The Voice is the e-mail newsletter of The Special Needs Alliance. This installment was written by Special Needs Alliance members Edward V. Wilcenski, Esq. and Laurie Hanson, Esq.. Ed Wilcenski is a partner in the Clifton Park, New York law firm of Jones Wilcenski & Pleat PLLC. His practice is focused entirely on Special Needs Estate Planning, Elder Law, and Trust & Estate Planning and Administration. He is a former President of the Special Needs Alliance, and is a frequent author and lecturer on topics involving special needs trusts and estate planning for individuals with disabilities and their families.
Laurie Hanson is a shareholder in the Minneapolis, Minnesota elder law firm of Long, Reher & Hanson, P.A. whose focus is to provide individuals who are aging or living with disabilities positive strategies to live as independently as possible for as long as possible. Ms. Hanson concentrates her practice exclusively in the areas of government benefit eligibility, special needs trusts, trust and public benefit litigation, estate planning and planning for incapacity. She is the past president of the Elder Law Section of the Minnesota State Bar Association.
Now age 30, Carrie has been living semi-independently since she turned 21. She receives $694 each month from the Social Security Administration: $500 of CDB (Childhood Disability Benefit) and $194 of SSI (Supplemental Security Income). CDB is an income benefit for individuals who were disabled before age 22 and have a parent who paid into the social security system and is retired, dies, or is disabled. CDB is based on the parent’s social security account. A description of how the entitlement amount is determined is beyond the scope of this article.
Carrie is on Medicare, Medicaid, and a Medicaid waiver program. When Carrie was 28, she met Daniel and fell in love. They have been dating ever since and have announced joyfully that they are going to get married in the fall. How will the marriage affect her SSI? How will it affect her Medicaid? Should the family give them gifts? How will her needs be met? What is Daniel’s situation – is he living with a disability or is he able-bodied and able to work and earn a living?
The “marriage penalty” most commonly refers to the increase in taxes paid by married individuals when their combined income pushes them up into a higher tax bracket. Taxation is not the main concern here. Instead, the concern is whether or not the combined income and assets of the marriage will disqualify the bride and/or groom from receiving public benefits and therefore leave them unable to live successfully in the community.
Will Carrie lose her CDB or Medicare?
It depends on whether Daniel himself is receiving Social Security benefits (SSI, SSDI, CDB or retirement benefits). Since neither Medicare nor CDB are “means-tested” programs, the Social Security Administration will not look at Carrie’s assets or Daniel’s income and assets to determine whether she is eligible. She has been eligible for CDB and Medicare simply because of her disability that began before age 22 and the retirement of her father, who has a Social Security work record. Her marriage to another social security recipient would not cause her to lose her own CDB eligibility. However, if Daniel is not a social security beneficiary, Carrie would lose her own CDB eligibility that derives from her father’s status as a retired Social Security wage earner. If Carrie instead had been receiving a Social Security Disability Insurance (SSDI) benefit, based upon her own work record, as a result of later onset of her disability, she would not lose her SSDI entitlement due to marriage.
Will Carrie lose her SSI? Will her SSI be reduced?
If Carrie marries Daniel, his income will be “deemed” to her. This means that his income counts when determining whether or not Carrie is able to receive SSI. Also, his resources count in determining Carrie’s eligibility. If Daniel also receives SSI, then they will both remain eligible, but there is a “marriage penalty.” As individuals, each may have $2,000, but as a married couple they may have only $3,000. As individuals, each may each receive up to $674 (the 2010 maximum federal SSI benefit) or $694 combined SSI and CDB. As a couple, the combined maximum income in 2010 is $1,011. Thus, they would have to reduce assets by $1,000 and their income could be reduced by as much as $377.00 each month. If both are dependent on SSI and Medicaid (see below) they are probably better off having a marriage ceremony – but not obtaining a license! (However, for those of you in states recognizing common law marriage – beware!).
To-do list before marriage:
The SSI participant and his or her advocates must assess the participant’s income and resource picture and the couple’s income and resource picture against the SSI program limits to determine whether marriage is a an economically feasible option. In some cases the marriage will not create an eligibility problem.
Will Carrie lose her Medicaid?
Carrie may lose her Medicaid if she marries Daniel because, like the SSI program, the federal Medicaid program deems his income and resources to her. If by marrying Daniel, her income and assets will exceed income and asset eligibility levels, she will lose her Medicaid and perhaps her safety net, depending upon the services the Medicaid program is providing her. In some states, the Medicaid waiver programs do not count the assets or income of the spouse, and so if Carrie lives in one of those states, her eligibility will not be affected.
To-do list before marriage:
The Medicaid recipient and his or her advocates must assess the individual’s income and resource picture and the couple’s income and resource picture against the Medicaid program limits to determine what is best for each individual. The advocates should explore whether the state has a Medicare supplement policy or high-risk policy that can be purchased to meet the recipient’s needs. Perhaps Carrie could go on Daniel’s insurance through work. Perhaps there is a state waiver program that will not take into account a spouse’s income. All these issues must be explored and a plan put in place prior to the marriage, so that Carrie’s needs (and Daniel’s) can be met.
What about wedding gifts?
Family members (often the parents of the bride and groom) are inclined to make gifts to commemorate the event, both at the time of the event, as well as on an ongoing basis. In many cases, this support is necessary to allow the newlyweds to continue to live in the community. As a preliminary matter, because tangible personal property (furniture, electronic goods, entertainment items) are considered “exempt” under both the SSI and Medicaid program rules, those types of gifts can be presented at the time of the wedding without concern.
The bigger challenge for families is figuring out how to provide financial support for the couple without impacting government benefit program eligibility. This also requires parents and other generous family members to consider how their estate plans should be revised as a result of the marriage. Gifts of money given directly to the individuals will adversely affect the government benefits. In order to avoid this, here are a few rules to follow:
- Cash gifts will not affect Medicare or Childhood Disability Benefits.
- Cash gifts are counted as income in the month received and an asset thereafter for both the Medicaid and SSI programs. For Carrie that means the first $194 she and Daniel receive in gifts will offset her SSI income dollar for dollar. She must report the gifts, and she will be charged with an overpayment that month and eventually have to pay that back to the Social Security Administration. If she or Daniel has more than $2,000 (or $3,000 if they are both SSI recipients) the month after the gifts are received, then Carrie (or both of them) will be ineligible beginning that month.
- If Carrie lives in a state where she can be on a Medicaid waiver program that does not deem her husband’s income and assets to her, then the gifts can all be given to Daniel without affecting Carrie’s Medicaid benefits.
- If a supplemental needs trust is established by a relative for Carrie (and for Daniel, if he too is eligible), then gifts can be given to the trustee of the trust and the assets in the trust will not be counted and eligibility will not be jeopardized. If both Carrie and Daniel are disabled, the trust can be drafted for one of them and allow remaining funds at his or her death to be held for the benefit of the survivor for the rest of his or her life. Upon that survivor’s death, the trust terms can provide for return of any remaining funds to the family who funded the trust in the first place. A similar management arrangement can occur if there are children of the marriage, who would presumably also require additional financial support.
To-do list before marriage:
Advocates for Carrie and Daniel must meet and analyze the various public benefits that Carrie and/or Daniel are receiving and make sure that gift guidelines are included in the invitation. That way, all gifts given will be used for Carrie and Daniel’s benefit and not jeopardize any public benefit. A special needs attorney should draft the trust before the invitations go out, so that instructions as to how to make out the checks can be clear. Also or alternatively, it should be made clear that no cash gifts should be given but that Carrie and Daniel can receive household items or gift cards that cannot be redeemed for cash or for food items (because of Carrie’s SSI) without jeopardizing benefits. Planning is the key!
These types of trust arrangements make the identity of the trustee very important. In a typical case (which does not involve a married beneficiary), parents will designate a non-disabled child to serve as trustee of a disabled sibling’s trust. But if the non-disabled sibling is also expected to manage property for the surviving spouse of a sibling with a disability, the dynamic is different. It is important for the family to discuss this openly and ensure that the sibling trustee is comfortable with this arrangement. In some cases, a family member from the surviving spouse’s side could serve as a co-trustee, which can often make communication with the surviving spouse easier and thus decisions on trust distributions more efficient. Variations in this area abound, and as with any type of estate planning, communication is critical: communication between the parents and the expected trustee, communication between the families of the married couple, and good written communication to guardians and trustees who will step in when the parent/advocates are no longer able to remain in the driver’s seat.
What other issues should be explored prior to marriage?
Advance directives for health care and powers of attorney for finances.
In a typical estate planning case, a spouse is usually named as the primary agent under a power of attorney and health care directive to make both financial and medical decisions in the event of unexpected incapacity. When an individual with a cognitive or developmental disability gets married – especially to another individual with cognitive or developmental disabilities, this is a more challenging decision. On one hand, the commitment of the individuals through marriage suggests that the same rules should apply: the spouse with the disability should be named as the primary agent. On the other hand, families must be realistic in recognizing the limitations of some individuals with disabilities, and whether the spouse is capable of what is required of an agent.
To-do list before marriage:
Prior to the marriage, families and advocates must discuss with the bride and groom-to-be who will be responsible for health care decisions and financial matters. Should it be the spouse or the spouse along with another advocate? In some cases, families bypass the spouse and name the spouse’s parent as agent or guardian. Alternatively, the spouse could be listed as a co-agent with the individual’s parent. Each situation is unique, and different individuals will approach this issue in different ways. The important point is that even after the marriage, individuals with disabilities may need help. Agents (guardian, power of attorney, health care agent) will still play an important role, and in many cases both a spouse and another advocate can share the responsibility in providing that assistance. By planning this before the marriage and before a crisis strikes, much heartache can be avoided.
Medicaid lien (estate recovery).
When Carrie and Daniel get married the Medicaid lien or estate recovery rules need to be considered. In many states the Medicaid program can make a claim against property owned by individuals after their death for Medicaid benefits paid. There are wide variations from state to state in how Medicaid lien or estate recovery rules are applied. Carrie and Daniel should get legal advice on whether the Medicaid lien will apply to either of them in their state and what options are available to minimize the impact of any claim against their assets.
In summary, Daniel’s and Carrie’s income, assets and income-earning potential (as well as whether or not either of them is going to get an inheritance some day) should be part of the decision-making process. If one of the parties is gainfully employed and the other receives means-tested public benefits to meet daily needs, will it be financially feasible for them to get married? We strongly urge the couple to consult with an attorney experienced in special needs and Social Security law specifically concerning the effects of marriage on all of their potentially applicable benefit programs.
Marriage should not have harsher consequences just because one or both of the parties are receiving government benefits, but these benefits can present a number of complex issues. As with everything in the area of estate planning, it is important to explore these issues in advance, and to keep an open line of communication among the appropriate family members before, during and after the marriage.
We leave the reader with this thought: Maybe this is another area where advocates must contact legislators to describe how “anti-family” these rules can be. If an individual with a disability is better off not married (as often seems the case), but simply living together, are our public benefit rules family-friendly?
About this Newsletter:
We hope you find this newsletter useful and informative, but it is not the same as legal counsel. A free newsletter is ultimately worth everything it costs you; you rely on it at your own risk. Good legal advice includes a review of all of the facts of your situation, including many that may at first blush seem to you not to matter. The plan it generates is sensitive to your goals and wishes while taking into account a whole panoply of laws, rules and practices, many not published. That is what The Special Needs Alliance is all about. Contact information for a member in your state may be obtained by calling toll-free (877) 572-8472, or by visiting the Special Needs Alliance online.