accounts.
What are the key requirements to qualify to open an account with the Maine Trust for People with Disabilities?
The Board of Advisors of the Maine Trust for People with Disabilities determines at its discretion whether to accept an application to open a new account. All of the following requirements must be satisfied in order for a new account application to be considered:
  • The beneficiary of the account must currently qualify for, or in the future must be likely to qualify for, means-test benefits under a governmental program, such as SSI or MaineCare (i.e., Maine’s version of the Medicaid program).
  • The beneficiary must have a medical diagnosis of an intellectual disability or traumatic head injury.
  • The beneficiary must reside in the State of Maine.
  • The new account must be funded (either during life or on death) with a minimum of $10,000.
How do I open an account in the Maine Trust for People with Disabilities?
The Maine Trust for People with Disabilities offers two types of accounts.

The first type of account is known as an “MTPD Trust #1” account. This type of account can be funded with the assets owned by any person except the individual with disabilities. For example, parents and grandparents can fund an MTPD Trust #1 account for a child or grandchild.

The second type of account is known as an “MTPD Trust #2” account. This type of account can be funded only with assets that are owned by the individual with disabilities who will be the beneficiary of the account. For example, an individual with disabilities who has received an inheritance or a lawsuit settlement can fund an MTPD Trust #2 account with such assets.

Both an MTPD Trust #1 account and an MPTD Trust #2 account are established by completing an application known as a “Joinder Agreement” and submitting it for review and acceptance to the Maine Trust for People with Disabilities. Copies of the Joinder Agreement can be found at the following link: http://www.themainetrust.com/Setting-Up.html.

How do I fund an account established with the Maine Trust for People with Disabilities?
The method by which an account is funded determines on whether the account established is a “MTPD Trust #1” account of a “MTPD Trust #2” account.

“MTPD Trust #1” account: There are several ways to fund an “MTPD Trust #1” account.

  • Funding During Life. Parents and others can fund the account while they are living. For example, a person who establishes an account can fund the account while he or she is still living by making gifts to the Trust account.
  • Funding on Death. Parents and others can fund the account on death, such as under a Last Will and Testament or by naming the account as the designated beneficiary of a life insurance policy, annuity, IRA or 401(k) plan.
  • Combination of Lifetime and Death Gifts. Parents and others can fund an account both during their lives and on their deaths. For example, parents could set up an account for a disabled child and fund it during their lives. In addition, the parents could make gifts to the account under their Last Wills and Testaments.

“MTPD Trust #2” account: Since an MTPD account can be funded only with assets owned by the disabled individual, this type of account generally is funded soon after the account is initially established. Typically such accounts are funded with assets that the disabled individual receives as an inheritance or as an insurance settlement.

Once an account with the MTPD has been established and funded, can the person who funded the account demand that the funds are returned if he or she wants them back?
Under federal law, funds contributed to an account in the Maine Trust for People with Disabilities cannot be returned. However, in certain circumstances the Board of Advisors of the Maine Trust for People with Disabilities can approve the transfer for funds from an account in the Maine Trust for People with Disabilities to either another pooled special needs trust or to an individually-created special needs trust that benefits the individual who is the beneficiary of the account with the Maine Trust for People Disabilities. Lastly, courts have the authority to order funds to be returned when the circumstances are appropriate.
How can I find other information about how an account with the MTPD operates?
Both these FAQS and the Joinder Agreement of the Maine Trust for People with Disabilities contain detailed information regarding the administration of the Trust, including the investment of assets, who runs the Trust, the timeframes and procedures for requesting distributions, fees, and other pertinent information. You can also contact us here.