The Problem 

If you are disabled or elderly  you may not qualify for certain government benefits, such as Supplemental Security Income (SSI) and Medicaid , because your income or “countable assets” are too high.   Generally your home, furnishings, vehicle and certain other specific types of property are not counted, while  bank and financial accounts and the like are counted.

If you are already qualified, and your countable assets increase, you can lose your benefits.  For example, a parent or grandparent leaves assets to a loved one receiving government benefits and this disqualifies the loved one from receiving the benefits.  This can happen when the onset of disability is after the Will or other planning is done, or if the effect of the inheritance on government benefits is simply not addressed.  It can result in the recipient having to “spend down” the entire inheritance, i.e. pay out-of-pocket what the government benefit used to pay for.  When the entire inheritance is gone, the recipient is again eligible for benefits, but in the meantime  the entire inheritance has been wasted.

The Solution

Set up a special needs trust.  Special needs trusts, also called supplemental needs trusts, are trusts  designed to permit the beneficiary to enjoy the benefits of the assets owned by the trust without those assets being counted when qualifying for SSI or Medicaid.

A trust is an arrangement under which one person, the trustee, holds legal title to assets for the benefit of one or more other persons (the beneficiary or beneficiaries).  The trust agreement will contain  directions regarding administration, investment and distribution of trust assets.

First-Party Self-Settled Special Needs Trusts

Trusts funded with the disabled person’s own money are called first party special needs trusts.  They must meet strict requirements of federal law.  The trust must be irrevocable and established before age 65.  The trust must be for a disabled person and the trust assets can only be used for that person’s  benefit.  The trust must include a “payback” requirement.  That means any assets in the trust at termination, often at the death of the disabled person, must be paid to the state up to the amount of government benefits provided.  These trusts are often used when a disabled person comes into money, for example, upon settlement of a personal injury suit.

Third Party Supplemental Needs Trusts

Third party supplemental needs trusts are the solution to the inheritance problem.  Rather than leaving assets outright, the parent or grandparent leaves them to a trustee who receives them with the instructions to provide for the loved one’s needs – those that the government program does not cover – generally anything other than food and shelter.

It is important that the trustee has some discretion and is not required to distribute any income or principal to the beneficiary.  Also, the disabled person cannot have the right to demand payment of any income or principal of the trust from the trustee.  The trustee’s discretion and the beneficiary’s lack of a right to demand distributions are what keeps the trust assets from being countable resources under the SSI and Medicaid rules.

So long as the trust document provides trustee discretion and does not entitle the beneficiary to demand distributions, the trust can be very flexible otherwise.  These trusts are not subject to the strict federal requirements applicable to self-settled trusts.  For example, there can be other beneficiaries and their need not be a pay-back requirement.  Because the future is uncertain, every Will should contain  supplemental needs trust provisions that are triggered whenever a gift would be made under the Will directly to a person eligible for government benefits such as SSI or Medicaid.

Conclusion

Government benefits can be very important for the safety and security of the disabled and the elderly.  However, they are not very generous.  Through proper planning, a parent or other donor can ensure that their gift enhances the recipient’s quality of life and adds to  government benefits, rather than eliminating or reducing the government benefit.

 

So goodbye, goodbye
I’m gonna leave you now
And here’s the erason why
I like to sleep with the wiodwopen
And you kee0 the window closed
So goodbye
Goodbye
Gooobye

It turns out that thermostat settings are one of the biggest causes of conflict in marriages.  The wrong setting can cause one spouse to be too cold or too hot, and result in talks of divorce.

It’s not just mental either.  Scientists say that women have a lower body mass to surface area, slower resting metabolism and less muscle mass than men.  Therefore, they may feel more comfortable with warmer temperatures.

Financial considerations might come into play as well.  In the summertime, you can save between one to three percent on your air conditioning bill for each degree you set the thermostat over 72 degrees.

We found another way to raise money for your divorce.  Worthy.com is a website that has online auctions where professional jewelry buyers will bid for the diamond in your engagement ring.

Unlike mining diamonds from the earth, which can harm indigenous peoples and the environment, Worthy.com mines the largest cache of diamonds on earth – us.  After all, there is no physical difference between a new diamond and a used diamond.

Worthy.com will grade your diamond, take pictures and post it for auction.

Can’t afford a divorce lawyer?   Need new furniture for your divorce apartment?  Plumfund.com is a website where you can ask people to contribute money for your divorce.

The site describes itself as “Free online crowdfunding for the people we love.”  It has different categories, from baby to funeral, to create a registry for your life events.

You can register your wedding and honeymoon under the Honeyfund category.  I found the divorce requests under “divorce” by using the site search function.

Greg is talking to experienced divorce lawyer, Jeb, about property distribution in a divorce.

“We have separate bank accounts and that $60,000 is in my name alone,” Greg says.

“Doesn’t matter,” Jeb advised, “it’s still marital property.”

“What if I should spend the $60,000 before the divorce?”

“It depends on how you spend it.  If you buy a car or a Rolex, those items become marital property.  If  you buy consumables, then the money is gone and the court can’t divide it.”

“What if I give it to my brother as a gift?”

“That won’t work,” Jeb told him.  “The court can undo that gift.”

(to be continued)

 

by James J. Gross

Randy Work and Mandy Gray married 22 years ago.  Randy  was an executive at Lone Star Funds and their marital estate was worth $225 million dollars by the time they divorced in 2015 in England.  The court split the money equally between

Work appealed and argued that he should receive 61% because of his special contribution.  U.K. judges have distinguished cases where success is of a “wholly exceptional nature” and people who’ve become very wealthy through ordinary means.

The three judge appeal panel ruled against Work, however, and upheld the lower court’s finding that the fortune was the result of “being in the right place at the right time, or benefiting from a period of boom,” not professional genius on the part of Randy.

 

by Michael F. Callahan

The Maryland Court of Appeals has issued its ruling in Milton E. Jackson v Gayle S. Jackson., the case we have been discussing in this last series of articles.

Mr. Jackson was a federal employee with retirement funds under the CSRS system – a large pension, and no social security.  Ms. Jackson was a state government employee – covered by social security and a smaller pension.

Mr. Jackson’s argued that a part of his pension should be treated as social security benefits and not counted when equalizing the pensions of each party.

The Court of Appeals ruled that:

(a)  a state court could not divide social security benefits of a spouse in divorce because federal law establishing social security preempts that.

(b)  The trial court may not calculate and offset the value of a spouse’s future social security benefits from the other spouse’s pension benefits before division of that pension between the spouses in a divorce.

(c)  However, the trial court must consider the spouses’ respective entitlements to social security benefits in determining a martial award as an “other factor” under Maryland divorce law.

So in the end, the Court left a way around the prohibition against dividing or offsetting social security benefits.  It left it to the judge’s discretion to determine a marital award based on “other factors” including social security.  And the judge doesn’t even have to show how the marital award is calculated.   The judge just needs to say that all factors were considered.

 

 

by Michael F. Callahan

Federal law prohibits the assignment and attachment of social security benefits.

The U.S. Supreme Court had a chance to examine similar provisions regarding railroad retirement benefits in Hisquierdo v Hisquierdo.  In that case, the Court said a state divorce court may not treat railroad retirement benefits as marital property due to federal preemption.  Further the court said the state court could not award an offset against other marital property on account of the benefits.

In Dapp v Dapp, 211 Md. App. 313 (2013). the Maryland Court of Special Appeals (CSA) considered whether a trial court could enforce an agreement dividing Husband’s railroad retirement benefits between the spouses.  The CSA held that the federal legislation referred to above preempted the Maryland divorce court’s jurisdiction and the trial judge had no power to enforce the agreement to divide these benefits.

So will the Maryland Court of Appeals, the states highest court, allow an offset for social security benefits in Milton E. Jackson v Gayle S. Jackson, a case that is currently pending before it?   Stay tuned.

 

by Michael F. Callahan

In Pleasant v Pleasant Maryland’s Court of Special Appeals (CSA) held that social security benefits cannot be treated as marital property and it affirmed the trial court’s decision taking no account of them.

But the court’s opinion includes this footnote 3 that seems contrary to the court’s decision:

“In an appropriate case, of course, it may be that a court could consider the fact that a party is receiving, or will receive, social security benefits, as ‘any other factor’ in determining whether to make a monetary award.”

Maryland’s divorce law provides that the judge must consider certain factors in distributing property, the last of which is any other factor the court considers appropriate.

by Michael F. Callahan

In 1993, The Maryland Court of Special Appeals (CSA) held that the court could not divide social security benefits because they were not martial property under state law but rather governed by federal law.  Therefore the CSA affirmed the trial court’s decision equally dividing the marital portion of husband’s pension when received but not dividing the wife’s social security benefit.  The court made no other adjustment to the equitable distribution of marital property for social security.  Pleasant v Pleasant, 97 Md. App. 711, 632 A.2d 202 (1993).