Law Office of Donald D. Vanarelli Blog

Currently, the value of assets passing to heirs upon the death of a U.S. citizen free of federal estate taxes, called the federal estate tax exemption amount, is $5.12 million dollars per person. This federal estate tax exemption amount is valid through the end of 2012.

In the past, upon the death of the first member of a married couple, the federal estate tax exemption of $5.12 million dollars would be applied to assets in the estate owned by that first deceased spouse in order to reduce or eliminate the estate taxes due. However, if that first spouse owned assets worth less than $5.12 million dollars, the balance of the federal estate tax exemption left over would disappear. Then, the second spouse to die could utilize his/her own $5.12 million dollar exemption amount to offset estate taxes due for his/her own estate assets, but could not access the unused portion of the federal estate tax exemption amount resulting at the death of the first spouse.

Some married couples preserved the federal estate tax exemption amount of the first spouse to die by re-titling assets and using testamentary trusts. However, there was no way to preserve the unused portion of the federal estate tax exemption amount of the first spouse to die except by utilizing these more sophisticated estate planning techniques.

Recently however, the Internal Revenue Service (IRS) issued Notice 2011-82 to alert executors of the estates of decedents dying after Dec. 31, 2010 of a new, simpler method of preserving the unused portion of the federal estate tax exemption amount of the first spouse to die. This new method involves making a “portability” election through the filing of United States Estate and Generation Skipping Transfer Tax Return, known as Form 706.

This “portability” election allows executors to pass along the unused portion of the federal estate tax exemption amount of the first spouse to die to the surviving spouse without the necessity of using sophisticated estate planning techniques to preserve the exemption amount.

In order to qualify for the “portability” election, the IRS requires that specific rules must be followed. These rules are contained within Notice 2011-82. Most importantly, to make the election, the executor must file Form 706 for the decedent’s estate on a timely basis, even if the executor would not otherwise be obligated to file Form 706. By timely filing Form 706, an estate will be considered to have made the “portability” election. No election may be made if the Form 706 is filed after the time prescribed by law (including extensions) for filing.

Although the federal estate tax exemption amount is always subject to change, and will, in fact, likely be changed this year or soon thereafter, the benefit of the “portability” election is well worth the effort required to file Form 706. Therefore, if you have been appointed the executor or administrator of an estate, you should consider electing  “portability” of the federal estate tax exemption amount by filing Form 706 on a timely basis.

The notice from the IRS is attached here – Notice 2011-82

In the December 13, 2011 Estate of Sano Chancery Division case, the decedent’s wife had sued the decedent’s former employee (Ms. Chung) and that employee’s sister (Ms. Choi), claiming that they defrauded and unduly influenced the decedent to change a beneficiary designation of a $2.5 million life insurance policy. The policy had originally named the decedent’s business as primary beneficiary and his wife as secondary beneficiary, but was later changed to name Ms. Chung as the sole beneficiary. Ms. Chung and Ms. Choi were sisters of the decedent’s former business partner. Ms. Chung was the decedent’s long-time employee and friend, and the two allegedly began a romantic relationship after the beneficiary designation change. Ms. Choi was the decedent’s insurance agent who obtained both the original policy and the beneficiary change in issue.

Before the court was a motion for summary judgment, in which the defendants argued that the plaintiff had “no knowledge of any facts underlying the allegations set forth in her complaint.” (Slip op. at 5). Defendants asserted that, because plaintiff’s complaint was based upon speculation, summary judgment was appropriate. Defendant Choi also argued that plaintiff’s claims of negligence and breach of fiduciary duty against her should be dismissed for failure to file an affidavit of merit.

Although acknowledging the plaintiff’s “inability to point to specific facts in the record in opposing … summary judgment” (slip op. at 23), the court rejected the defendants’ emphasis on the plaintiff’s claims being implausible. The court acknowledged that plaintiff would face “significant hurdles” at the time of trial. Nevertheless, it noted that, in a summary judgment motion, the court is not required to determine the likelihood of success at trial. As to the claims of undue influence, fraud, conspiracy, unjust enrichment and conversion, the court found that genuine issues of material fact existed, such that summary judgment was inappropriate.

However, with respect to the claims of breach of fiduciary and negligence that were asserted against Ms. Choi, the court found those claims were alleging professional malpractice against Ms. Choi. Because there was no evidence that Ms. Choi’s actions were negligence as a matter of law, the court concluded that an expert would be needed, and that the plaintiff’s failure to provide an expert report or file an affidavit of merit necessitated dismissal of those claims.

A copy of the December 13, 2011 opinion can be found here – Estate of Sano

Below is a roundup of the top 10 national elder law decisions for the past year, as measured by the readers of the ElderLawAnswers website.

1. Medicaid Applicant’s Penalty Period Does Not Begin Until Returned Assets Are Spent Down

In Marino v. Velez (U.S. Ct. App., 3rd Cir., No. 10-2324, Jan. 10, 2011), the U.S. Court of Appeals, Third Circuit, ruled that a New Jersey Medicaid applicant who transferred assets and then had some of the transfers returned cannot get credit toward her penalty period for the time before the transfers were returned that she was resource-eligible.

2. State Cannot Recover Assets That Were Transferred Before Medicaid Recipient Died

In In Re: Estate of Perry (Idaho Dist. Ct., 4th Dist., No. CV-IE-2009-05214, March 16, 2011), an Idaho district court ruled that the state cannot recover assets from the estate of a Medicaid recipient’s spouse that were transferred to the spouse before the Medicaid recipient died.

3. Federal Court Ruled Medicaid May Recover Cost Of Medical Care From Recovery For Future Medical Expenses

A federal district court ruled that a state Medicaid agency may recover the cost of a beneficiary’s medical care from the portion of her personal injury settlement that was allocated to medical expenses, regardless of whether the funds were allocated to past or future medical care. Perez v. Henneberry (D. Colo., No. 09-cv-01681-WJM-MEH, April 26, 2011).

4. Court Upholds Nursing Home Resident’s Eviction Prior to Resolution of Medicaid Appeal

In King v. Butler Rest Home Inc. (Ky. Ct. App., No. 2010-CA-001467-MR, June 17, 2011), a Kentucky appeals court held that a nursing home may evict a resident for nonpayment despite a pending Medicaid appeal.

5. Payments to Caregivers of Dementia Patient Are Deductible Medical Expenses

The U.S. Tax Court ruled that payments to caregivers of a dementia patient are deductible medical expenses, even though the caregivers were not licensed health care providers. Estate of Lillian Baral (U.S. Tax Ct., No. 3618-10, July 5, 2011).

6. Third Circuit Affirmed That N.J. May Count Promissory Notes As Available Resources

In a long-running case that has bounced back and forth between two federal courts, the Third Circuit Court of Appeals ruled that New Jersey’s Medicaid agency may analyze promissory notes as trust-like devices and count the notes as available resources. Sable v. Velez (U.S. Ct. App., 3rd Cir., No. 10-4647, July 12, 2011). I previously blogged about this very important case here.

7. Transfer of Medicaid Applicant’s House to Son Falls Within Caregiver Child Exception

A New Jersey appeals court ruled that the transfer of a Medicaid applicant’s house to her caregiver son was not subject to a Medicaid penalty period because it fell within the “caregiver child” exception to Medicaid rules prohibiting the transfer of assets. V.P. v. Department of Human Services (N.J. Sup. Ct., App. Div., No. A-2362-09T1, Sept. 2, 2011). I previously blogged about the V.P. case here.

8. U.S. Court Rules Connecticut Likely Cannot Refuse Spousal Refusal Doctrine

Ruling that a state statute violates federal Medicaid law, a federal district court granted a preliminary injunction preventing Connecticut from denying Medicaid benefits to an applicant seeking to disregard his spouse’s assets using the doctrine of spousal refusal.  Fortmann v. Starkowski (D. Ct., No 3:10cv1562 (JBA), Sept. 28, 2011).

9. Medicaid Applicant’s Transfer to Daughter Created Trust-Like Device

In Pfeffer v. Arizona Health Care Cost Containment System (U.S. Dist. Ct., D. Ariz., No. CV-11-0891-PHX-GMS, Sept. 29, 2011), a federal district court ruled that when a Medicaid applicant transferred money to her daughter with the intention that the daughter pay for her care during the resulting penalty period, she created a trust-like device, so the money is still an available resource.

10. Irrevocable Trust Set Up by Medicaid Applicant’s Children Is Available Asset

In Hedlund v. Wisconsin Dept. of Health Services (Wis. Ct. App., No. 2010AP3070, Oct. 13, 2011), a Wisconsin appeals court ruled that a Medicaid applicant who transferred funds to her children, who then put them in an irrevocable trust for her benefit, is ineligible for Medicaid because the trust is an available asset under state law, even though the transfer occurred 17 years before she applied for Medicaid.

In the January 4, 2012 Marinaccio v. Grgec decision, the Appellate Division was presented with an appeal of a probate matter that had been decided by an umpire under the New Jersey Alternate Procedure for Dispute Resolution Act (“APDRA”). The Appellate Division held that, after the umpire’s decision not to vacate a probate settlement agreement is reviewed at the trial level, it is not subject to further appellate review.

The plaintiff, Frank Marinaccio, had been sued by his sisters concerning the distribution of testamentary trusts. During the course of the litigation, the parties agreed to mediate the dispute, and ultimately executed a settlement agreement. The agreement provided that the brother would give each sister $250,000 from the proceeds of sale of the parents’ home, and that the brother would use his best efforts to market and sell the house expeditiously. It also provided that further disputes would be resolved by binding arbitration in accordance with the APDRA, before the umpire who had mediated the case.

Based upon the brother’s failure to market and sell the house, the sisters moved before the umpire to have Mr. Marinaccio declared in violation of the agreement. They also sought fees and costs, purusant to R. 1:10-3. The brother, in turn, moved to vacate the settlement agreement. With respect to the motion to vacate, the umpire found that the brother failed to meet the requirements of R. 4:50-1b to justify such relief. He also awarded the sisters legal fees.

Relying on N.J.S.A. 2A:23A-13(c)(5), Mr. Marinaccio sought review by the Chancery Division. The chancery court confirmed the umpire’s decision not to vacate the settlement, as well as the umpire’s fee award.

On further appeal, the Appellate Division ruled that the chancery court’s decision on the motion to vacate was not further appealable under the APDRA: in their settlement agreement, the siblings had agreed to be bound by the APDRA, which provides that, once a court enters an order “confirming, modifying, or correcting an award,” there is no further judicial review. It went on to note that, although the parties are permitted to expand the scope of this limited judicial review by agreement, the Marinaccio parties did not. The Appellate Division confirmed that there may be “rare circumstances” grounded in public policy considerations that would justify further appellate review, such as child support or custody issues, rulings in which a judge was biased or exceeded his or her authority, and attorney fees (which are within the exclusive supervision of the courts). It found, however, that issue of Marinaccio’s motion to vacate did not involve such “rare circumstances.”

Although the Appellate Division recognized that a counsel fee award is an exception to the APDRA’s bar against appellate review, it affirmed that fee award.

A copy of the January 4, 2012 opinion can be found here – Marinaccio v. Grgec

Listed below are the blog posts, articles and other content from the Law Office of Donald D. Vanarelli website and blog with the highest readership in 2011.

1. Certain “Blue Water” Navy Vietnam Veterans Now Eligible For Agent Orange Presumptive Service-Connected Compensation Benefits
2. Summary Of Changes To The Estate And Gift Tax Laws In 2011 And 2012 Resulting From Enactment Of The “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010”
3. Article – Will Contests, Probate Litigation and Elder Abuse Actions
4. Top 10 Veterans Service-Connected Disability Compensation Benefit Cases Decided By The Federal Circuit In 2009 – 2010
5. Article – Medicaid Liens and Estate Recovery in New Jersey
6. Medicaid Eligibility And The Pickle Amendment
7. New Statutory Short Form Power Of Attorney And New Major Gifts Rider Form Now Available For New York State
8. VA Compensation Claims and the “Medical Nexus” Requirement
9. The Basics of VA Pension Benefits
10. Medicaid Eligibility Denied Based Upon A Home Transfer To A “Caregiver Child” Who Was Employed Full-Time
11. Does The VA Consider Assets Transferred To A Special Needs Trust In Determining Eligibility for VA Improved Pension And Aid And Attendance Benefits?
12. Article – Nursing Home Law and Litigation
13. Article – Special Needs Trusts and Disability Planning
14. Top Ten (10) Social Security / SSI Disability Appeals Decided By Federal Appellate Courts In 2010
15. Article – Estate Planning and Administration
16. Top Special Education Cases Impacting Disabled Students In New Jersey
17. Article – Financial Exploitation of The Elderly: Impact on Medicaid Eligibility
18. Article – Medicaid Applications and Medicaid Appeals
19. Article – Guardianships and Fiduciary Services
20. Top Ten (10) New Jersey Probate Litigation / Will Contest Cases in 2010

In Bond v. Bond, the Appellate Division considered whether a non-custodial parent’s creation of a special needs trust (“SNT”) can justify the elimination of that parent’s obligation to pay child support. Although it concluded that the non-custodial parent “may utilize a special needs trust to take advantage of government programs to lessen the burden on the parent to provide support and medical assistance,” it went on to reason that the creation of such a trust would not justify the non-custodial parent’s concurrent application seeking to eliminate his obligation to pay child support.

Plaintiff Jonathan Bond and defendant Wendy Bond are the divorced parents of two sons, ages 23 and 20. The elder child, referred to as “A.B.” in the opinion, is autistic. The parties’ property settlement agreement (“PSA”) obligated the father to pay $50,000 per year in child support for each child, regardless of the mother’s income. The PSA noted that A.B. would likely never become emancipated, and that the father would pay his special education and similar expenses. It also set forth the parties’ agreement that each child should “attend and accomplish the highest level of schooling/education possible for that child.” After the divorce, A.B. was declared incapacitated, and Jonathan and Wendy Bond were appointed co-guardians of his person and property.

When A.B. turned 21, he enrolled in a residential facility for special needs young adults. Following A.B.’s enrollment, Jonathan Bond filed a motion seeking, inter alia, to establish an SNT for A.B. and eliminate the child support obligation; and to apportion A.B.’s expenses based upon the parties’ income and assets. Wendy Bond cross-moved to determine the parties’ financial contributions toward each of the sons’ expenses, and for an award of counsel fees. Although Wendy Bond did not oppose her ex-husband establishing an SNT for their son, she objected to the termination of child support.

By Order of December 15, 2009, Mr. Bond’s request to eliminate child support and establish the SNT was denied. He was also ordered to pay 99% of post-secondary educational costs of the parties’ non-disabled son, with the mother being responsible for 1% of those costs.

The trial court also concluded that the father had acted in bad faith, and awarded $27,397 in counsel fees to the mother.

By Order of March 17, 2010, a motion judge (who had not made the earlier rulings) directed Mr. Bond to pay $5,335 in counsel fees for failing to comply with the December 15, 2009 Order.

On appeal, the Appellate Division found it appropriate to review the parties’ finances. It found that, although Mr. Bond was claiming that his financial circumstances had declined in recent years, his 2008 gross earned income was $4,924,469.  It found that he owns a $6 million home in New York City and a $3 million beach house in Bridgehampton. His net worth is reportedly over $8 million. Wendy Bond’s earned income in 2008 was $9,218, although her unearned income was $253,539 (apparently reflecting income earned from equitable distribution). She has a $1.9 million home in Short Hills. Her claimed expenses include contribution for A.B.’s extracurricular activities, medication, clothing and toiletries, and her frequent travels to and from his residential school, including hotels, meals, and activities with A.B. during her visits. She maintains a home for A.B.’s visits, and she pays for his vacations.

The Appellate Division noted that, although the application was advanced by the father as one for the establishment of an SNT, the trial court had “perceptively concluded that this was primarily an application to terminate child support,” and to require the parties to contribute toward the children’s living expenses based on their relative income and assets. It found that, although an SNT is a beneficial tool to allow funds to be invested in a manner that would not disqualify the beneficiary from governmental benefits, the parties had entered into the PSA fully recognizing A.B.’s future needs. It went on to find that Mr. Bond had failed to establish that his claimed decrease in income was permanent, or that A.B. would actually be eligible for public benefits if the SNT were established. It noted that, in the event that A.B.’s assets were depleted in the future, he would become eligible for public benefits at that point, and it denied Mr. Bond’s application:

In sum, we conclude that plaintiff failed to demonstrate any “changed circumstances” that would warrant a modification of the PSA …Ultimately, plaintiff’s motion was a self-serving effort to revise the terms of the PSA to make them more favorable to him.

With regard to the March 17, 2010 Order by the motion judge directing Mr. Bond to pay $5,335 in counsel fees for failing to comply with the prior Order, the appellate court remanded for a statement of reasons. As to the trial court’s other rulings, it affirmed.

A copy of the December 22, 2011 opinion in the Bond case is annexed here – Bond v. Bond

1. 2012 Maximum Pension Rates for VA Base Pension Plus Aid and Attendance Supplement

• Single Veteran – $1,703.00 Per Month or $20,447.00 Per Year
• Married Veteran – $2,019.00 Per Month or $24,239.00 Per Year
• Surviving Spouse – $1,094.00 Per Month or $13,138.00 Per Year
• Veteran Married to Veteran (Both A & A) – $2,631.00 Per Month or $31,578.00 Per Year

2. General Qualifications for Non-Service Connected VA Aid and Attendance Benefits

• Either Veteran, Widowed Spouse, and Dependent / Disabled Child May be a Claimant)
• Veterans Must Typically Have Served Ninety Days Active Duty with One Day During Wartime (Those Who Enlisted After September 7, 1980 Have a Different Time Frame)
• Veteran Cannot Have Had a Dishonorable Discharge
• Claimant’s Physician Must Declare Him/Her as in Need of Assistance from Another Individual, or in Need of a “Protective Environment” Which May Include Services Offered by Assisted Living
• Claimant Should have Limited Household Assets; Excluding Primary Home, Car, and Personal Belongings. If Assets are Jointly Owned by Other than Spouse, Only the Claimant’s Share is Generally Countable. In the Case of a Married Veteran, Both His/Her Assets are Countable. There is No Longer a Current Asset Cap, Per Se. The VA Now Considers the Claimant’s Life Expectancy in Determining how Much a Claimant can Have. In the Case of Assets Over $50k, It May be Best to Consult an Elder Law Attorney. One Should Never Transfer Assets without the Proper Legal/Professional Advice.
• Claimant’s Household Out-of-Pocket Yearly Medical Expenses Must Exceed or Come Close to His/Her Total Yearly Household Gross Income (Total Yearly Cost of Assisted Living is Typically Considered a Medical Expense)
• Surviving Spouse Must have been Married to the Veteran for at Least One Year OR have had Children by the Veteran if Married Less than One Year and Never Remarried (with Possibly One Very Rare Exception)
• Surviving Spouse Must have been Living with the Veteran Throughout the Marriage and at the Time of the Veteran’s Death unless the Separation was Due to Fault of the Veteran or Other Unavoidable Situation (There May Be Some Exceptions Related to Separations Due to Abuse)
• Minor or Disabled Adult Children May Qualify for Limited Benefits on Their Own
• Once Awarded Aid and Attendance or Housebound Status, a Veteran May Obtain Free Medications, Medical Equipment, Incontinence Supplies, Glasses, and Hearing Aides from the VA Hospital/Clinic via U.S. Mail. A Separate Application Must be Made Through the Health Care System.

* * Note: Each VA Claim is Unique and the Above Criteria is Generic in Nature and May Not be Applicable to Each Claimant. There are Never Any Guarantees that Any Claim or Specific Benefit Amount will be Awarded.

**Shared with the Permission of Veterans Information Services, Inc. and the Creators of VisPro: www.info4vets.com**

Who Can Help Me Fill Out the Forms?

Any non-accredited individual may assist with completing the forms; however, this individual is allowed to assist ONLY one person. A VA accredited agent or a service organization, such as your local State Veterans Office, VFW, or American Legion may help you, as well as a VA accredited attorney.

NO-ONE may charge you for helping you prepare or present the VA application forms, but you should be sure that the person understands VA rules and regulations.

What are the Advantages of Having an Attorney Assist Me?

An attorney may assist you with much more than just the VA application, such as making sure that all of your assets are in order to help prevent a denial of your claim and with other paperwork that might be needed to help prove your claim. An attorney must be accredited through the VA and as such, can represent you before the VA if your claim is denied or if the award is incorrect.

Must I Already be Living in an Assisted Living Community Before I Apply?

No, it is not necessary to be living in assisted living in order to apply for VA benefits; however, if you are in need of personal assistance, the entire cost of assisted living helps to qualify you for benefits, but you must be a current resident to submit these expenses as a deduction off income.

How Long Does It Take to Find Out if I am Eligible?

An attorney should be able to give you an idea of your qualification within thirty minutes; however, in order to be absolutely certain that you qualify for benefits, the attorney would need to review all of your financial, personal, military, and medical records.

How Long Does It Take for Me to Get My First Check?

Once an application is turned into the VA, it can take anywhere from two to six months on average to get your check if you are approved for benefits. If you have dementia or other memory loss issues, the VA may insist on meeting you and your representative before sending you a check, so your award may be delayed a few additional months.

Does the Money Come to Me or Straight to the Assisted Living Facility?

All benefits are paid to the claimant and not to any facility.

Can I Have It Deposited Directly Into My Bank Account?

Yes, the VA actually prefers to have all checks directly deposited into a bank account. If you have memory loss issues, the VA will insist on a direct deposit.

Is It Retroactive Back to When I First Applied or Does It Start the Day/Month I Get Approved?

Benefits are retroactive from the first day of the next month after the VA receives your application OR your first notice of intent to file. An attorney can help you preserve this Informal Award Date. In order for the benefits to be retroactive, you must live through the entire month after the VA receives your first Informal Request or application, whichever is received first. In addition: if you are filing an Informal Request, you must be alive when the rest of the application is submitted and you have one year from the date of the Request to get the rest of your application into the VA.

** Shared with the permission of Veterans Information Services, Inc. and the Creators of VisPro- www.info4vets.

Below are figures for 2012 that are frequently used in the estate and elder law practice or are of interest to clients.

Medicaid Spousal Impoverishment Figures for 2012

The new minimum community spouse resource allowance (CSRA) is $22,728, and the new maximum CSRA is $113,640. The new maximum monthly maintenance needs allowance is $2,841. The minimum monthly maintenance needs allowance remains $1,838.75 until July 1, 2012.

The new Community Spouse Monthly Housing Allowance for all States except Alaska and Hawaii is $551.63.

Income Cap

The income cap for 2012 applicable in “income cap” states will be $2,094 a month.

Medicaid Home Equity Limit

Minimum: $525,000; Maximum: $786,000.

Gift And Estate Tax Figures

• Federal estate tax exemption: $5.12 million for individuals.
• Lifetime tax exclusion for gifts: $5.12 million.
• Generation-skipping transfer tax exemption: $5.12 million.
• The annual gift tax exclusion remains at $13,000. 
  

Long-Term Care Premium Deductibility Limits For 2012

The Internal Revenue Service has announced the 2012 limitations on the deductibility of long-term care insurance premiums from taxes. Any premium amounts above these limits are not considered to be a medical expense.

Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary’s total qualified long-term care expenses or $310 per day (for 2012), whichever is greater.

Medicare Premiums, Deductibles And Copayments For 2012

• Basic Part B premium: $99.90/month (was $96.40 for most beneficiaries).
• Part B deductible: $140 (was $162).
• Part A deductible: $1,156 (was $1,132).
• Co-payment for hospital stay days 61-90: $289/day (was $283).
• Co-payment for hospital stay days 91 and beyond: $578/day (was $566).
• Skilled nursing facility co-payment, days 21-100: $144.50/day (was $141.50).

Premiums for higher-income beneficiaries:

• Individuals with annual incomes between $85,000 and $107,000 and married couples with annual incomes between $170,000 and $214,000 will pay a monthly premium of $139.90 (was $161.50).
• Individuals with annual incomes between $107,000 and $160,000 and married couples with annual incomes between $214,000 and $320,000 will pay a monthly premium of $199.80 (was $230.70).
• Individuals with annual incomes between $160,000 and $214,000 and married couples with annual incomes between $320,000 and $428,000 in 2010 will pay a monthly premium of $259.70 (was $299.90).
• Individuals with annual incomes of $214,000 or more and married couples with annual incomes of $428,000 or more in 2010 will pay a monthly premium of $319.70 (was $369.10).

Rates differ for beneficiaries who are married but file a separate tax return from their spouse:

• Those with incomes between $85,000 and $128,000 will pay a monthly premium of  $259.70 (was $299.90).
• Those with incomes greater than $128,000 will pay a monthly premium of $319.70 (was $369.10).

Social Security Benefit Changes For 2012

• Monthly federal Supplemental Security Income (SSI) benefit amount will be $698 for an individual and $1,048 for a couple. The New Jersey monthly supplement remains $31.25.
• Monthly Social Security and SSI income limit indicating an individual receiving benefits based upon disability or blindness is engaging in Substantial Gainful Activity (SGA) is $1,010 (disabled) and $1,690 (blind).
• Average monthly Social Security retirement payment: $1,229 a month (was $1,186) for individuals and $1,994 (was $1,925) for couples.
• Maximum amount of earnings subject to Social Security taxation: $110,100 (was $106,800).

(Information obtained from the ElderlawAnswers website.)

Social Security Disability (“SSD”) and Supplemental Security Income (“SSI”) are two programs available from the Social Security Administration (“SSA”) that may play an important role in an elder law practice.

SOCIAL SECURITY DISABILITY (“SSD”) BENEFITS:

Available to a blind or disabled worker who:

1. applies for benefits;
2. has not reached full retirement age;
3. has sufficient social security earnings to be deemed insured for disability;
4. is disabled;
5. has been disabled for a 5-month waiting period within the last 17 months prior to the month of application. 20 C.F.R. §404.315; 42 U.S.C. §423.

SUPPLEMENTAL SECURITY INCOME (“SSI”) BENEFITS:

Available to an aged (65 or older), blind or disabled individual who:

1. applies for SSI and all other benefits for which he/she may be entitled;
2. is a U.S. resident or qualified alien;
3. is not a resident of a public institution;
4. meets the income and resource requirements; and
5. is not fleeing to avoid prosecution for a felony or violating probation or parole. 20 C.F.R. §416.202.

“DISABILITY,” DEFINED:

Disability for adults is defined as the inability to engage in “substantial gainful activity” (SGA).  There must be a physical or mental impairment, or combination of impairments, that can be expected to last for a continuous period of at least 12 months, or result in death. 20 C.F.R § 416.905.

The Social Security Administration has established certain earnings levels as reasonable signs that a person can perform SGA.  As of 2012, that level is $1,010 per month for disabled persons, and $1,690 per month for a blind person. www.ssa.gov/OACT/COLA/sga.html.

If one can potentially earn $1,010 or more (or 1,690 or more if blind), then Social Security presumes that that person is able to engage in SGA.  The presumed SGA amount is indexed to an annual cost of living allowance and is adjusted in January of each year.

SOCIAL SECURITY RETIREMENT BENEFITS:

Available to worker who has reached retirement age. The normal retirement age varies, depending on the worker’s birth date, and benefit amount is based upon the worker’s “primary insurance amount (“PIA”)” and the age of the applicant.

SPOUSE/FORMER SPOUSE BENEFITS:

Spouses and former spouses of fully ensured workers are entitled to derivative benefits:

1.       OLD AGE BENEFITS:

If an insured worker is alive and receiving benefits, benefits based on the worker’s earnings records are available to the worker’s spouse/former spouse who retires at normal retirement age, or who is otherwise eligible based on his/her status as responsible caregiver of worker’s child.

2.       WIDOW’S/WIDOWER’S BENEFITS:

Available to worker’s widow/er based on earnings record of fully insured worker. Benefits are available at the widow/er’s retirement at age 60 or above, or earlier if the widow/er is disabled or responsible caregiver of worker’s child.

CHILDREN’S BENEFITS:

Available to worker’s children, if worker is entitled to retirement/disability benefits, or the worker is deceased and fully insured. Child must be dependent minor child or disabled adult child.

SOCIAL SECURITY AND MEDICARE:

Those age 65 and over who are entitled to Social Security Retirement benefits also qualify for Medicare Part A (hospitalization) benefits. www.socialsecurity.gov/pubs/10043.pdf.

After 24 months of SSD eligibility, individuals who receive SSD are entitled to Medicare Part A, and are eligible for Medicare Part B subject to payment of a premium.

MAJOR DIFFERENCES BETWEEN THE SSD AND SSI PROGRAMS:

• SSD benefits are available only to those with sufficient social security earnings to be deemed “insured” for disability. SSI benefits are not based on insured status or the individual’s earnings. SSI benefits are paid to blind or disabled persons based upon that person’s income and resources.
• Unlike SSD, which is available to those who have not reached the age of retirement, SSI is available not only to the blind and disabled, but also to individuals over age 65.
• In New Jersey, individuals who receive SSI are also automatically entitled to Medicaid benefits.
• After 24 months of SSD eligibility, individuals who receive SSD are entitled to Medicare Part A, and are eligible for Medicare Part B subject to payment of a premium.

INTERPLAY BETWEEN THE SSD AND SSI PROGRAMS:

• An individual may receive benefits under both SSI and SSD, if he/she qualifies for both.
• The standards for the medical determination of disability are the same for the SSI and SSD programs for adults.
• Although an SSI recipient may receive up to $20 per month of unearned income without penalty, any unearned income in excess of $20 per month will be deducted from the SSI benefit on a dollar-for-dollar basis. Benefits received under SSD are considered “unearned income,” and those monthly benefits decrease the amount of SSI benefits to which the individual is entitled, on a dollar-for-dollar basis. POMS SI 00830.050; POMS SI 00830.210. Conceivably, a recipient’s social security benefit could reduce his or her SSI benefit to zero, resulting in a loss of Medicaid benefits.

THE APPEALS PROCESS:

Levels of appeal from an adverse determination:

1. Reconsideration: A paper review of the file
2. Hearing by an Administrative Law Judge: Hearing, including questioning of witnesses. Most reversals occur at this level.
3. Review by the Appeals Council
4. Federal Court review

Forms may be obtained online from www.ssa.gov.

THE HEARING:

Outline of Testimony:

• Personal, educational, literacy/fluency, and mental aptitude background
• Work experience
• Impairment(s), including onset date, symptoms, medical sources consulted
• Current treatments
• Physical limitations
• Environmental restrictions
• Psychiatric limitations
• Pain
• Physical Residual Functional Capacity for various activities
• Daily activities of a typical day
• “Before and After” example of limitations
• Medical doctors
• Demonstrations

DETERMINING DISABILITY:

Disability is determined based upon the sequential analysis set forth in 20 C.F.R. §404.1520. According to the sequential analysis, a determination of disability is based upon a five-part analysis of criteria. The first two criteria are as follows:

(1)     The claimant is not engaged in “substantial gainful activity” (“SGA”); and

(2)     The claimant has a “severe” impairment, which will last at least 12 months (or result in death).

If the claimant satisfies the above two inquiries, the severity of the impairment is then analyzed as follows:

(3)     The impairment meets or equals the severity of the listed impairments defined in the medical listing.

If the answer to this question is in the affirmative, then the claimant is disabled, according to medical listing. Otherwise, the inquiry is as follows:

(4)     The claimant is unable to perform his/her “past relevant work” (“PRW”); and

(5)     The claimant is unable to perform other work within his “residual functional capacity” (“RFC”).

If these latter questions are answered affirmatively, then the claimant is disabled according to vocational factors, even though the claimant has not satisfied the medical listing.