Plan To Be 100

A recent unpublished COA opinion raises some interesting issues regarding the probate court’s role in creating special needs trusts, as well as some food for thought on how the Affordable Care Act (aka, Obamacare) may impact decisions in these cases in the future.

In In Re Hope Special Needs Trust a 75 year-old man with mental illness petitioned the probate court for authority to create and fund a self-settled Special Needs Trust (SNT) with about $300,000 which he inherited.  At the time he petitioned, the man was receiving several government benefits, including two means-tested benefits: Supplemental Security Income and Medicaid.  In addition, because of his eligibility for these benefits, the cost to him of staying in the group home in which he resided was for reduced.

The Court found that the man was in fact a protected person, but denied the request to create and fund the SNT and instead ordered the funds be placed in a conservatorship for his benefit.

The COA upheld the trial Court’s decision.

In reaching this result, the trial Court found that the resources the man had were sufficient to privately pay for his care needs, including any increase in rent at the group home, and that the petitioner did not fully appreciate that trade-off that he was making, which was that he was giving up the ability to leave any unused portion of his estate to his heirs in return for continuing to receive modest government assistance through these means-tested programs.  Interestingly, the Court stated that this man did not understand what his attorney had him sign, a seeming slam on the attorney (no doubt, one of our several fine Yooper elder law attorneys, as this case came out of Chippewa County.)

So the conclusion of this trial Court was that the best interests of the protected person were not being served by the relief requested. This case should remind those of us who do this work that once the authority of the probate court is invoked, the court has the ability to independently analyze the situation and make its own determination about what is in the best interest of the protected person.

[An interesting side issue in this case is that the petition requested the funds be put in a pooled accounts (d4C) trust.  This is interesting because it is divestment to fund a pooled accounts trust after age 65 for Medicaid purposes. BEM 401, page 7.  It appears this individual was not in a Medicaid program where divestment is an issue, and the facts suggest that he was not likely to pursue these divestment programs (the long term care programs) anytime soon, if ever.  It is also interesting because, were this a first-party (d4A) trust, and were this individual under the age of 65, the issue of cutting out the heirs would have been mitigated since a first-party trust could have left the remaining resources, after reimbursement to the state for medical expenses paid by Medicaid (which in this case it appears would have been minimal) to the heirs or beneficiaries, seemingly removing the Court’s primary objection to the plan.]

Now the Obamacare issue.

Assuming Obamacare stands, in the future, purchasing health insurance for people who have preexisting conditions will not be an issue.  That means there will be fewer situations where SNTs are needed where the purpose is primarily to realize government health care benefits.  That doesn’t mean the other benefits of SNTs are lost or that some government benefits, like services through Community Mental Health which may not be obtainable without Medicaid eligibility, won’t still exist.  It does mean however, that the analysis will be different, and that in more situations the attorney will likely arrive at the same conclusion that this Court did, that the protected person can afford to pay for their care needs without establishing an SNT.