Currently, there are two important bills pending in the federal and state legislatures that affected the aged and the disabled. One bill pending before the United States Congress affects special needs trusts. The other bill, which is pending before in the New Jersey Legislature, affects the Medicaid asset transfer rules for New Jersey’s Medicaid program.
The federal bill concerns who can establish a special needs trust. A special needs trust is a trust that permits a beneficiary of means-tested government benefits, such as Medicaid and Supplemental Security Income, to enjoy the benefits those programs offer and to have other monies that can be used to supplement those government benefits.
A disabled person may receive Medicaid benefits, and the Medicaid program may be paying for substantial medical services for the disabled person, such as nursing home care. But the Medicaid program does not pay for all medical services that a disabled person may need or desire. The person might want therapy or a medical procedure for which the Medicaid program will not pay because the therapy or service is not deemed necessary under the Medicaid program’s guidelines.
If the disabled person has money in a special needs trust, the trustee of the trust could decide to pay for those therapies or services that the trustee deems worthy. The ability to obtain extra therapies and services can be a tremendous help to a disabled individual.
A special needs trust is a self-settled trust, meaning that the disabled person puts his own money into the trust. The disabled person must be under the age of sixty-five when the trust is established and when the assets are placed into the trust. If the person is over the age of sixty-five, then assets placed into the trust are treated as an asset transfer for purposes of the Medicaid program and will disqualify the disabled person from the Medicaid program for a period of time.
A special needs trust must also contain a payback provision. A payback provision provides that when the disabled person dies, any money left in the trust will go to pay the state’s Medicaid program back for any benefits that it paid to the disabled person when he was alive.
Oddly enough, though, despite the fact that the trust is funded with the disabled person’s assets and is for the disabled person’s benefit, the disabled person cannot establish his own self-settled special needs trust. The trust must be established by his parent, grandparent, guardian, or a court.
The fact that the disabled person cannot establish his own special needs trust is, for lack of a less euphemistic word, discriminatory. It treats all disabled people as if they were mentally incapacitated, which is untrue. Many people (probably most people) who are classified by the Social Security Administration as disabled retain their mental capacity.
The Special Needs Trust Fairness Act, which has been approved by a sub-committee of the United States Senate, seeks to correct the law that establishes special needs trust to permit the disabled person, if he retains mental capacity, to establish his own special needs trust.
The other bill of importance to the aged and disabled is pending in the New Jersey Legislature. This bill affects the Medicaid asset transfer rules for New Jersey’s Medicaid program.
Medicaid is a means-tested government health payment program for needy individuals. In order to qualify for Medicaid, a person must be aged or disabled and must have a very limited amount of assets.
In order to “punish” applicants who have tried to purposefully impoverish themselves by giving away their assets before making application for Medicaid, the Medicaid program has established transfer of asset rules. In short, if an applicant has given away any asset during the five-year period of time prior to applying for Medicaid, Medicaid makes that individual ineligible for Medicaid benefits for a period of time; the more money given away, the longer the period of ineligibility.
The current legislation would permit the New Jersey Medicaid program to disregard small transfers equaling no more than $500 in any one month. By disregarding these small transfers, the Medicaid program can be administered quicker and more efficiently.