OBRA SUPPLEMENTAL NEEDS POOLED TRUSTS DO NOT BENEFIT THE WARDS IN COOK COUNTY

OBRA SUPPLEMENTAL NEEDS POOLED TRUSTS DO NOT BENEFIT THE WARDS IN COOK COUNTY


Medicaid Fraud and Abuse Rampant in Cook County Probate Court

Many of our readers have requested additional information about OBRA Special Needs Pooled Trusts.

In Cook County, many wards' estates, valued in the hundreds of thousands of dollars, are placed into OBRA Supplemental Needs Pooled Trusts. Supposedly, this is being done for the benefit of the ward as it allows the ward to qualify for Medicaid, thus saving the funds for the special needs of the ward. However, in reality, the ones benefitting from these trusts are the attorneys and guardians. Once a ward's estate is placed into the trust, they can no longer (by law) reside in private pay nursing homes, and are thus moved into public aid facilities. And, instead of using the funds placed into the OBRA for the special needs of the wards that aren't being met in the public aid nursing homes, the funds are being used primarily to pay attorneys and legal fees until the estate is depleted.


From Wikipedia, the free encyclopedia: http://en.wikipedia.org/wiki/Supplemental_Needs_Trust

A Supplemental Needs Trust is a U.S.-specific term for a type of special needs trust (an internationally recognised term). Supplemental needs trusts are compliant with provisions of U.S. state and federal law and are designed to provide benefits to, and protect the assets of, physically disabled or mentally disabled persons and still allow such persons to be qualified for and receive governmental health care benefits, especially long-term nursing care benefits, under the Medicaid welfare program. Supplemental or Special Needs Trusts are frequently used to receive an inheritance or personal injury litigation proceeds on behalf of a disabled person in order to allow the person to qualify for Medicaid benefits.

Background of Medicaid law

Medicaid is the Federal program administered by the states which provides health care for those who can't afford it. See 42 U.S.C. § 1396 et seq. Federal law establishes certain mandatory requirements which each state must adopt in its local Medicaid program, and the states are also given options to elect certain other components in the health care plan which they may decide to provide. Accordingly, Medicaid does vary from state to state in certain aspects, but there are also mandatory Federal law provisions.

One significant governmental benefit which is available only through Medicaid is long-term nursing care which includes care for the physically disabled and the mentally disabled. Long-term nursing care can be extremely expensive. To qualify for Medicaid and its long-term nursing care benefits, the applicant must be “poor” and there is a limit to the countable assets which he or she can own. To qualify for Medicaid, the applicant must meet the asset guidelines for Supplemental Security Income (SSI). SSI allows a single applicant to own no more than $2,000 in countable assets and a married applicant to own no more than $3,000 in countable assets. Certain assets are specifically exempted and are not countable.

Trusts as Medicaid countable assets

A trust is a legal arrangement in which legal title to assets is held by a trustee under certain defined restrictions of a governing instrument (usually a will or a written trust agreement) for the benefit of another party known as the beneficiary. Trusts can be used as a vehicle to make assets available to a beneficiary but still significantly restrict them. Recognizing the gray area which trusts can provide concerning the ownership of assets, Federal Medicaid law places significant restrictions on the types of trusts which can be used to preserve assets of a beneficiary and still qualify the beneficiary for governmental benefits.

Prior to the enactment of the Omnibus Budget Reconciliation Act of 1993 (O.B.R.A), P.L. 103-66, it was possible to create a self-settled, discretionary trust for the benefit of the settlor and still allow the settlor to qualify for Medicaid’s long-term nursing care benefits. These trusts were called “special needs trusts” or “supplemental needs trusts” because restrictive language in the trust agreement allowed the trustee to pay only for the support needs of the settlor-beneficiary which the government did not pay. The trust was not for the unrestricted, general support of the beneficiary which is typical in normal estate plans. Special needs trusts were perceived by the United States Congress to be abusive and were effectively abolished by O.B.R.A.

In general, with limited exceptions, regardless of the purposes, provisions, or discretion contained in the trust, a self-settled trust which is created after August 11, 1993 will be treated as an available asset which can disqualify the settlor-beneficiary from Medicaid. 42 U.S.C. § 1396p(d)(2)(C). This means that generally a person cannot create his or her own trust, transfer his or her own assets into the trust, and still be qualified for Medicaid. However, spouses can leave property in a supplemental special needs trust at their death to care for their surviving spouses and not have the trust property considered as assets available for Medicaid. 42 U.S.C. § 1396p(d)(2)(A)(ii).

Medicaid exempt trusts

Since the effective date of O.B.R.A., only limited types of trusts can now be used and still preserve an applicant’s Medicaid eligibility. One major distinction should be made when analyzing Medicaid trusts. Trusts created by the disabled beneficiary (or a third party with legal authority over the disabled beneficiary) with the disabled person’s own assets for the disabled person’s own benefit are classified as first-party, self-settled trusts. These types of trusts must be distinguished from trusts created by a third party for the benefit of a disabled individual with the third party’s own assets (such as a grandparent creating a trust for a grandchild). Legal restrictions generally exist for first-party, self-settled trusts which do not exist for third-party trusts. These trusts are a good thing to have if someone is expecting a windfall, such as an inheritance.

First-party, self-settled trusts

Most self-settled trusts holding the disabled beneficiary’s own assets created after August 11, 1993 are countable resources for Medicaid. The Medicaid statute, however, provides for three specific types of trusts which can be funded with the applicant’s own assets and which will not disqualify the applicant from Medicaid. These trusts are called “D-4A Trusts” after the subsection of the law which authorizes them. They are also called “Federalized Special Needs Trusts” because the Federal Medicaid statute makes them available in every state.

Because of the requirement that the State be reimbursed for medical assistance, D-4A Special Needs Trusts may have limited utility when the goal is to pass assets of the disabled individual to family members. The main benefit of the D-4A Trusts is to provide a quality of life for the Medicaid beneficiary. Assets can be held in the trust and used to pay for the beneficiary’s special or supplemental needs which the government does not provide, while Medicaid pays the significant medical bills. If the medical assistance provided during life does not turn out to be costly, then upon the death of the beneficiary, there is a chance that assets may be preserved in the trust and pass to loved ones.

Disabled Individual’s Special Needs Trust

Under the provisions of 42 U.S.C. § 1396p(d)(4)(A), a Disabled Individual’s Trust will not be counted as a Medicaid asset even when it is funded with the applicant’s own assets. The requirements for the trust are that the individual must be under age 65 at the time the trust is created (and funded), and disabled under the Social Security definition. Further, the trust must be for the "sole benefit" of the disabled individual. The trust must be created by a parent, grandparent, guardian, or court. Upon the death of the individual, the State Medicaid agency must be reimbursed for the costs of the medical assistance which was provided by Medicaid during the disabled individual's lifetime. This is often called the “payback” provision.

It is important to note that the Disabled Individual’s Trust must be created by a parent, grandparent, guardian, or court. The statute does not allow the disabled individual to create his or her own trust, even if he or she is otherwise legally competent. Action by a third party is required in creating the trust. In this regard, these types of special needs trusts are often established by a court on behalf of a disabled person as a part of or ancillary to a serious personal injury lawsuit.

"Miller" Trust

A "Miller" Trust can be used to qualify a Medicaid applicant with income in excess of the eligibility limit (not imposed in all states) for long-term care assistance from Medicaid. Such a trust is not really a "special needs" trust at all; it is not funded with the beneficiary's assets. The Miller trust can be named as recipient of the individual's income, from a pension plan, Social Security, or other source. The Miller trust takes its name from the Colorado case of Miller v. Ibarra, 746 F. Supp. 19 (D. Colo. 1990), and is specifically sanctioned by 42 U.S.C. § 1396p(d)(4)(B). As with a self-settled special needs trust (referred to above as a "Disabled Individual’s Trust"), upon the death of the beneficiary, the State Medicaid agency must be paid back for its medical assistance from any remaining assets in the Miller trust. An older name for the Miller trust, still occasionally used, is “Utah Gap" trusts, reportedly coined by a Colorado advocate describing the gap between the income cap for eligibility and the actual cost of nursing home care as similar to the yawning chasm between mesas dotting the Southern Utah landscape. The Miller trust is significant only in those states which impose an income cap on Medicaid long-term care eligibility; ironically, Utah is not one of those states. Income caps are in place in about half of the states.

Also referred to as a qualified income trust.

Nonprofit Pooled Income Special Needs Trust

A Nonprofit Pooled Income Special Needs Trust is authorized by 42 U.S.C. § 1396p(d)(4)(C). Again, the individual must be disabled under the Social Security definition. Unlike the other exempt trusts which can be administered by a private trustee who is an individual (such as a family member), the Pooled Income Trust is run by a nonprofit association, and a separate account is maintained for each individual beneficiary. All accounts are pooled for investment and management purposes. The trust (or more accurately, an account in the pooled trust) may be created by a parent, grandparent, guardian, or court, and it can also be created by the disabled individual himself. Upon the death of the disabled individual, the balance is either retained in the trust for the nonprofit association or paid back to the State Medicaid agency for its medical assistance.

In some states, a disabled individual over age 65 is entitled to transfer assets to a pooled trust and then be immediately eligible for Medicaid. In other states, the transfer must be made before the disabled individual attains the age of 66.

Reference

http://www.elderlawanswers.com/elder_info/elder_article.asp?id=2742#6

Retrieved from "http://en.wikipedia.org/wiki/Supplemental_Needs_Trust"

Editor's note: The inappropriate use of OBRA Special Needs Pooled Trusts in the Cook County Court system appears to be fraudulent, as the special needs of the wards are not being met with their estate funds. Rather, the attorneys, guardians, and public aid nursing home owners are benefitting. A review of the Office of the Public Guardian's cases reveals that over 50% of the wards' estates are placed into these trusts. There is often a misconception by the public that wards of the Public Guardian are destitute. The truth is, the Public Guardian does not typically accept destitute wards; destitute wards go to the State Guardian.

Wards of the Public Guardian and private guardians have enough funds to support them in private pay facilities for many years, but instead their funds are placed into OBRA trusts, and the wards are placed into public aid nursing homes while the estates are being churned by attorneys and guardians. We urge a federal and state investigation into the inappropriate use of OBRA Special Needs Pooled Trusts by the Cook County Probate courts.

The wards are NOT benefitting from these trusts! Rich wards of the Public and private guardians are living in less desirable public aid facilities, when they could have afforded private pay facilities which would better meet their needs and enhance the quality of their lives. Public aid beds are being used inappropriately to the expense of the tax payers, and there is a shortage of public aid beds for those truly in financial need.