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RI Receives $112.8M In Federal Funds For Health-Benefits Computer System

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Federal Grant Clears Way For Design and Implementation of Health-Benefits Computer System

On October 19, 2015 the State of Rhode Island announced it has received an additional $112.8 million in federal funds for a new computer system. The system, whose overall cost has soared to $380 million, is being built to verify eligibility for Medicaid, tax credits for HealthSource RI and other public assistance.

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The expectation with the new computer system is that it will allow all future applications for benefits to be completed on-line, allowing for better tracking and controls. Currently, if a person wishes to apply for Medicaid the application is done via a booklet with multiple pages of supporting document all needed to accompany the application. In the near future, applications will be able to be submitted electronically and all supporting documents will be scanned and attached to the application, reducing time and errors.

Still have questions as to Medicaid qualification and benefits? Contact our office for a free consultation.

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IRS Announces 2016 Estate and Gift Tax Limits

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2016 Estate and Gift Tax Limits –

For 2016, the Internal Revenue Service has announced that the estate and gift tax exemption is $5.45 million per individual, up from $5.43 million in 2015. That means an individual can leave $5.45 million to heirs and pay no federal estate or2016-gift-tax-ornament_optomized-480x350 gift tax. A married couple will be able to shield $10.9 million from federal estate and gift taxes.

The annual gift exclusion for 2016 remains the same at $14,000.

Why is this important? Most people have a desire to pass as many assets as they can to their heirs. When deciding on your estate plan, knowledge as to what portion of your estate, if any, may be subject to estate taxation is critical in deciding on a plan.

My assets are below the 2016 threshold, should I still be worried? Maybe. Even though the you may be below the Federal level, you may be above the levels taxed by each state. For example, the State of Rhode Island has set a limit of $1,500,000 before an estate tax is due; Massachusetts is even worse being set at $1.0 million. Other states, such as Florida and New Hampshire do not impose any estate tax.

Still concerned and confused about estate taxes? Contact us for a free consultation.

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Special Needs Trusts: Planning for Persons with a Disability

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Special Needs Trusts – Choosing the Right Option – Excerpt from an October 9, 2015 Seminar

            Self-settled special needs trusts were authorized by Congress in 1993. The language in the statute is very brief, but raises many issues. “A trust containing the assets of an individual under age 65 who is disabled (as defined in §1614(a)(3)) and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court, if the state will receive all amounts remaining in the trust upon the death of such individual up to the amount equal to the total medical assistance paid on behalf of the individual under a state plan under this title.” Most commonly, self-settled special needs trusts are required in connection with personal injury settlements, but can also be used when a disabled individual receives an inheritance, or is receiving equitable distribution, alimony, or child support.

The purpose of the self-settled special needs trust is to enable the beneficiary to maintain or obtain eligibility for means-tested public benefits such as SSI and Medicaid. Trusts may also be used when the beneficiary is receiving SNAP (formerly Food Stamps) or Section 8 Housing. Beneficiaries receiving SSDI and Medicare do not require a special needs trust, because these benefits are insurance-based rather than means-tested.

Means-tested public benefits have income tests and many, such as SSI and Medicaid, have asset tests. An individual with disabilities who receives the proceeds of a personal injury settlement, an inheritance, equitable distribution, alimony, or child support is likely to be in a financial position that exceeds the income or asset test limit for any given means-tested program. By placing the assets in a properly-drafted self-settled special needs trust, the assets are non-countable. If the trust is administered properly, distributions from the trust on behalf of the beneficiary are generally not considered income.

For some beneficiaries, the SSI payment, Food Stamps, or Section 8 Housing subsidy is important; for most of the beneficiaries, however, the Medicaid benefit is absolutely critical. By placing funds in the self-settled special needs trust, the individual is able to maintain important needs-based public benefits while at the same time enjoying the benefits of the settlement, inheritance, equitable distribution, alimony, or child support.

Clients are often confused as to what they can do for a disabled child or loved one. Many may have some level of experience or knowledge, having associated with many other individuals who they themselves have disabled children. The conversations and preconceptions as to what can be done based on these conversations with friends and acquaintances can be both a blessing and a curse. The blessing is in that they may have a better than average understanding that there are options to protect assets on behalf of the disabled beneficiary, the curse is that there may be a significant amount of misinformation that you may need to navigate through before a client agrees to a specific course of action.

Assessing the Degree of the Beneficiary’s Current and Future Disability Needs.

The purpose of a Special Needs Trust is to see that the money intended for the beneficiary goes to the beneficiary without jeopardizing her or his eligibility for government benefits (e.g., SSI, Medicaid, and Social Security). Secondly, it serves to protect the money from being squandered or inappropriately spent.

In a Special Needs Trust, the trustee has the duty to use the funds to pay for expenses of the beneficiary that supplement (not replace) benefits received from various governmental assistance programs. These “special needs” might include:

  • Fees for attending special-needs facilities.
  • Insurance
  • Rehabilitation
  • Medical and dental expenses.
  • Eye glasses.
  • Transportation
  • Automobile
  • Computers and electronic equipment.
  • Vacations
  • Athletic training and competitions.
  • Companion services/home health assistance.
  • Other items to enhance self-esteem.
  • Training programs.
  • Maintenance
  • Education
  • Entertainment

The Special Needs Trust is a type of discretionary trust in which the trustee is given the power to manage assets in the trust (e.g., to invest trust funds and to sell assets) and the discretion to use trust assets for the benefit of the person with special needs. Trust assets can be in the form of cash, stocks, personal property, and real property. The trust also can own or be the beneficiary of life insurance. [1]

Knowing these options is critical to understanding the drafting and advice you provide a client. If you have a beneficiary that is incapacitated and will remain institutionalized for the remainder of their lives then the Special Needs Trust can be used just as a fallback for the beneficiary as there is little to no likelihood that the beneficiary will be able to use the resources in a manner that materially enhances their life enjoyment. If on the other hand the beneficiary is able to enjoy any of the above referenced activities then the client and the beneficiaries will enjoy the Trust.

[1] “Planning For The Long Term Care Of A Special Needs Individual”, J. David Spiceland, CPA and Craig J. Langstraat, LL.M., Practical Tax Strategies, Volume 73, Number 03, September 2004.

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