2017 SSI Update. Materials

Transcription

1 2017 SSI Update David Lillesand, Esq. Lillesand, Wolasky, Waks & Hitchcock, P.L. Materials Title XVI SSI Update as of March 4, Statutory Changes - BBA and SNT Fairness Act 2016 Federal Regulations - Attorney Rules of Conduct Court Decisions - Eight Federal and Seven State, including four state supreme court cases 2017 New SNT POMS and non-snt POMS RCC Precedents 22 dealing with SNTs 1

2 Sources of SSI Law The largest law library of original materials is available free, online: SSI Law and Regulations Finder 2016 Edition ( SSA materials - Statute, regulations, rulings, POMS, HALLEX, RCC precedents, plus helpful materials Spotlights series, the SSA Handbook, and our Understanding SSI book, and more. Caselaw all federal cases reported online, but not by SSA itself [I like ] 2017 SSI Benefits (0.3%) COLA) Federal Benefit Rate (FBR) SSI payment amounts for 2017: $735 for Individual/Child $1,103 for Couple Countable Resources (assets) limits: $2,000 Individual $3,000 Couple 2

3 Federal Regulations - Attorney Rules of Conduct 20 CFR Rules of conduct for attorneys (b) Affirmative duties: 1. Act with reasonable promptness 2. Assist the claimant in complying with SSA requests 3. Conduct his or her dealings in a manner that furthers the efficient, fair and orderly conduct of the administrative decision-making process, including duties to: i. Provide competent representation to a claimant ii. Act with reasonable diligence and promptness in representing a claimant Federal Regulations - Attorney Rules of Conduct 20 CFR Rules of conduct for attorneys (c) Prohibited Actions 2. Charge from any source, directly or indirectly, any fee for services in violation of law 3. Make or present false or misleading oral or written statements 9. Refuse to comply with any of our rules or regulations 10. Suggest, assist, or direct another person to violate our rules 11. Advise any claimant or beneficiary not to comply with any of our rules 3

4 Statutory Changes - BBA Bipartisan Budget Act of 2015, Public L Expands criminal penalties for attorneys and others: Creates new felony for conspiracy to commit Social Security fraud. Increases from 5 to 10 years the time in prison for attorneys and others who make or cause to be made a false statement or misrepresentation. 2. Expands the CDI (Cooperative Disability Investigation) units which will be established in all 50 states by October 2022 (Sec. 811) Statutory Changes - BBA Bipartisan Budget Act of 2015, Public L Requires SSA to test a benefit offset starting at or below the current trial work month level ($780 in 2015) (Sec. 823). 4. Presumption that earnings are earned when paid (Sec. 825). 5. Electronic reporting of earnings (Sec. 826). 6. Reallocates Old Age and Survivors Trust Funds with the Disability Insurance Trust Funds to keep both solvent through 2034 (Sec. 833) 4

5 Statutory Changes SNTFA Special Needs Trust Fairness Act SEC. 2. FAIRNESS IN MEDICAID SUPPLEMENTAL NEEDS TRUSTS. (a) IN GENERAL. Section 1917(d)(4)(A) of the Social Security Act (42 U.S.C. 1396p(d)(4)(A)) is amended by inserting the individual, after for the benefit of such individual by. (b) EFFECTIVE DATE. The amendment made by subsection (a) shall apply to trusts established on or after the date of the enactment of this Act. Statutory Changes - SNTFA Special Needs Trust Fairness Act Congressional Research Service s unfortunate description: Amends title XIX (Medicaid) of the Social Security Act with respect to the treatment of revocable trusts for the benefit of an individual for purposes of meeting income requirements for Medicaid coverage. Extends the supplemental needs trust exemption from treatment of a trust as resources available to the individual to supplemental needs trusts for Medicaid beneficiaries established by those beneficiaries. 5

6 Intro to Federal Court Decisions - SSA Processing of Claims Seven steps of application and appeals. The FOUR SSA administrative review steps: 1. Initial determination 2. Reconsideration 3. Federal Administrative Law Judge (ALJ) Hearing 4. SSA Appeals Council review on the record Federal Court SSA Appeals Then claimant has THREE levels of federal court review: 5. United States District Court 6. United States Circuit Court of Appeals 7. United States Supreme Court We re now going to talk about federal court cases 6

7 Federal Court Decisions Newsome V. National Casualty Company, Unpublished decision, U. S. Circuit Court of Appeals, Fifth Circuit Blind man became quadriplegic in auto accident, DPOA agent hired PI attorney PI Attorney and judge secretly create SNT for $3.8 million the night before the settlement Plaintiff s subsequent attorneys failed to appeal SNT order in time, file Rule 60(b) Motion and lose Federal Court Decisions D.U. v. Rhoades, U. S. Circuit Court of Appeals, Seventh Circuit Medicaid Waiver recipient s services were cut, files appeal in federal court seeking preliminary injunction to continue services pending final hearing Injunction denied because SNT money, even if exhausted, will be replaced by money judgment Court notes that chance of winning depends not on proving that nursing services are helpful, but that they are medically necessary 7

8 Federal Court Decisions Corporation of Guardianship v. Brajer U. S. District Court, M.D. North Carolina E-Ferol class action where federal judge sought to have all medical liens filed prior to settlement North Carolina Medicaid didn t file Client got settlement, then died, and fight is over the Medicaid lien amount - $696k vs $78k Federal Court Decisions Corporation of Guardianship v. Brajer, cont. Issue repay Medicaid from date of SNT or for life Plaintiff sent check for $77, (full amount) with notation Full Payment in Satisfaction of Disputed Claim North Carolina cashed the check Court set case for trial (Tune in later) 8

9 Federal Court Decisions Orr v. Colvin, USDC E.D. California Defective SNT but attorney wins at ALJ hearing 9/2013 Appeals Council doesn t timely appeal, but re-opens case 5 months later in 2/2014, then claimant appeals Federal judge rules that trust was defective, but forces SSA to give 90 day period to amend under Early Termination POMS Note: the second defect (funeral expenses) did NOT have a 90 day amendment right. Federal Court Decisions Lessons from Orr v. Colvin When is an ALJ decision final? SSA Rules state that appeals must be filed within 65 days But Re-opening can occur by the Appeals Council within 2 years if good cause is found: (1) New and material evidence is furnished; (2) A clerical error was made; or (3) The evidence that was considered in making the determination or decision clearly shows on its face that an error was made. 9

10 Federal Court Decisions Nat l Found. v. Reese, USDC S.D. Ind. Pooled SNT accepts $250k from beneficiary who dies 5 weeks later with $240k in SNT and no Medicaid lien Trustee decides to keep the $240k alleging that the Joinder Agreement lists the deceased beneficiary as remainder beneficiary PI atty had referred cl to PSNT and PI paralegal witnessed the signing of Joinder Agreement Federal Court Decisions Hanover Ins. Co v. Clemmons, USDC M.D. Tenn. Clients sue malp ins carrier when atty/snt trustee steals funds and goes to prison for 18 years Federal court grants Ins. Co. Motion for Summary Judgement LESSON: Is the individual trustee or Pooled SNT covered for theft? State bar remedy adequate? 10

11 Federal Court Decisions Kleinert v. Commissioner, U.S District Ct., N.D. California Deceased mom s RLT left funds to disabled son Before distribution, Trustee gets court modification to create SNT for son rather than make an outright disqualifying distribution SSA determines it should be a first party not third party SNT on issue of vesting, but ALJ overturns SSA Federal Court Decisions Kleinert v. Commissioner, cont. Appeals Council doesn t appeal, but re-opens 5 months later under standard 24 month good cause for reopening Federal judge rules that vesting for probate vs. vesting for trust are different, and SSA s AC lacked good cause to re-open, so ALJ decision stands And, the rest of the story 11

12 Federal Court Decisions Kleinert v. Commissioner, cont. The attorney had taken the case pro bono When he won, I suggested and sent sample pleadings so he would file a claim for EAJA attorney s fees Without SSA opposition, court awarded over $10,000 which comes from SSA s budget, not the claimant s money! State Court Decisions Pikula v. Dept. of Social Services, Conn. Supreme Ct. Medicaid nursing home recipient denied LTC due to deceased father s HEMS standard trust. State argues it s a general support trust. Applicant argues deceased dad INTENDED to create TP-SNT Court rules for applicant. 12

13 State Court Decisions Kroll v. NY State Dept of Health, NY App. Division Grandfather s trust allowed 20-yr-old to withdraw all principal at age 21 Parents seek to exercise Power of Appointment to create TP-SNT using state decanting statute State argues it must be FP-SNT with Medicaid payback Court rules for beneficiary State Court Decisions In re Corn, Arkansas Supreme Court Corn s deceased girlfriend funds TP-SNT but forgets about some assets Corn seeks to place forgotten $260k life insurance proceeds in FP-SNT via court-established SNT Local judge goes off on unfairness and denies petition as against public policy. Arkansas Supreme Court reverses he who pays piper calls tune 13

14 State Court Decisions State v. Wilson, Del. Super Mom appointed SNT trustee of PI award then steals kid s money Special Needs lawyer testifies he 1) explained SNT and types of distributions allowed; 2) provided written materials as well; 3) advised she had to account for every penny of SNT LESSON: a) Re-consider appointing layperson as Trustee, and b) document, document instructions State Court Decisions In re V., Alaska Supreme Court 2016 Minor s PI settlement directed to ARC of Alaska as SNT trustee Minor, acting pro se, sought to recover his funds from ARC of Alaska Alaska Supreme Court upheld denial of motion to remove funds from SNT because pro se claimant failed to secure jurisdiction over the ARC of Anchorage 14

15 State Court Decisions In re Petition of Hagenbuch, New Hampshire Supreme Court 2017 Food stamp (SNAP) appeal. Parties stipulated the PI SNT is not a countable asset for SNAP benefits State included $20k direct distributions for legal and trustee expenses as F.S. recipient s countable income N.H. S.Ct. analyzed the federal food stamp regs in detail to conclude that TP direct payments are not income State Court Decisions Hernandez v. (Florida) AHCA (3 rd DCA) and Goheagan v. AHCA (4 th DCA) Medicaid Third Party liability liens in wrongful death suits U.S. Supreme Court decisions in Ahlborn and Woz that restricted state s right of TP lien recovery applies only to living clients, not to protect estate from claim in wrongful death 15

16 Court Decision Lessons Dave s 10 takeaways from federal court decisions: 1. Read and apply the POMS!! and don t get creative 2. Quickly Report to SSA with provable CRRR mail to avoid overpayments and trigger right to 90-day amendment 3. Do the (calendar) math length of time to appeal and cost-benefit analysis of compliance; consider putting funds in SSA-approved pooled SNTs instead of appeals 4. It ain t over til the fat lady sings Appeals Council has 65 days to take own-motion review (appeal) but two years to re-open for good cause Federal Court Decisions Dave s 10 takeaways from federal court decisions: 5. Last year: Close is NOT good enough Although plaintiff may have intended to create an SNT, the trust simply does not meet the requirements of an SNT under 42 U.S.C. 1396p(d)(4)(A) federal court decision 6. This year: Maybe close IS good enough proof that dad intended to create SNT may defeat HEMS standard 7. Don t be afraid of overpayments recovery is 10% of FBR from future SSI checks with no interest on the debt 16

17 Federal Court Decisions Dave s 10 takeaways from federal court decisions: 8. Federal Court Standard of Review makes it a definite uphill battle, chance of winning miniscule 9. Consult with other attorneys before heading down the appeal route, even to ALJ level, given the length of time to get a hearing currently 18 months 10. Courts can make bad decisions, too e.g., Pennsylvania court remand on broken trust issue The New 2017 SNT POMS The brand new, revised, Special Needs Trust POMS are on their way in early

18 The New 2017 SNT POMS As of the Date of Preparation of these materials (3-4-17), we have: (the sound of crickets ) A New 2017 Non- SNT POMS iappeal Good news, bad news Good news - Beginning December 10, 2016, you can file nonmedical appeals online at Bad news the transition is difficult; and soon SSA will require that if you are an attorney you must be trained and get access to Electronic Records Express (ERE) to review file and upload briefs and documents. 18

19 A New 2017 Non- SNT POMS iappeal Good news, bad news More Good News - New sections of the Program Operations Manual System (POMS) were released with more information about the iappeals non-medical appeals process. Those sections include GN iappeals Non-Medical - General and Title II Instructions. Benefits continue through the first appeal level if appeal initiated within ten days. See SI Appeal and the Right to Goldberg Kelly (GK) Payment Continuation. SSA Office of General Counsel Office of General Counsel provides: legal advice to SSA staff in connection with the operation and administration of SSA coordinates program litigation strategy nationwide and is responsible for comprehensive analyses of litigation trends.. The Ten Regional Chief Counsels provide litigation support and legal services and advice to the SSA staff, and legal and managerial expertise to OGC about their geographic region 19

20 SSA Regions RCC Precedents What are RCC Precedents The POMS is a primary source of information used by Social Security employees to process claims for Social Security benefits The Precedents are a part of the POMS and are opinion letters written under the authority of the Regional Chief Counsel (RCC) who, as attorney for the staff of SSA in that particular region, advises SSA staff on application of the state and federal laws to program operations RCCs and staff - Not our enemy, but are not on our team either. They are your opposing counsel in federal litigation, along with the USDOJ through the U.S. Attorney s Office 20

21 RCC Precedents PS Atlanta Region (2007) PS In-Kind support and Maintenance, Proposed Attorney Letter to SSI Claimants. This opinion addresses an attorney s request for the Social Security Administration (SSA) to approve language used in a letter that instructs his Supplemental Security Income (SSI) clients on the information needed by SSA to establish a valid loan agreement. The Social Security Administration does not provide legal advice; but would provide the attorney with the Program Operations Manual System (POMS) section used when determining whether or not allegations of a loan agreement is a bona fide loan of in-kind support and maintenance. POMS Table of Contents RM - Records Maintenance GN - General RS - Retirement and Survivors Insurance DI - Disability Insurance SI - Supplemental Security Income HI - Health Insurance NL - Notices, Letters and Paragraphs VB - Special Veterans Benefits PR - Title II Regional Chief Counsel Precedents PS - Title XVI Regional Chief Counsel Precedents SL - State and Local Coverage Handbook 21

22 28 SNT RCC Precedents of interest in reviewed pooled trusts 11 approved and 11 found invalid 6 Reviewed non-pooled trusts - either FP-SNTs or TP-SNTs with 3 approved and 3 found invalid 10 Pooled SNTs declared safe harbors This year s ten academy award winners are Arizona A - Jewish Family and Children s Service of Southern Arizona, Inc. Pooled Supplemental Benefits Trust California E Special Needs Foundation Self- Settled Master Trust Florida A Settlement Solutions National Pooled Trust Second Restatement 22

23 This year s academy award winners are Florida B Public Guardianship Pooled Special Needs Trust Florida E Family Network on Disabilities National Pooled Trust Indiana B Kentucky Pooled Special Needs Trust New Mexico A ARCA Foundation Grantor Pooled Trust Restatement This year s academy award winners are New York B United Cerebral Palsy Association of New York State, Inc. New York D The Wolf Foundation, Inc. Amended and Restated First Party Pooled Trust Funded by People with Developmental Disabilities South Carolina A Babcock Center Foundation, Inc., Pooled Fund Trust 23

24 Those not receiving an award this year are Planned Lifetime Assistance Network of California (PLAN of California); Z Pooled Trust; California Charities Pooled Trust (CPT); Foundation for Indigent Guardianship, Inc., for State of Florida Public Guardianship Pooled Special Needs Trust; Lifetime Care Foundation for the Jewish Disabled Community Trust II; Dakota Pooled Trust; the Third Restated South Dakota Pooled Advocate Trust; and the Utah Pooled Trust. So what to do if you placed business with a loser Contact Pooled Trust administrator and make sure they are amending the trust to conform Determine which of your clients had funds placed in the defective trust, secure a copy of the amended master trust (and joinder agreement, if applicable) Send copy of amended documents to clients asking them to retain and show SSA in future recertifications Advise clients to contact you immediately if SSA contacts them for recertification. 24

25 What went wrong? Early termination provisions Didn t provide for Medicaid payback Allowed Medicaid payback too early Permitted court to direct funds to third parties before Medicaid payback Requires Medicaid lien to be enforceable under state law Sole Benefit rule violations Permitted trustee to use Pooled SNT beneficiary s funds to be used to defend another s termination of benefits RCC Precedents State Survey #1 REGION IV (ATLANTA) Southeastern States Survey on "Dry" or "Empty" Trusts (2016) - EXAMPLE Florida: Florida case law, however, indicates an express trust is not created until property is conveyed for the purpose of the trust. See McLemore v. McLemore, 675 So. 2d 202, 205 (Fla. Dist. Ct. App. 1996); In re Herskowitz s Estate, 338 So. 2d 210, 212 (Fla. Dist. Ct. App. 1976). Thus, Florida law does not appear to recognize a trust that is established with no funds. 25

26 RCC Precedents State Survey #1 REGION IV (ATLANTA) Southeastern States Survey on "Dry" or "Empty" Trusts (2016) - EXAMPLE Florida: Florida case law, however, indicates an express trust is not created until property is conveyed for the purpose of the trust. See McLemore v. McLemore, 675 So. 2d 202, 205 (Fla. Dist. Ct. App. 1996); In re Herskowitz s Estate, 338 So. 2d 210, 212 (Fla. Dist. Ct. App. 1976). Thus, Florida law does not appear to recognize a trust that is established with no funds. Similar for all states in southeast Alabama, Kentucky, Georgia, Mississippi, North and South Carolina, and Tennessee RCC Precedents State Survey #2 REGION V (CHICAGO) Upper Midwest (2016) See Illinois A, but applied ONLY in Indiana A Doctrine of Worthier Title Issue: Survey of state law in Region V concerning the revocability of grantor trusts, specifically whether a trust s final distribution grantor s estate creates a residual beneficiary interest so that grantor is not the sole beneficiary. 26

27 RCC Precedents State Survey #2 Compare Chicago RCC to Dallas RCC and Atlanta RCC Those RCC Precedents looked at each state, and found that about half the states had abandoned the Doctrine of Worthier Title and halve had not, and discussed each state specifically. When evaluating or defending a particular SNT you have to review the SSI SNT POMS but also whether the DWT was violated; look for Regional POMS RCC Precedents Promissory Note as Evidence of a Valid Mortgage on Non-Home Real Property for SSI eligibility (2016) SSI Claimant s second home sought to exempt it as resource by daughter giving her parents a note and mortgage to reduce equity value under the $2,000 SSI resource limit The amount of the note tracked personal loans parents gave since 2002 The mortgage therefore wants for consideration, as Recipient s parents did not part with anything of value or forego an existing right at the time the promissory note was executed, and are actually in a better position than before the execution of the promissory note, citing Florida cases in 1953 and

28 RCC Precedents before 2016 Examples of earlier Florida RCCs: $50,000 private annuity approved (2005) Personal Services Contract approved (2014) for same parties as PSC disallowed in 2013 Nunc Pro Tunc doesn t work under Florida law for substantive changes EVEN IF the state judge signs the order (2011) State law allowed null and void clauses in 2006, but they re not effective now since national POMS issued Questions? If not asked & answered here, ed questions to me are encouraged, phone conferences as necessary. No charge for routine issues. Let s just do it right for the clients! David Lillesand, Esq. Lillesand, Wolasky, Waks & Hitchcock, P.L. 635 Court Street, Suite 202 Clearwater FL David@LillesandLaw.com (727)