DISTRIBUTIONS FOR ENTERTAINMENT, MEDICAL EXPENSES, CREDIT CARDS, DEBIT CARDS, AND GIFT CARDS

by Thomas D. Begley, Jr., Esquire, CELA

DISTRIBUTIONS RELATED TO ENTERTAINMENT

            Care must be taken when distributions are made for recreational activities, such as vacations.  Some entertainment activities involve shelter.  Taking a vacation usually involves shelter.  SSA defines income as something one can use to get shelter.  The POMS gives an example of an SSI recipient receiving a refundable airline ticket.  This would be considered in-kind income.  Since virtually everything can be converted to cash and used for shelter, trustees must scrutinize expenditures.

• Companions.  Frequently, persons with disabilities require one-on-one assistance from specially-trained staff.  These paid companions are compensated.  These funds cannot be converted to shelter, so they tend to pass muster with SSA.
• Memberships.  Membership in a fitness center or YMCA or any other organization does not cause a problem, since no shelter is involved.
• Tickets.  Movie and concert tickets should pass muster.  They typically do not involve shelter.  The trust should purchase the tickets and give the tickets to the recipient, rather than distribute money to the recipient to buy the tickets.
• Vacations.  An issue often arises as to whether the payment for a hotel room on a vacation, or for a state room on a cruise constitutes payment for shelter.

                                                ◦           Vacations Expenses.  Under the POMS, ISM the individual receives during a temporary absence is not counted. However, it should be noted that during a temporary absence SSA continues to value ISM as if an individual were physically in his/her permanent living arrangement.  So, if the trust were paying a person with a disability’s rent in an apartment, the rent would be considered ISM while the individual was temporarily absent, but the payment for the cabin or suite on the cruise would not be considered ISM. If the trust pays for a hotel at a resort, this would not be considered ISM either.

                                                ◦           Incidental Vacation Expenses.  One way for a trust to pay incidental vacation expenses is for the trust to pay the provider directly.  This works very well where the resort is an all inclusive arrangement.  The other way to pay for incidental expenses is to have a co-traveler pay these expenditures and reimburse them from the trust or pay with a credit card or debit card.

DISTRIBUTIONS RELATED TO MEDICAL EXPENSES

            One of the most pressing needs for disabled beneficiaries is medical care.

Medical Insurance

            It is crucial that the disabled beneficiary obtain some form of medical insurance. Options include the following.

• Private Medical Insurance. Typically, a source of private medical insurance at regular rates is through the parent's coverage with the parent's employer. Parents of such child must make every effort not to lose their jobs.  Another option is insurance under the Affordable Care Act (ACA).
• COBRA. The Consolidated Omnibus Budget Reconciliation Act of 1996 (COBRA) allows former employees and their dependents to continue the employer's coverage for a limited period of time, commonly 18 months. However, if the employee became disabled within two months of the qualifying event causing him to lose medical insurance coverage, COBRA coverage may be extended for 29 months. If the former employee died, divorced, or became entitled to Medicare, then the employee's dependents are eligible for 36 months of coverage.
• Medicare. Medicare is only available to persons under 65 if they are disabled and have 20 quarters of coverage. If they receive SSDI, then two years after the determination of disability they are entitled to Medicare. Persons receiving Medicare should obtain a Medicare supplement policy. There is usually a very limited open enrollment period to obtain this coverage after which it becomes impossible to obtain because of pre-existing conditions.
• Medicaid. Persons receiving SSI also receive Medicaid. Other ways of obtaining Medicaid are through state Medicaid waiver programs or the ACA.

Non-Covered Medical Expenses

            Typically, Medicaid pays for 100 percent of covered expenses. However, very often, psychological services, certain types of testing and some special therapies are not covered. It is appropriate for a trustee to pay for these non-covered services. It is also appropriate for a trustee to pay for dental care, prescriptions, and podiatrist care.

Provider Non-Acceptance

            Some providers do not accept Medicaid, because of the low reimbursement rate. It is difficult to find a dentist participating in the program. Some individuals with disabilities choose physicians who do not accept Medicaid. It is appropriate for a special needs trust to pay for services from those physicians.

Out-of-Pocket

            If the person with a disability receives Medicare, rather than Medicaid, there may be copayments, deductibles and payments for services that Medicare does not cover. It is appropriate to pay for those costs from a special needs trust.

DISTRIBUTIONS FOR CAREGIVERS

            There are a number of considerations when a trustee hires a caregiver for the beneficiary with disabilities.  Certain rules pertain whether the caregiver is a parent or not.

Insurance Considerations

            Whenever a trust employs a caregiver, whether it be a parent or other family member or even a non-family member, insurance is an important consideration.

Worker’s Compensation Insurance

            Worker’s compensation insurance should always be considered where a caregiver is being employed.  If the caregiver suffers an injury in the course of employment, the trust will be responsible.  Worker’s compensation insurance makes sense.

Casualty Insurance

            Casualty insurance is usually not an issue.  However, where an outside non-family caregiver is employed, casualty losses from theft may result, and appropriate insurance should be obtained.

Wage and Hour Legislation

            Wage and hour laws must be considered in setting payment for caregivers.

Withholding

            Trustees often hire caregivers.  The caregiver can be either a family member or a non-family member.  The issue is whether the caregiver is an employee or an independent contractor.  If the caregiver is an employee, there must be withholding for FICA and FUTA.  No such withholding is required for an independent contractor.  The trust may consider employing a payroll service to administer payment to the caregiver.

            Caregivers often want to be paid “under the table.”  It goes without saying that a trustee should always resist these requests.

            Significant factors in determining whether the caregiver is an employee or independent contractor include:

• Instructions.  Is the worker required to comply with the other person’s instructions with respect to when, where and how the work is to be performed?
• Personal Service.  Are the services to be performed personally or can they be sub-contracted?
• Continuing Relationship.  Is the relationship between the worker and the person being cared for continuing?
• Work Hours.  Is the worker required to work set hours?
• Payment.  Is the worker paid by the hour, week or month?
• Realization of Profit or Loss.  Can the worker realize a profit or loss on an individual transaction?
• Right to Discharge.  Can the worker be discharged?  If so, he is likely an employee.

Agency

            It is almost always good practice for the trust to employ any non-family caregivers through an agency.  It is a little more expensive to use an agency, rather than deal direct with a potential caregiver, but the agency has the responsibility of supervising the caregiver and paying taxes.  The agency will be responsible for withholding and for worker’s compensation insurance.

CREDIT CARDS, DEBIT CARDS, AND GIFT CARDS

Credit Cards

            In appropriate cases, the trust beneficiary should obtain a credit card.  The credit card should have a low limit so that it is not abused.  Credit cards are loans, and loans are not considered income for SSI purposes. If credit cards are used to purchase shelter, these are considered ISM and result in a reduction of the SSI benefit.  It is often difficult to obtain a credit card for disabled beneficiaries, because they often have a very poor credit history.  It is also difficult to obtain a credit card in the name of a trust.  The credit card must be designed so that the user cannot obtain cash.

            There are companies that issue credit cards to customers with sub-prime credit.  Occasionally, a disabled beneficiary may qualify for such a card.  Another way to obtain a credit card for a disabled beneficiary is to secure the credit card with cash.  For example, the trust could deposit $1,000 in a bank account with the bank issuing the card.  The card might have a maximum of $500.  The terms of the agreement might be that if the trust does not pay the credit card bill within a certain period of time, the credit card issuer could take the funds from the security account.

            If the disabled beneficiary or someone acting on his behalf uses a credit card to make a cash withdrawal from an ATM, the amount of the withdrawal would be unearned income to the beneficiary.

Debit Cards

            A debit card is cash that typically can be used for any purpose and, therefore, would be considered an asset.  Some cards, such as True Link cards, are restricted as to use and are not considered assets.

Gift Cards

            Gift cards are cash, and generally trustees should not provide beneficiaries receiving SSI with gift cards. As with any other cash distribution, the delivery of the gift card to the beneficiary reduces the beneficiary's SSI payment dollar-for-dollar and may ultimately require repayment.

            While there is no written guidance, Kenneth A. Brown of the Social Security Administration has opined that gift cards will not be treated as cash if the card is non-transferrable and the card is for a store that does not provide shelter.  Cards not meeting these criteria will be treated as cash equivalents.