Various articles on this website address ways in which aged or disabled persons may protect their assets and still get government benefits such as Medicaid for long term care in a nursing home, or Medicaid for health care in the community. By retaining accumulated assets or protecting assets one is about to inherit, an individual can ensure for herself a better quality of life, especially when the only other alternative is to fully impoverish oneself to retain government benefits.
One tool lawyers utilize to enable clients to shelter assets is a trust. There are various types of trusts that can be employed depending on the individual’s circumstances, and each type of trust has its advantages and disadvantages.
For example, the law will allow a disabled person to keep his or her accumulated wealth to allow for a higher quality of life and to still obtain Medicaid benefits. [Such opportunity is separate and distinct from the benefit under the Affordable Care Act which allows non-disabled people with low incomes to obtain Medicaid health insurance. Moreover, this long-standing opportunity afforded to disabled persons likely will persist even if the President and Congress were to repeal the Affordable Care Act as they have threatened to do.]
Consider Mary, a 50 year old disabled individual, who, due to her disability, was never able to work, and who receives Supplemental Security Income (SSI) and is eligible for Medicaid benefits, both of which are means-tested programs. Means-tested programs are benefit programs that will pay only if the recipient has very few assets, typically $2,000 or less. Mary, who has been living with less than $2,000 is about to inherit $200,000. Unfortunately, the deceased relative who has left such inheritance did not do estate planning to prevent such inheritance from causing Mary to lose her government benefits because she will have more than $2,000 after the inheritance is paid to her.
All is not lost for Mary, however. Mary can work with an experienced attorney to create a special trust to hold her $200,000 inheritance in such a manner that it will not be counted as her resource for benefits purposes. With such a trust in place, Mary will continue to have less than $2,000 in her name, continue to receive SSI (which she will spend each month for her personal needs), and continue to receive Medicaid to cover her health care needs. Moreover, the trust assets can be used, not to make distributions directly to Mary, but rather, to pay for things Mary needs and for opportunities Mary can pursue. One significant condition of this type of trust is that, if there are funds remaining in the trust when Mary dies, then the Trustee will repay the State for Medicaid benefits Mary has received during her lifetime. But if the trust funds are used for Mary’s wants and needs during her lifetime, then she will have a better quality of life without losing government benefits, and if all the funds are spent for this purpose, then there will be no government payback.
The law governing the use of a trust in this manner is clear cut and well known to experienced elder law and disability law attorneys. What is not so clear cut is whether such a trust may be used to shelter assets and still allow an individual to obtain or retain Federal or State housing benefits. For example, if Mary, in addition to getting SSI and Medicaid, also received a voucher to enable her to pay her rent, the question arises: Will Mary lose this benefit once she inherits the $200,000, even if she employs the type of trust discussed above?
A colleague of mine faced this very question recently and discovered that the law and regulations governing the housing benefit programs do not address whether using the trust described above, which enable Mary to shelter her inheritance for SSI and Medicaid eligibility purposes, likewise will shelter the inheritance and enable her to keep her housing benefits.
This lack of clarity is not new. William M. Gatesman faced the same situation more than a decade ago. Then as now, the law was not clear and the regulations did not adequately address the situation. But a client needed to know, because she depended on her housing subsidy and losing it would have negative consequences for her.
That being the case, Mr. Gatesman researched the housing subsidy rules and called the director of the government office that administered the Federal/State housing subsidy program. Gatesman found support in one of the housing department’s publications, which publication arguably suggested that using such a trust would allow his client to keep the inheritance and still get the housing subsidy in the same way that she, like Mary discussed above, could keep her SSI and Medicaid benefits.
Mr. Gatesman argued his case in a telephone call and a letter to the Director of the Rental Assistance Division of the Housing Opportunities Commission of Montgomery County, Maryland, which administered the housing benefit programs affecting his client. As a consequence of that advocacy, the Director issued an Opinion Letter that concluded that Mr. Gatesman’s client could retain her housing benefit because the assets in the trust will not be counted as available to Mary for housing subsidy eligibility purposes. Indeed, the Opinion Letter advised further that, except in certain circumstances which did not apply in the case at hand, the existence of the trust and the trust assets need not even be disclosed when applying to obtain the housing subsidy.
One can read that opinion letter by clicking this highlighted text. As is evident from this Opinion Letter, this issue was addressed a long time ago, in 2004. Benefits law and practice is not a stagnant thing, and much has transpired over the past 13 years since the Housing and Opportunities Commission issued it’s Opinion Letter. That being the case, one seeking to shelter assets and maintain eligibility for housing benefits needs to consult with qualified counsel to ascertain whether this Opinion Letter would still be applicable at this time and in the particular circumstances faced by the individual. Nevertheless, this Opinion Letter serves as an historic legal determination that should be significant for lawyers who assist clients in preserving assets and in obtaining and maintaining eligibility for public benefits.
As a courtesy to my colleagues, for a limited time, I will include links below to other relevant documents.