On May 20, 2021, the Estate and Trust Study Group of the Maryland State Bar Association held a meeting on the topic of Special Needs Planning. The meeting featured speaker Sage C. Hart, Esq. of O’Byrne Law, LLC, who provided a brief overview of special needs planning and an update for 2021.
Ms. Hart began by pointing out the four main factors attorneys should consider when planning for clients with disabilities or family members of individuals with disabilities: planning goals; what public benefits are available for the individual; ways to support the individual’s decision making; and what estate planning tools are available to help them meet their other goals.
When Ms. Hart first meets with clients with disabilities or family members of individuals with disabilities, she asks them what their planning goals are and what they consider to be a good life. Generally, parents planning for children with disabilities want to ensure that they have secure housing, a meaningful purpose, and financial security. These goals can be achieved through planning documents, such as special needs trusts, and by maintaining their eligibility for public benefits.
Ms. Hart then provided an overview of the benefits programs that are available in Maryland. The programs are divided into two main categories: those that employ the means test to determine eligibility and those that do not. She then focused on Social Security programs that provide income to individuals with disabilities: the Supplemental Security Income Program (SSI) and Social Security Disability Insurance (SSDI). She noted there are significant differences in the eligibility requirements for each program. While they rely on the same criteria for assessing whether a person has a disability, the SSI program evaluates a person’s income, assets, and resources to determine eligibility, while SSDI takes a person’s income into account for determining eligibility but does not evaluate assets or resources such as an inheritance.
Maryland’s Medical Assistance program, which is the brand name for Medicaid in Maryland, has multiple coverage groups. Clients with disabilities seeking assistance with estate planning may not know which coverage group they receive assistance through, though, which is critical information for ensuring they continue to meet the eligibility requirements for such benefits. Clients should be able to reach out to the Department of Social Services for their county to determine their coverage group codes, which attorneys can then use to ascertain the eligibility requirements.
Ms. Hart then discussed the planning tools she employs to help clients with disabilities achieve their goals. She typically uses special needs trusts and ABLE accounts. If a special needs trust is properly drafted and funded, the resources of trust will not be considered the property of the beneficiary for purposes of determining eligibility for public assistance programs. Funds in special needs trusts are available to beneficiaries, however. Notably, trustees have sole control over the funds in special needs trusts but must use the funds for the benefit of the beneficiary. There are two types of special needs trusts: third-party and first-party. A third-party special needs trust is funded from money that belongs to someone other than the beneficiary, while first-party special needs trusts are funded solely with funds that belong to the beneficiary. Clients should be wary of commingling third-party and first-party assets in a single trust. Ms. Hart then discussed the benefits, detriments, and potential pitfalls of each type of special needs trust.
Ms. Hart briefly touched on ABLE accounts, noting that they are helpful tools but cannot replace other estate planning documents. Essentially, ABLE accounts are accounts in which parties can place assets for individuals with disabilities. Individuals can access and use the assets, but the assets will not weigh against them for purposes of determining eligibility for public assistance programs.
Ms. Hart ended by discussing the recent modifications to the rules regarding ABLE accounts and recently passed legislation that impacts estate planning.
A recording of the program will be available on the MSBA Estate & Trust Study Group page.