An Introduction to: OBRA - PowerPoint PPT Presentation

1 / 15
About This Presentation
Title:

An Introduction to: OBRA

Description:

An Introduction to: ... No rounding down for monthly gifting, and all transfers are lumped together. Annuities may no longer include balloon payments, ... – PowerPoint PPT presentation

Number of Views:126
Avg rating:3.0/5.0
Slides: 16
Provided by: Shann267
Category:

less

Transcript and Presenter's Notes

Title: An Introduction to: OBRA


1
An Introduction toOBRA 93 Special Needs
Trusts
2
OBRA 93
  • When Congress enacted the Omnibus Reconciliation
    Act of 1993 (OBRA 93), it created a specific
    exception to the rules that normally apply to
    trusts. OBRA trusts share the following
    characteristics
  • Trust assets are not counted as an available
    resource
  • Transfers to OBRA trusts are not subject to
    transfer penalties and,
  • Interest or dividend income generated within OBRA
    trusts are not counted as income for purposes of
    public benefit eligibility.

3
42 U.S.C. 1396p(d)(4)(A)
  • OBRA 93 was codified in the law at 42 U.S.C.
    1396p, where three specific types of trusts are
    found that preserve public benefit eligibility.
    These three trusts include
  • (d)(4)(A) Trusts, or Special Needs Trusts
  • (d)(4)(B) Trusts, or Miller Trusts and,
  • (d)(4)(C) Trusts, or Pooled Trusts.

4
(d)(4)(A) Special Needs Trusts
  • A Special Needs Trust (SNT) must meet the
    following requirements
  • The beneficiary must be disabled as defined by
    law and under age 65
  • Only the beneficiarys parent, grandparent, legal
    guardian, or a court may establish the SNT
  • The SNT must be irrevocable, funded with the
    beneficiarys assets, be established and
    administered for the sole benefit of the
    beneficiary and,
  • Any funds that remain in the SNT at the
    beneficiarys death must be used to reimburse the
    State for all medical benefits provided during
    the beneficiarys lifetime.
  • The requirement to reimburse the State is
    commonly referred to as a payback provision.

5
(d)(4)(B) Miller Trusts
  • Miller Trusts are also called Income Trusts and
    serve a very limited purpose. They can solve
    income problems for benefits such as long term
    nursing home care.
  • The trust can only receive and hold income.
  • Except for a small personal needs allowance, all
    of the income received each month must be spent
    for the beneficiarys care.
  • Any funds that remain in a Miller Trust at the
    beneficiarys death must be used to reimburse the
    State for all medical benefits provided during
    the beneficiarys lifetime.

6
(d)(4)(C) Pooled Trusts
Pooled Trusts are very similar to Special Needs
Trusts, but there are some important differences
  • A Pooled Trust (PT) must meet the following
    requirements
  • The beneficiary must be disabled as defined by
    law, but there is no age limit
  • The PT account must be established by the
    beneficiarys parent, grandparent, legal
    guardian, or a court, but the beneficiary may
    also establish the trust on his or her own
    behalf
  • The PT account must be irrevocable, funded with
    the beneficiarys assets, be established and
    administered for the sole benefit of the
    beneficiary
  • PTs must be created and managed by a non-profit
    association
  • A separate account must be maintained for each PT
    beneficiary, but the trustee may pool the
    accounts for investment and management purposes
    and,
  • Any funds that remain in the SNT at the
    beneficiarys death must either be retained in
    the trust or used to reimburse the State for all
    medical benefits provided during the
    beneficiarys lifetime.

7
Third Party Trusts
  • Third Party Special Needs Trusts are NOT OBRA
    Trusts, but are simply trusts that are created
    with funds belonging to someone other than the
    beneficiary. They must
  • Be established by someone other than the
    beneficiary who has no legal duty to support the
    beneficiary
  • Be funded with funds in which the beneficiary has
    no ownership interest and,
  • Contain special need provisions regarding trust
    distributions.
  • Third Party Trusts may be revocable or
    irrevocable and can be incorporated into
    traditional estate planning because they do not
    require payback provisions.

8
Deficit Reduction Act of 2005Effects on Medicaid
Planning
  • The look-back period for all transfers below fair
    market value is now 60 months, and penalties will
    now begin at the date of application.
  • No rounding down for monthly gifting, and all
    transfers are lumped together.
  • Annuities may no longer include balloon payments,
    and in most cases, they must name the State as a
    contingent beneficiary.
  • Personal Services Contracts are limited and
    narrowly defined in some states.
  • Home equity over 500,000-750,000 will be a
    countable asset.
  • Purchase of a life estate will be disallowed if
    the beneficiary is not living in the home.

9
Who Can Benefit from a Special Needs Trust?
  • People who are disabled as defined by law
  • Some Examples
  • Elderly persons who have become infirm
  • Nursing home residents
  • ALF residents
  • Minor children with disabilities
  • People with disabilities living in the community
  • Disabled recipients of or applicants to
    government assistance programs such as Medicaid
    or SSI and,
  • Recipients of personal injury settlements who
    need to apply for or protect, government
    assistance benefits.

10
How Trust Funds Can Be UsedExamples
  • Purchase a home
  • Purchase a vehicle
  • Travel expenses
  • Entertainment
  • Differentials in housing costs between shared and
    private rooms in institutional settings
  • Any other expense not provided by government
    assistance programs
  • Care-Giver services
  • Attorney fees
  • Guardian fees
  • Supplemental nursing care
  • Medical procedures not provided through
    government assistance
  • Tuition
  • Transportation

11
How Professionals Benefit
  • SNTs and PTs can provide additional resources for
    helping clients augment or increase the level of
    care and services they receive.
  • Increasing the level of care and services
    ultimately translates into an additional revenue
    source for professionals who add value.
  • SNTs and PTs can reduce potential liability in
    the decision-making process of settlement
    allocation.

12
The Florida Pooled Trust
  • The Florida Pooled Trust was created to assist in
    public benefits planning across the country and
    to protect the interests of a vulnerable
    population.
  • The end result is that beneficiaries of the
    Florida Pooled Trust can continue receiving
    public benefits for meeting essential needs and
    still have resources available for their special,
    or supplemental needs.

13
Safety and Protection
  • With an eye toward safety, protection, and
    stability, the Florida Pooled Trust has been
    structured with an internal safety system.
  • The Trusts safety system consists of a check and
    balance system that is supported by professional
    money management as well as separate custodians.

14
Conclusion
  • Many of the previously-used public benefit
    planning vehicles have been eliminated.
  • Because of the increasing complexity of public
    benefit programs, the use of specialized
    administrative professionals has become a
    critical consideration.
  • Attorneys are becoming increasingly more
    concerned about protecting public benefit
    eligibility at the time a settlement is reached.
    Helping a client to establish a SNT or PT can
    alleviate that concern.

15
Who Operates The Florida Pooled Trust?
  • The Not-for-Profit Trustee is
  • The Center For Special Needs Trust
    Administration, Inc.
  • 4912 Creekside Drive ? Clearwater, FL 33760
  • 1-877-766-5331
  • www.sntcenter.org
Write a Comment
User Comments (0)
About PowerShow.com