CEA Special Needs Trust Planning 3 — Questions and Answers
Question 1: When a Special Needs Trust beneficiary receives in-kind support and maintenance (ISM), what is the most likely consequence?
- Automatic termination of the trust
- Reduction in SSI benefit payments (Correct answer)
- Loss of Medicaid eligibility permanently
- Increase in Medicare premiums
Correct answer: Reduction in SSI benefit payments
In-kind support and maintenance such as food and shelter provided by the trust can reduce the beneficiary's SSI payments by up to one-third.
Question 2: What is the term for the legal document that outlines the trustee's authority and provides guidance on how to administer an SNT for a specific beneficiary?
- Letter of intent (Correct answer)
- Trust protector agreement
- Trustee memo
- Care plan directive
Correct answer: Letter of intent
A letter of intent is a non-binding document that provides the trustee with guidance about the beneficiary's needs, preferences, routines, and goals.
Question 3: Which federal statute governs Supplemental Security Income (SSI) resource and income rules that directly affect SNT planning?
- Title II of the Social Security Act
- Title XVI of the Social Security Act (Correct answer)
- Title XIX of the Social Security Act
- Title XVIII of the Social Security Act
Correct answer: Title XVI of the Social Security Act
SSI is governed by Title XVI of the Social Security Act, which sets the income and resource limits relevant to SNT planning.
Question 4: An SNT beneficiary who receives SSDI rather than SSI is primarily concerned with which public benefit when planning trust distributions?
- SSI income limits
- Medicare coverage (Correct answer)
- Medicaid spend-down requirements
- Section 8 housing eligibility
Correct answer: Medicare coverage
SSDI recipients rely on Medicare rather than Medicaid, so trust planning must focus on protecting Medicare eligibility and coverage.
Question 5: Which scenario would cause a Special Needs Trust to be invalidated or disqualify the beneficiary from Medicaid?
- The trust pays for a vacation cruise
- The trust makes direct cash payments to the beneficiary (Correct answer)
- The trust purchases a vehicle used by the beneficiary
- The trust pays for dental care not covered by Medicaid
Correct answer: The trust makes direct cash payments to the beneficiary
Direct cash payments to the beneficiary are counted as income for SSI/Medicaid purposes, potentially causing disqualification from means-tested benefits.
Question 6: What does ABLE stand for in the context of disability planning alongside Special Needs Trusts?
- Achieving Better Living Expenses
- Achieving a Better Life Experience (Correct answer)
- Accessible Benefits for Living Expenses
- Assisted Benefits and Living Endowment
Correct answer: Achieving a Better Life Experience
ABLE stands for Achieving a Better Life Experience, referring to tax-advantaged savings accounts created by the ABLE Act for individuals with disabilities.
Question 7: How does an ABLE account complement a Special Needs Trust in disability planning?
- It replaces the need for an SNT for all beneficiaries
- It provides tax-free growth for smaller, flexible disability expenses (Correct answer)
- It eliminates the Medicaid payback requirement for first-party SNTs
- It allows unlimited contributions without affecting SSI
Correct answer: It provides tax-free growth for smaller, flexible disability expenses
ABLE accounts offer tax-free savings for qualified disability expenses and are particularly useful for day-to-day smaller costs, complementing the SNT's broader supplemental role.
CEA Special Needs Trust Planning 3
When a Special Needs Trust beneficiary receives in-kind support and maintenance (ISM), what is the most likely consequence?