Disability has no legal definition -- nor should it. We all require assistance with some aspect of our lives. Some people require more assistance than others do.

When representing a client with disabilities, focus upon what assistance the client requires and how you can facilitate the continuation or improvement of that assistance.

A "developmental disability" is distinguished from other disabling conditions in that it must occur, by definition, before the affected person reaches the age of 22 years. A developmental disability is expected to continue indefinitely and has a severe impact upon the ability of the affected individual to function independently in society. Future Planning on behalf of People with Developmental Disabilities, A Guide for Estate Planners, GAPS program, Association for Retarded Citizens of Oregon, 1990, page 6.

Developmental disabilities can result from mental impairments, physical impairments, or a combination of both. Generally, most people with moderate to severe cerebral palsy, mental retardation or autism are considered "developmentally disabled."

"The most significant factor which distinguishes people with developmental disabilities from those without handicaps is the degree of assistance that those with handicaps require in their daily lives. Although everyone requires assistance in some aspect of life, those with developmental disabilities often need a greater degree of help in more areas and for a longer period of time than do their non-handicapped peers. Those with physical disabilities often need prostheses or mechanical devices such as wheelchairs or braces. Those with mental impairments often need guidance to make important life decisions or otherwise exercise sound judgment. Because their handicaps are permanent, people with developmental disabilities generally need assistance through the remainder of their lives."

Future Planning, GAPS, above, pages 7-8.

Often, the assistance received by a disabled client comes in the form of various public assistance programs, such as Social Security, Medicare, Medicaid, and community programs. It is important that the attorney/planner be aware of the benefits the client is receiving and develop a plan that will continue or improve upon those benefits.

Eligibility for public benefits programs, such as Social Security retirement, Medicare, and Social Security disability are based only upon the beneficiary's "status," such as citizenship, age, disability, and/or work history.

Other public benefit programs, such as SSI and Medicaid, are "needs-based" benefits. Eligibility for these programs requires not only "status," but also specific levels of assets and income. In addition, the amount of assets and/or income available to the beneficiary can affect his or her ongoing eligibility or the amount and extent of benefits.

Most often, when people speak of "Social Security benefits," they are referring to benefits under Title II of the Social Security Act, called "Old Age, Survivors, and Disability Insurance." Monthly Social Security benefits include: (1) checks for retired persons over 62, (2) disability checks for a worker who becomes severely disabled before 65, and (3) checks to the survivors of a deceased worker. 42 USC Section 301 et seq.; 42 USC Section 402(a), 423(a)(1).

Social Security benefits are based upon status, not upon financial need. Social Security is a public insurance benefit. Beneficiaries are not disqualified for having excess resources. Social Security beneficiaries are entitled to retain any amount of assets. Unearned income is not restricted. 42 USC Section 410.

Social Security benefits will be affected by the beneficiary's earned income, i.e., wages or net profits. It is important to determine the amounts of earned income allowed to the individual. Earned income over the allowable amount can result in reduced benefits and overpayment. 42 USC Section 402, 403.

For more information about Social Security Benefits, see OSB Elder Law CLE Handbook, Chapter 4.

Medicare is a federal health insurance program for certain elderly and disabled individuals. The two parts, Part A (hospital insurance) and Part B (medical insurance), differ in their eligibility requirements and coverage. Part A covers primarily the cost of hospital, skilled nursing facility (maximum 100 days), home health, and hospice care and is available to most recipients without payment of premiums. Part B covers many other health care expenses, such as physician services, diagnostic tests, and the use of medical equipment. Enrollment in Part B is optional and is purchased by paying a monthly premium, which usually is deducted automatically from the individual's Social Security check (in 2002, $54.00). Both Part A and Part B require payment of deductibles and copayments. 42 USC Section 1395 et seq.

Medicare is available to insured participants who are over 65 years old and receive Social Security or railroad retirement benefits. Beneficiaries under age 65 who are eligible for Social Security disability benefits and have been disabled for more than 24 months are also entitled to Medicare. 42 USC Section 1395I-2(a); 1395c.

Medicare beneficiaries need to file claims to receive benefits. There is no requirement that a beneficiary report assets or income.

For more information about Medicare Benefits, see OSB Elder Law CLE Handbook, Chapter 5.

Supplemental Security Income is a federal program of cash assistance for aged, blind, and disabled individuals who have little income and few assets. The program provides monthly checks from the federal government of (in 2002) up to $545 for an individual and up to $817 for a couple.

SSI is administered by the Social Security Administration (SSA). In Oregon, eligibility for SSI benefits (in most cases) automatically qualifies the recipient for Medicaid benefits.

The legal authority for the Supplemental Security Income program is contained in Title XVI of the Social Security Act, 42 USC Sections 1281-1385. HHS regulations implementing the program are found in 20 CFR Section 416.1100 et seq. Internal policy guidelines are found in the Program Operations Manual System (POMS), Section SI00810.100, et seq.

1. Who is Eligible for SSI?  To be eligible for SSI, a beneficiary must be 65 or older, blind (vision no better than 20/200 even with glasses), or disabled (a physical or mental impairment that prevents a person from doing any substantial work and that is expected to last at least 12 months or result in death). He or she must be a citizen of the United States or a lawfully admitted alien. 42 USC Section 1382c(a)(1)-(3).

The individual's income and assets cannot exceed certain levels established by Congress. To be eligible for SSI, a single person cannot have "countable resources" worth more than $2,000, and a couple cannot have countable resources worth more than $3,000. The individual cannot have "countable income" in a month of more than the amount of the Federal Benefit Rate (FBR) for an individual of $545 or for a couple of $817 (for 2002). 42 USC Section 1382(b).

2. Income.  Income includes both "earned" and "unearned" income. 42 USC Section 1382a(a). Generally, earned income is wages paid from a job or the net earning from self-employment. It can also include payments from special work activity programs and certain sickness or disability benefits. 42 USC Section 1382a(a)(1).

Unearned income is, simply, all income that is not earned income. This includes anything an individual receives in the form of cash or otherwise that the individual can use to meet his or her needs for food, clothing, or shelter. 42 USC Section 1382a(a)(2).

Non-cash assets an individual receives constitute "in-kind income." This includes food, clothing, shelter, or anything that may be used to acquire these necessities. 20 CFR Section 416.1102. Thus, an individual receives in-kind support and maintenance when he or she receives food, clothing, or shelter directly without having paid for it or receives these items because someone else pays for it. 20 CFR Section 416.1130(b).

Items an individual receives that cannot be used as food, clothing, or shelter, or to obtain these necessary items, are not income. 20 CFR Section 416.1103. Therefore, it is not countable income for a trustee (or anyone other than the beneficiary) to make a payment directly to a third-party vendor for goods other than food, clothing, or shelter that benefit the individual. 20 CFR Section 416.1103(g), POMS Section SI 00810.010.

a. Countable Income.

b. Not Income.

3. Resources.  "Resources" are defined as "cash or other liquid assets," including real or personal property that an individual (or spouse) owns and could convert to cash to be used for support or maintenance. 20 CFR Section 416.1201(a).

In determining an individual's resources, the distinction between resources and income must be understood. An individual who receives an asset in a given month that may be used to meet his or her needs for food, clothing, or shelter receives income in that month. An asset that an individual already possesses in that month does not constitute income but is counted as a resource. POMS Section SI 00810.100(A).

SSI does not count certain kinds of assets in determining eligibility for SSI. These include:

42 USC Section 1382b(a).

4. Trust Assets.  A trust is treated as a resource if the beneficiary has unrestricted access to the principal. POMS Section SI 01120.105(A)(2).

Most special needs trusts restrict the beneficiary's access to the principal. The trust principal is not counted as a resource where the beneficiary's access is restricted, even where the trust agreement can be revoked by someone other than the beneficiary, the trust agreement provides that the beneficiary receive a regular specified payment from the principal for his or her use, or a representative payee or legal guardian is designated for bank accounts using the form "in trust for." POMS Section SI 01120.105(A)(2).

Medicaid is a joint federal-state program of medical assistance. Eligibility is based upon status (i.e., age, disability, or family) plus financial need. Unlike SSI, Medicaid does not pay cash grants to beneficiaries. Medicaid pays providers directly for health care and long-term care services rendered to eligible Medicaid recipients. Federal law provides the basic framework for the Medicaid program in 42 USC Section 1396 et seq. States are mandated to provide some services to certain groups of people. Other covered groups and services are optional. Oregon's applicable statutes and rules appear at ORS 414.025 et seq. and OAR Chapters 410, 411, and 461.

1. Who is Eligible for Medicaid?

a. Aged, blind or disabled individuals who receive SSI cash benefits are automatically eligible for Medicaid. OAR 461-135-710. See discussion of SSI eligibility above. "Aged" means 65 or older, and "disabled" means unable to perform any substantial work as a result of a medically proven physical or mental impairment, for at least one year. OAR 461-125-370.

b. Institutionalized individuals, or individuals who would be eligible for Medicaid if they were institutionalized and who receive in-home or community-based services under Oregon's Medicaid Waiver, referred to as "waivered services." OAR 461-135-760.

2. Income.  To be eligible for Medicaid, an individual's income and assets cannot exceed the levels established for SSI eligibility. One important exception is for institutionalized individuals or individuals receiving waivered services. Institutionalized individuals whose income is at or below 300 percent of the SSI standard (in 2002, $545 x 3 = $1,635) are also eligible. OAR 461-135-750.

3. Resources. Again, the resource limits are those used for the SSI program. Also, generally speaking, those assets which are exempt under SSI are also exempt for Medicaid eligibility. However, the Medicare Catastrophic Coverage Act (P.L. 100-360) eliminated the value limits on many exempt assets for individuals who began receiving long-term care after September 30, 1989. 42 USC Section 1396r-5(c)(5)(B).

One of the exceptions found in the Medicaid rules is for institutionalized individuals with spouses. To protect the financial well-being of the spouse at home, Medicaid will permit married Medicaid recipients to retain significantly more assets (and monthly income) than recipients who are single. These exceptions are contained in the spousal impoverishment rules found in 42 USC Section 1396r-5, which allow certain spouses to keep one-half of the couple's total assets, with a minimum of (in 2002) $17,856 and a maximum of $89,856. 42 USC Section 1396r-5, OAR 461-160-580.

4. Trust Assets. Trusts funded with money contributed by third parties (parents, grandparents, children, friends, etc.) are governed by the same rules as SSI.

Trusts funded with money belonging to the individual or spouse are governed by the Medicaid trust rules found in 42 USC 1396P(d) and OAR 461-140-540. These rules apply if the assets of the individual were used to form all or part of the corpus of the trust and if the following individuals established the trust other than by Will:

In the case of a Revocable Trust:

In the case of an Irrevocable Trust:

42 USC 1396p(d)(3)(B). OAR 461-140-540(9).

5. Exempt Trusts.   The Omnibus Budget Reconciliation Act of 1993 ("OBRA 1993") expressly allowed (created) certain trusts to be established and administered without adversely affecting the individual's Medicaid eligibility. They are as follows:

a. Trust for a Disabled Person Under 65.  A trust for a "disabled person" (as defined under SSI rules) under age 65 containing that person's assets and established for that person's benefit by the person's parent, grandparent, legal guardian, or a court, will not be considered an asset, provided the state will receive all amounts remaining in the trust upon the death of the disabled person up to the amount of Medicaid assistance provided to this person by the state. OAR 461-145-540(8)(a). A more complete discussion of the "disability trust" can be found in part VI., "Planning for an Individual Already Receiving Public Assistance," below.

b. Trust for a Disabled Person Managed by a Nonprofit Association. Also contains provision for reversion to the state. See OAR 461-145-540(8)(c).

For more information about Supplemental Social Security (SSI) Benefits, see OSB Elder Law CLE Handbook, Chapter 4.

(Aging News Alert, MetLife Mature Market Group 12/8/98)

( Alzheimer’s Association New, San Diego Chapter, Spring 2002.)

Many of our clients with significant incapacity or disability require some form of long-term care. Few clients or couples have enough income to pay for the high monthly cost of long-term care ($2,000 to $5,000).

By utilizing the state and federal laws governing eligibility for Medicaid, much can be done toward preserving the estate and/or preventing impoverishment of the spouse remaining in the community.

Long-term care needs can range from around the clock medical treatment to simply requiring assistance with the daily activities of life. In the past, a nursing facility was the only option for care outside the home. Today, Oregon leads the nation in providing alternatives to the traditional nursing home-type care.

1. Nursing Home Care. Nursing homes, licensed by the State, provide several different levels of nursing care to residents. These range from intensive nursing and rehabilitative care for people with unstable medical conditions to routine care for people with chronic medical problems. Current estimated costs range from $3250 to $5000 per month, depending on the level of care needed.

2. Adult Foster Care. An adult foster home provides care to five or fewer residents. The operator or resident manager lives in the home. Personal care, cooking and cleaning are provided. Other types of care depend upon the qualifications and license of the provider. Estimated costs range from $2000 to $2750 per month.

3. Residential Care. Residential care facilities serve six or more residents and have staff on duty around the clock. Meals and housekeeping services are provided, but the amount of personal care and supervision varies.

"Assisted Living" is a particular type of residential care, with its own administrative rules. The focus is on providing care through a social model that emphasizes independence.

Estimated costs for residential care range from $1500 to $4000 per month.

4. In-home Services. A range of services can be provided at home, from a short visit to meet a particular need for assistance, to live-in help. In-home services, generally, are not licensed by the state, although some providers carry their own license. Estimated costs vary according to the hours of service and the type of provider used.

5. Adult Day Care. Adult day care is available in a variety of settings ranging from freestanding programs to nursing homes or senior centers. It often functions as respite care, to allow a regular caregiver, such as a spouse, to have a break or to continue working. Daily charges are now about $40 to $80.

1. Health Insurance--Medicare.   Health insurance, including Medicare, is primarily focused upon the payment of hospital and physician care for catastrophic illness or accidents. Patients must require skilled care (the services of a doctor or nurse available 24 hours a day). Medicare may cover a skilled care patient but only in a licensed nursing facility and only for a maximum of 100 days. (See discussion above.)

2. Long-Term Care Insurance. This is a new and growing industry that should be watched with interest and concern. Long-term care policies frequently contain limitations or exclusions that prevent them from being an effective mechanism for funding care for an extended period of time. Policies sold in Oregon must now include coverage for alternatives to nursing home care.

For more information about Long-Term Care Insurance, see OSB Elder Law CLE Handbook, Chapter 8.

3. Private Pay.  Currently, over half of the cost of long-term care in Oregon is paid from personal or family funds. The funds of both spouses are considered available to pay for care. The assets of adult children are not available assets unless they have signed as a guarantor for the nursing home expenses.

4. Medicaid. The Medicaid program is the second largest source of payment for long-term care in Oregon. Medicaid is a joint federal and state program. Medicaid covers the full range of long-term care services, including skilled, intermediate, and custodial care, adult foster home, and in-home services.

2. Foundations of Elder Law and Advanced Issues for Elder Law Practitioners, OLI CLE, April 18, 1997.

3. Various materials for the National Academy of Elder Law Attorneys, 1604 North Country Club Road, Tucson, Arizona 85716, (602) 881-4005.

4. R. Pagnano and W. Fitzwater, "Special Needs Trusts," Chapter 10, Administering Trusts in Oregon, OSB Publication, 1995.

Estate planning most often involves establishing a testamentary distribution of the client's property to the heirs and devisees. This process makes a number of assumptions: that the heirs are competent to manage the inheritance and make sound financial decisions, and that the heirs are capable of caring for themselves independently. These assumptions cannot be made if an heir is also a severely disabled or incapacitated person.

In addition, as discussed above, many disabled heirs receive public assistance benefits. Some of these programs, such as Supplemental Social Security, Medicaid, subsidized public housing, and food stamps, are "needs-based" programs. In other words, one's eligibility is based upon one's financial need. A testamentary bequest or distribution to such a person will likely make him or her ineligible for the public benefit until the funds are liquidated.

Parents with adult disabled children have no legal duty to support that child. Once the child reaches majority (18 years), the parent's duty to provide room, support, and medical care terminates. Neither the state, county, nor a private facility can force a parent to provide support for an adult child who would otherwise be eligible for public assistance.

Planners for parents of adult disabled children should consider the following options.

This is the simplest option but seldom the best. The beneficiary will receive the funds with no limitation and with no supervision. Also, if the beneficiary is receiving needs-based assistance, the beneficiary will be ineligible for the assistance until the funds are spent down.

This still may be the best option for a child who may be disabled but still capable of managing his or her own affairs.

A common and simple method of planning is transfer to a third party outright. The third party would be a family member or friend who is committed to the disabled person and is trustworthy. In essence, the parent is funding a person who will step into the same role as the parent had--providing for the disabled person as needed.

The problem with this option is obvious. There is no legal method of requiring the third party to assist the disabled child. The bequest is the sole and unrestricted property of the third party. (That said, in most families, one or more family members would remain as committed to the disabled person, with the same care and concern as the parent.)

The parent could transfer to a trust established for the benefit of the adult disabled child. The trust could give the trustee discretion to make distributions of income and principal as the trustee determined necessary for the disabled person. The trust would be structured very similar to a testamentary trust established for minor children.

This arrangement will adequately provide for an incapacitated person who cannot manage his or her own financial affairs. It will not work for an incapacitated or disabled person receiving public assistance benefits. As discussed below, if the trust assets can be paid or applied for food, clothing and shelter, the assets will be considered available to the disabled person and could disqualify the person for certain public benefits, such as Medicaid. However, if public assistance eligibility is not important or likely to be needed in the future, this option is sufficient.

Most parents prefer to supplement rather that to replace the public assistance benefits their adult disabled child is receiving. One method of accomplishing this goal is transfer to a special needs or supplemental needs trust.

1. Definition. A grantor, who has no duty of support to the beneficiary, creates a nonsupport discretionary trust for the supplemental needs of the beneficiary.

2. Applicable Law. The state may count only the income and resources that are "available" to the public support applicant. See Soc. Sec. Act; Section 1109 and 1902(a)(17); Reg. 435.845 and 436.845. See also CCH Medicare and Medicaid Guide (1990), paragraph 14.311, p. 6171.

Resources available to the applicant do not disqualify him or her if they are not available for conversion into food, clothing, or shelter. See 20 CFR Section 416.1102; 416.1103; 416.1201(a).

Social Security regulations, 20 CFR Section 416.1201, list four requirements, all of which must be satisfied to render an asset a countable resource, as follows.

a. The recipient must have an ownership interest in the asset. For example, property loaned to the recipient is not a resource to him or her.

b. The individual must be independently able to deal with the property. Thus, property subject to legal dispute, or requiring the assent of a second person to withdraw or use (such as a bank account requiring two signatures), is not a resource.

c. The property must be convertible to cash. If as a practical matter the property cannot be sold, then it is not a resource regardless of its nominal or book value.

d. Though convertible to cash, if availability is limited to uses other than those relating to food, clothing, and shelter, the property is not a resource to the recipient.

See also Social Security Administration, Program Operations Manual (POM) Section 01121.105.

Oregon rules provide that "a resource is not available if the resource is an irrevocable or restricted trust and cannot be used to meet the basic monthly needs of the financial group." OAR 461-140-020 (3)(e).

Cases supporting the creation of trusts that provide for the supplementary needs of beneficiaries include In re Emmons Will, 59 N.Y.S.2d 264 (Sur. Ct. 1946); In re Wright's Will, 107 N.W. 2d 146 (Wis. 1961); Matter of Holmquist Trust, 357 N.W.2d 7 (Wis. Ap. 1984); Snyder v. Dept. of Public Welfare, 556 A.2d 31 (Pa. Commw. 1989); Lang v. Com. Dept. of Public Welfare, 528 A.2d 1335 (Pa. 1987); Tidrow v. Dir. Mo. State Div. Family Serv., 688 S.W. 2d 93 (Mo. App. 1985); and see an unpublished administrative law judge opinion, Boston, Mass., reported in The Elder Law Report, vol. 2, no. 3, (1990), pp. 3 and 4, by Alex L. Moschella.

Special needs trusts have a dual purpose: (1) to supplement, not replace, public benefits, and, more importantly, (2) to improve the overall quality of life of the beneficiary. The trustee is required to carefully balance these two objectives. The trustee must avoid making a distribution to the beneficiary that may violate the income or resource levels of the applicable public assistance program (usually SSI or Medicaid), while still maintaining a level of support that insures a good quality of life for the beneficiary.

As discussed above, it is necessary that the trustee of a special needs trust possess a full and working knowledge of the public assistance programs available to the beneficiary now and in the future.

The following are some general guidelines for trustees to consider when making distribution of income and/or principal to beneficiaries of special needs trusts.

1. Avoid Direct Distributions to the Beneficiary.  Direct distributions of income or principal to the beneficiary will be considered income received by the beneficiary in that month. For Medicaid purposes, a direct distribution can result in an increased share of the cost for care. For SSI, the distribution can result in a dollar-for-dollar offset of the monthly benefit. 20 CFR Section 416.1123(a); OAR 461-140-540(9)(c).

2. Utilize the Exempt Resources Rules. As discussed above, there are certain resources (home, car, and medical equipment) that are exempt for the purposes of most public benefits programs. 42 USC Section 1382b(a).

The trustee should:

3. Make Payments Directly to Vendors. The trustee should make payments, on behalf of the beneficiary, directly to the third-party vendor. Direct payments for goods other than food, clothing, or shelter are not income to the individual. 20 CFR Section 416.1103(g).

1. D. Meyer, "Trusts,: Chapter 4, Handling Claims for Minor and Disabled Plaintiffs: Coordinating All Aspects of the Case, OLI CLE, April 10, 1998.

2. R. Pagnano and W. Fitzwater, "Special Needs Trusts," Chapter 10, Administering Trusts in Oregon, OSB Publication, 1995.

3. S. Ross, "The Special Needs Trust and Its Use in Estate Planning for Families with Disabled Children," Estate Planning, Trust and Probate News, No. 4, p. 7, 9, Spring 1987, State Bar of California.

4. C. Kruse, Discretionary Trusts: Insulating Discretionary Trust Assets for Elders and Incapacitated Persons from Consideration by Medicaid and Other Public Support Providers, 17 ACTEC Notes, No. 1, Summer 1991, pp. 26-71. Also, published in part, Third Annual Symposium on Elder Law, The National Academy of Elder Law Attorneys (1991).

What do you do when a client who is already receiving public assistance in the form of Medicaid or SSI benefits receives an inheritance or an award from a personal injury suit? As discussed in Chapter III above, the receipt of income and/or assets has the effect of making the client ineligible for benefits.

Unfortunately, the planning options for individuals currently applying for or already receiving Medicaid benefits are few. The two most common are: (a) spend down, and (b) the use of a "Disability" Trust.

The most common planning tool is the spend-down of resources. The client (or fiduciary) comes to your office with resources above the Medicaid resource limit ($2000). The excess resources can certainly be spent on the client's long-term care needs. However, you can also spend down the excess resources by purchasing additional "non-countable" (exempt) resources, by adding to the value of existing non-countable resources, or by purchasing services for fair market value. This is often a simple and effective way to improve the client's quality of life. Be creative. Thoughtful purchases like prepaid monthly flower arrangements or regular visits by a massage therapist to provide hand or foot massages can brighten moments in the day of person with decreasing capacity. There are many personal items and services that can make life easier, more comfortable, or pleasing.

Spending down often begins by purchasing or enhancing existing exempt resources. Some examples are as follows: