When a person with disabilities submits an application for benefits, the SSA normally passes the application through a rigorous five-step process to ensure that the applicant truly needs assistance. The SSA first checks to see if the applicant is working, and then assesses whether the applicant is suffering from a “severe” medical condition. In the third step of the process, the SSA compares the beneficiary’s condition to a list of impairments that normally qualify a person for benefits without further assessment. When a person’s condition matches a condition on the list of impairments, the SSA presumes that the applicant has a disability and typically awards benefits without proceeding through the final two steps.

Unfortunately, most applicants typically have to wait for a long time before arriving at this third step in the evaluation process. Compassionate Allowances speed this process up by defining certain specific conditions that “obviously meet disability standards.” Prior to this month, the SSA included 50 medical conditions on the list of conditions that qualified for a Compassionate Allowance.  As of March 1, 2010, the SSA has now added an additional 38 conditions to the Compassionate Allowances list, greatly expanding the number of people who are eligible for the Compassionate Allowances program.

Although most of the conditions on the revised list are rare, of tremendous importance for the aging population is the fact that the SSA has now included Early-Onset Alzheimer’s Disease, Mixed Dementia, and Primary Progressive Aphasia among the new fast-track conditions, meaning that people who are diagnosed with any of these conditions can now receive disability benefits very quickly. In addition to a monthly disability payment, qualification for SSDI also allows earlier entry to Medicare health insurance benefits for those under age 65.  And for those under age 65 whose conditions are so severe that they must be placed in a nursing home, a disability determination from SSA also speeds up the Medicaid application process.

Please follow the links below to learn more about the Compassionate Allowance program:

Initial List of Compassionate Allowance Conditions

38 New Compassionate Allowance Conditions

Additional information about how compassionate allowances are processed

Statements from Family Members and Individuals with Early-Onset Alzheimer’s Disease

But they must. Failure to do so can lead to burnout, injury or illness. If you are the caregiver, any of these results will harm your ability to care for your loved one.

Here are some ways to take care of yourself and make sure you can take care of your loved one. The list is adapted from New York Times columnist Jane Brody’s excellent Nov. 17, 2008, column, “Caring for Family, Caring for Yourself.”

Once you have decided to move to another state, you should immediately contact a qualified special needs attorney in your future home state and discuss the steps you have already taken in regards to your child’s needs. You should also talk with the attorney who drafted the original trust documents, and put that attorney in contact with your new special needs planner. The new attorney will review the trust documents and let you know what, if anything, needs to change in order for the trust to function properly. Often, changing the trust can be as simple as executing a brief amendment or having the trustee sign off on slight changes. If your child’s trust was established by a court, which often happens as part of a personal injury settlement, you may need to obtain court approval for any substantive changes to the document. Furthermore, you may have to transfer authority over the trust from the court in your current home to a new court in your new state.

While Supplemental Security Income (SSI) is a federal program with a uniform benefit rate, many states offer additional SSI payments to beneficiaries. Parents need to be aware that their child’s benefit may be reduced or increased, depending on the state to which they are moving. As for Medicaid, it is both a federal and state program, and in some states, such as Virginia, must be applied for separately from SSI. So even though some types of Medicaid benefits (such as emergency care) in some states travel with your child, most Medicaid benefits don’t. In many states, your child will have to go through an additional application process in your new state, with different regulations regarding the treatment of your child’s trust’s assets.

The key lesson for any family choosing to relocate is to plan well in advance. Utilizing a qualified special needs attorney is the best way to familiarize yourself with your new state’s programs and laws, and to ensure quality, ongoing care for your child.

 If you have recently moved to Virginia, Maryland or Washington DC, the Farr Law Firm would be happy to review your current Special Needs Trust to see if it is appropriate or if modifications are necessary, and also to assist you with applying for Medicaid in your new home state.

But this is not the only problem child support creates for a child with special needs; a complicated process that the Social Security Administration (SSA) uses to evaluate household income can also wreak havoc with SSI and Medicaid benefits.

When a disabled child lives in a household with other people, the SSA takes into account the income of everyone who lives with the disabled child when it calculates eligibility for benefits. This is known as “income deeming.” The SSA applies a formula to determine what portion of the household income applies towards eligibility. If the total household income is too high, the disabled child can lose SSI and Medicaid.

In families going through a divorce, income deeming becomes especially important for two reasons. First, a child with special needs may have siblings who are also receiving child support from an absent parent. In these cases, that additional child support will count as household income and could place the SSI recipient’s benefits in jeopardy. Second, the choice of parent who will have custody of the child (the custodial parent) could throw off an SSI benefit if one parent’s household income is significantly different from the other’s. In many cases, loss of SSI benefits is not a key factor in choosing a custodial parent. But in other cases, especially when the child receives significant benefits from SSI and Medicaid, the choice of a custodial parent could make a tremendous difference for that child’s welfare.

If you or any of your loved ones are going through a divorce, Evan Farr can help you understand these complex income deeming regulations and will work with your divorce attorney to make sure that child support will not adversely affect your child’s future.

The Memorandum is not legally binding and, when directions conflict, those in wills, trusts and other legal documents take precedence. But for “non-legal” matters, it will serve as the primary source of information about your child, providing a roadmap for the courts, guardians, caregivers and others involved in your child’s life. That can be critical in easing your child’s transition, ensuring continuity of care and treatment, as well as appropriate decision making regarding living arrangements and other lifestyle choices.

Topics that can be included in a Memorandum, include the following:

- Individuals and organizations that should be contacted upon your death or incapacity
- Your child’s health care and therapeutic needs
- Your preferences for education, religion, and child-rearing practices
- Contact information for doctors, therapists and teachers
- Your child’s personal history, degree of independence or mobility, behavioral issues, and need for assistive technologies
- Your child’s interests and personality traits
- The location of medical records and other important documents.

While writing a Memorandum of Intent can be time-consuming and emotionally taxing, it’s very important not to postpone this task. Once the Memorandum is complete, place the original in a secure location and distribute copies to others involved in your child’s life. Then, mark your calendar, setting aside time to revise the Memorandum at least once a year so it will continue to reflect your child’s current life stage and situation.

The Farr Law Firm can help your family with drafting an appropriate Memorandum of Intent, and also with drafting appropriate Wills, Trusts and other legal documents needed by parents of children with special needs.

Please click here for a sample Memorandum of Intent from the Academy of Special Needs Planners that parents can fill out on their computer.

 For further information about a Special Needs Planning, click here.

 - How do you leave funds for the benefit of the child without causing the child to lose important public benefits?
- How do you make sure that the funds are well managed?
- How do you make sure that your other children are not over-burdened with caring for the disabled sibling?
- What is fair in terms of dividing your estate among your disabled child and your other children?
- How do you make sure there’s enough money to meet your disabled child’s needs?

Often, parents of children with special needs try to resolve these issues by leaving their estates to their healthy children — disinheriting the disabled children. These parents offer a variety of justifications for this approach:

- The disabled child shouldn’t receive anything because she can’t manage money and would lose her benefits.
- She doesn’t need any inheritance because she will be taken care of by the public benefits she receives.
- The other children will take care of their sister.  

This approach is to be discouraged for a number of reasons. First, public benefits programs are often inadequate. They need to be supplemented with other resources. Second, both public benefits programs and individual circumstances change over time. What’s working today may not work tomorrow. Other resources need to be available, just in case. Third, relying on one’s other children to take care of their siblings places an undue burden on them and can strain relations between them. It makes it unclear whether inherited money belongs to the healthy child to spend as he pleases, or whether he must set it aside for his disabled sister. If one child sets money aside, and the other doesn’t, resentments can build that may split the family forever.

The better answer to many of these questions is a special type of trust called a “Supplemental Needs Trust” or a “Special Needs Trust.” Such trusts fulfill two primary functions: the first is to manage funds for someone who may not be able to do so himself or herself due to disability. The second is to preserve the beneficiary’s eligibility for public benefits, whether that be Medicaid, Supplemental Security Income, public housing, or any other program. They come into play in a multitude of situations, including parents planning for a disabled child, a disabled individual coming into an inheritance or winning or settling a personal injury claim, or one spouse planning for a disabled spouse. 

First, a short explanation of what trusts are and how they work: A trust is a form of ownership of property, whether real estate or investments, where one person – the trustee – manages such property for the benefit of someone else – the beneficiary. The trustee must follow the instructions laid out in the trust agreement as to how to spend the trust funds on the beneficiary’s behalf – whether and when to distribute the trust income and principal. In the special needs context, trusts fall generally into two main categories: self-settled trusts that the beneficiary creates for himself with his own money and third-party trusts that one person creates and funds for the benefit of someone else. 

Each situation and each benefit program has its own rules which affect the drafting, funding and administration of special needs trusts. The public benefit programs in many ways track the treatment of trusts in terms of creditor protection. Just as in most states you cannot create a trust for your own benefit and protect the trust funds from creditors, you generally cannot create a trust for your own benefit and have the funds uncountable for purposes of Medicaid, SSI and other public benefits programs. However, Medicaid and SSI have provided for “safe harbors” that permit the creation of self-settled special needs trusts in certain circumstances. 

If the child is incapable of making personal or financial decisions once she reaches the age of majority, a parent — or anyone else who is an adult, is not incapacitated, and does not have a significant conflict of interest — can petition the court to be appointed the adult child’s guardian or conservator (the terminology is different in different states). The downside is that guardianship and conservatorship requires a court process, which can be time-consuming, costly and emotionally trying for the person with special needs and her family. In order to protect against abuse, the individual who is the object of the guardianship or conservatorship proceeding (the “ward”) will be represented by her own attorney and the court must determine if the disabled person is incapable of making her own decisions.

In cases where someone is appointed to make financial decisions, the court may require that person to be bonded, file annual financial statements and request the court’s permission before dealing with the property of the person with special needs. This is meant to increase oversight and protection, but it also decreases family control.

There are ways to avoid the time and expense of a guardianship or conservatorship process while accomplishing the same basic goals. If the person with special needs has sufficient capacity to understand, he can appoint an agent using a durable power of attorney over medical or financial matters, or both. Depending on the type of power of attorney, the agent will have the authority to make financial and property decisions or medical and personal decisions on behalf of the adult child, all without court intervention or direct oversight.

If the adult child receives either Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) and cannot manage the income, the Social Security Administration allows another person to receive the funds to use on the child’s behalf. However this option also requires the filing of an annual report showing how the money was used.

Another option for parents to consider is establishing a special needs trust. The trust allows a person with special needs to shield assets for certain purposes while maintaining eligibility to receive SSI and Medicaid benefits. The trustee invests and manages the trust assets, usually avoiding the need for a financial guardian or conservator.

The Farr Law Firm can help parents decide whether any or a combination of these approaches best fits their particular situation. Factors to consider include the nature of the child’s special needs, the source and type of the child’s assets and whether the child has sufficient capacity to understand her choices.

A copayment is the portion of a medical provider’s bill that the patient is responsible for. Under the new law, Medicare recipients will eventually pay the same 20 percent copayment for outpatient mental health services that they now pay for other types of medical care. This represents a significant reduction from the 50 percent copayment that patients currently pay for mental health care. The law gradually implements the changes, with the copay dropping to 45 percent in 2011, 40 percent in 2012, 35 percent in 2013 and finally to 20 percent in 2014.

The new law also increases access to certain drugs commonly prescribed for patients with mental illnesses. Specifically, Medicare must begin to offer full coverage for prescriptions of benzodiazepines and barbiturates by 2013. Low-income patients also gain better access to certain kinds of antipsychotic and antidepressant drugs that they may not be able to afford under current pricing plans.

Fortunately, help in calculating your “special needs goal” is available from financial planners with expertise in disability issues, as well as from special needs calculators, which are accessible free of charge on the Internet. Here are two such calculators:

MetDesk Special Needs Calculator: click here

Merrill Lynch Special Needs Calculator: click here

Using one of these calculators, either on your own or with the help of an advisor, is an excellent way to begin making concrete plans for your child’s future. Based on information you provide about anticipated income and expenses, the calculators offer a realistic estimate of how much your child will need in lifetime financial support. Financial planners suggest re-running this type of calculation periodically, particularly as your child nears adulthood, to ensure the estimate reflects the most accurate, up-to-date information about needs and circumstances.

The first step in determining the amount you must set aside in an SNT is to consider your goals and your expectations for your child’s future. If you haven’t yet created a Letter of Intent or an Advance Care Plan for your child, this is the time to draft such a document. Sample forms and software for this task is available through our office. The Letter of Intent or Advance Care Plan should address factors such as your child’s medical condition, guardianship needs, ability to work and desired living arrangements, all of which will drive your special needs calculation.

Once you’ve considered the “big picture,” you’ll need to identify your child’s future income sources and living expenses. The online calculators identify relevant categories for you (e.g., public benefits income. transportation costs).

Next, you’ll need to tackle the most arduous part of the process, placing a dollar value on each category. You can start by listing any current income or expenses likely to continue into your child’s adult years. You’ll need to consider income from sources such as life insurance proceeds, gifts, inheritances, and legal settlements, as well as from employment and public benefits such as Supplemental Security Income and Social Security Disability Income.

On the expenses side of the column, broad categories include, but are not necessarily limited to:

- Housing: rent, a mortgage, utilities, insurance, taxes, maintenance.
- Transportation: car payments, auto insurance, fuel, repairs, public transportation costs.
- Medical care: doctor visits, therapy, prescription drugs.
- Care assistance: respite, custodial, nursing home care.
- Special equipment: wheelchairs, assistive technologies, durable medical equipment, computers, service animals.
- Personal needs: grooming, hobbies, entertainment, vacations.
- Education and employment costs: tuition, books, supplies, tutoring.
- Future asset replacement costs: for a car, major appliances, electronics, furnishings.

Prior to running the calculation, you may need to indicate your child’s life expectancy and the number of years remaining until your retirement. Once you’ve input all required data, the calculator automatically will run an analysis of your funding needs based on preset assumptions about the rate of inflation and your after-tax investment returns. Both calculators indicate the amount of annual savings required to meet your goal. The Merrill Lynch calculation includes a lump-sum savings goal that must be met by retirement, as well as a year-by-year cash-flow analysis indicating any shortfalls or surpluses for a given year.

Financial planners advise that running alternative calculations can help you plan adequately for worst- and best-case scenarios. One variable to consider is your child’s ability to earn income. For example, if he or she is able to work more than expected, earned income may cover more expenses, but SSI payments will likely be reduced. As your child’s disability advances, he or she may need to leave the workforce, potentially increasing SSI payments but also adding new expenses.

Another critical factor is the impact of higher or lower investment returns on the amount you must set aside. If your child is very young, you may plan to invest aggressively, pursuing a higher rate of return than if he were nearing adulthood. The reason “an investment rule of thumb” is that you generally can take somewhat greater risks with a longer-term investment because you have more time to recover from dips in the market. If you anticipate a lower rate of return for any reason, you will need to compensate by setting aside more in savings.

As you can see, to some extent this is more of an art than a science. You can make your best guess or work with a financial planner who specializes in this field and who can bring to bear her experience with many families in similar situations.

Once you have a realistic estimate in hand, you’ll need to consider how to fund this need without sacrificing such financial goals as college for your other children and retirement for yourselves. You also need to balance the needs of your special needs child with your wish to benefit your other children, as well as cover your current expenses. You may not be able to completely fund the dollar amount resulting from the above calculations, but having a target can assist your planning.

Many parents find that a second-to-die life insurance policy is the easiest option to fund an SNT because the premiums are often lower. However, a joint first-to-die policy might make more sense for many parents, especially if one parent is the primary wage earner and one parent is the primary caregiver for the disabled child. With a first-to-die policy, if the wage-earner parent dies first, the policy will provide funds needed for the caregiver parent to be able to continue providing the care; if the caregiver parent dies first, the the policy will provide funds needed for the wage-earner parent to hire a replacement caregiver.

In short, how much you fund your SNT and how large an insurance policy to purchase will be a question of balance among your current needs, your retirement funding, the needs of your other children, if any, and the anticipated needs of your special needs child.

Finally, be sure to create or update your estate plan and determine which of your assets you’ll leave to the SNT. Also advise relatives of the need to direct gifts and bequests to the SNT, rather than the child, to avoid the risk of disqualifying the child from eligibility for public benefits.

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 sometimes 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, a “five-year rule” for distribution applies, meaning that the account must be paid out in full within five years after the death of the account owner.

Unfortunately, some SNTs 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 remainder beneficiary. However, sometimes SNTs are drafted so that entities that don’t have life expectancies — such as a charity — are potential beneficiaries. In such cases, the five-year rule applies and IRAs can’t generally avoid the income tax consequences of expedited withdrawal.

The rules governing IRA distributions to SNTs are exceedingly complicated. This is all the more reason to consult with an attorney such as Evan Farr, whose practice focuses on planning for adults and children with special needs.