Seattle Disability Law

A PUBLICATION OF THE LAW OFFICES OF LARRY A. JONES
SEPTEMBER 2008

The Arc Presents an Award

The Arc of Washington State recently presented an award to Larry A. Jones. Its inscription reads “In recognition of your outstanding contributions in supporting people with developmental disabilities and their families.”

At the award ceremony Larry was singled out for his decades of service chairing the Arc of Washington Trust Fund. Since its founding in 1950, the Trust Fund has made over $1,000,000 in grants to researchers at regional universities and in stipends to college students studying for a career in the field of intellectual and other developmental disabilities.

For more information on the Trust, go to the Arc’s website at www.arcwa.org and click on Grants.

Washington State Worst in DD Service Trend!

A new study has shown that the State of Washington has the worst trend in the nation in terms of declining waiver services. In the last five years through 2007 only 3 states showed declines in the number of persons receiving waiver services. People with developmental disabilities in Washington suffered the largest percentage decline.

For the last 25 years Medicaid Home and Community-Based Services waivers have quickly expanded to become the foundation for most services for adults with developmental disabilities across the country. (They are called “waivers” because this program provides assistance while waiving the old requirement that you had to be in a hospital or institution to get Medicaid.) Waiver services include supported housing, supported employment, therapies and personal care.

Yet from 2002 to 2007, Washington’s waiver recipients fell by 17%, from 11,173 to 9,317. Georgia fell from 9,826 to 9,194 (6%) and Michigan fell from 8,550 to 7,714 (10%).

The study is by K Charlie Lakin, et al., “Twenty-Five Years of Medicaid and Home and Community Based Services (HCBS),” Intellectual and Developmental Disabilities, 46:325-28. August 2008.

SPECIAL NEEDS TRUSTS: THE BASICS

A trust is a written legal document by which one person, called the trustor (also called the grantor or settlor), gives money or property to a second person or entity called the trustee for the benefit of a third person, the beneficiary.

A special needs trust holds money for a person with disabilities who has special needs. It is required whenever a person with a disability needs either: (1) Supplemental Security Income (SSI), which provides cash to adults and poor children; and (2) Medicaid, which provides funding for job coaches, supported living, respite, and therapies, along with prescriptions, doctors, and hospitals. Almost every adult with developmental disabilities will need Medicaid services. Children, however, may not be eligible for Medicaid or SSI. If they aren’t eligible, they may not need a special needs trust until they become an adult.

Both programs require that a recipient have less than $2,000 in assets (which Social Security calls “resources”), but will not count any money that is in a special needs trust.

Both programs also require that the person receive less than a certain amount of income, including gifts of cash, per month. Often a special needs trust cannot solve the (good) problem of a person who has high monthly income.

Special needs trusts are almost always irrevocable trusts, meaning that the trustor or grantor cannot “revoke” the trust and take back the money that had been placed in trust. Irrevocable trusts can sometimes, however, be amended. An irrevocable trust is like a corporation in that it exists independent of the person who may, for example, be the trustor or the trustee.

(By contrast, a revocable living trust allows a grantor to take the money back, if desired, and is usually used to avoid probate fees or estate taxes. Because of Washington laws, most of our clients do not need revocable trusts. If we were in another state, we would advise the creation of revocable family trusts. A revocable trust is the only kind of trust that ordinarily does not require a federal tax identification number as a separate taxpayer.)

Testamentary special needs trusts allow people with disabilities to inherit money without losing their SSI and Medicaid benefits. They are called testamentary because they are found in someone’s “last will and testament.” This type of trust becomes effective only after the person who makes the will dies. All families that include a member with disabilities need such a trust in their wills. Since death can occur at any time, creating a will with a testamentary special needs trust should be done as soon as possible.

Inter vivos or living special needs trust. An inter vivos trust is set up during the lifetime of the trustor or grantor. There are three situations in which inter vivos special needs trusts are common. First, an adult aged under 65 years with disabilities may earn more wages than he or she can wisely spend and can place the excess funds each month in an inter vivos special needs trust. Second, a person with disabilities may have inherited money not in a special needs trust or may have been injured and obtained an insurance settlement. A special needs trust is needed to hold those funds. Third, multiple family members may wish to contribute now or at their death to a trust for the benefit of a person with disabilities. A special needs trust can be created now which multiple donors are able to place their funds into.

A self-settled inter vivos special needs trust is one created with the money of the beneficiary for their own benefit. For example, when a person with disabilities places wages or an inheritance in trust, that would be a self-settled trust. (This type, and only this type, of special needs trust must have a provision requiring reimbursement to the state for Medicaid benefits that the person received during their lifetime, if there is money left in the trust at the time of his or her death.)

A third-party special needs trust is one created with the assets of anyone other than the beneficiary. This is the kind of trust in which family and friends can give money to benefit a person with disabilities. You should never place the assets of these third parties (family and friends) in the same trust as the assets of the Medicaid or SSI recipient!

Answers to the most common questions about special needs trusts.

1. Money from a special needs trust can usually be spent on anything the beneficiary needs or would like other than basic shelter and food. There are some circumstances in which money can be spent on rent or other residential supports.

2. If you have a will with a special needs trust in it (“testamentary trust”), you do not go to the bank and set up the trust now. That will be done by your personal representative or executor at your death.

3. Tax rates are higher for trusts than for individuals, but trust taxes can be reduced or avoided entirely in some situations. Tax considerations should be discussed with your attorney or tax-preparer. A self-settled Medicaid trust with a reimbursement provision at death is a Qualified Disability Trust and can claim a higher amount of income exempt from federal taxation than other trusts.

4. There is no limit as to how little or how much money can be placed in a trust.

5. Since 2006, it has no longer been true that Medicaid recipients do not need to have a special needs trust for their primary residence, whether that be a condo or a house where they live. Now there are limits on the value of residences not held in trust and a special needs trust may make sense.

Our firm’s services. We would be happy to prepare an affordable special needs trust for you. We can discuss your particular situation and advise you on what type of special needs trust is best for you. We can prepare all the various types discussed above. We will also discuss with you the Washington State Developmental Disabilities Endowment Fund Life Opportunities Trust to see whether that would suit your needs better.

SHORELINE DISCRIMINATED AT FIRCREST

The Last year The Arc of Washington State continued its strong tradition of advocacy on behalf of children with disabilities by filing a civil rights complaint against the Shoreline School District. Last month the US Dept of Education agreed with The Arc. Stacy Gillett, an Arc board member and paralegal with our firm, drafted the complaint on behalf of the children.

Shoreline failed to provide appropriate individualized educational programs (IEPs) for those children who reside at the Fircrest School in the Shoreline District north of Seattle. Instead of receiving the particular special education they needed, some children got nothing at all, while others got a “one size fits all” package of services. Children were segregated at the Fircrest institution. They were wrongly denied an opportunity to go to schools with other children who did not have disabilities. According to the Office of Civil Rights, the Fircrest classroom was noisy, crowded and short-staffed, and did not provide a full day of schooling.

The Shoreline District entered into a settlement agreement with the Department of Education. The district is required to apologize to students’ parents and to provide assurances about their revised practices. Each student at Fircrest must be evaluated and have their IEP reviewed to ensure they are getting the services they need and are placed in a public school setting. An independent team of professionals will be assembled to determine what compensatory education each child must be offered and to monitor how well Shoreline is keeping its promises.

New Label: it’s ID, not MR

Mental retardation (MR) is out. Intellectual disability (ID) is in.

“Intellectual disability” is now spreading as a replacement for MR. The term “intellectual disability” was first used in Australia over 10 years ago and has spread to the US.

At the White House it is now the “President’s Committee on People with Intellectual Disabilities.” It used to be the President’s Committee on Mental Retardation.

At The Arc’s national website (www.thearc.org) it proclaims “The Arc is the world’s largest community based organization of and for people with intellectual and developmental disabilities.”

The national organization for professionals in the field is no longer AAMR. It is now the American Association for Intellectual and Developmental Disabilities.

Even with its new prominence, it will take a long time before the new term gets used by most people. Most people have not even heard of it yet.