Personal Finance (Not Investing) • Inherited IRAs in special needs trusts and SSI

I'm guessing there may be some confusion due to terminology or labels used by Medicaid in various states. I'm quite sure that our state has our son on Medicaid specifically because, and only because, he is a Disabled Adult Child. As a DAC he automatically qualifies for Medicaid regardless of increased RSDI income. (When his income increased when switching from SSI to RSDI, the higher income level would otherwise have disqualified him from Medicaid in our state.) Since he went on DAC status, I have had no hassles with the state and Medicaid. (The comedy of errors with Social Security and Medicare are a different story.)

I found some paperwork that indicates the type of assistance he is receiving is called "Full Medicaid Coverage for the Disabled" in our state. Maybe this is equivalent to "Medicaid for Disabled Adult Child" in your state. I could be wrong, but it seems to me that our state then lists him as being enrolled in certain Medicare Savings Plans such as QMB, SLMB, or QI as a means to assure that he receives the proper full set of Medicaid benefits (payment of Part B premiums, 100% payment of Medicare copays and deductibles) for which he qualifies as a DAC.

Anyway, all this doesn't really answer my original question. I think the answer is now obvious, but was hoping you could simply confirm that in our example, where the place of residence bills the low rate of about $1,000/month for "food and shelter" and the DAC pays the full $1,000/mo from his own RSDI income toward the "food and shelter" portion of the bill, then that DAC would be determined to be paying his fair share of shelter costs. There could be no conceivable circumstance where "deemed income" could came into play in this example. Correct?

You raised an alarm about the perceived problems with third parties (such as a 3rd party SNT) paying for relatively expensive private-pay residential situations, under the assumption that the monthly payment is all going toward shelter costs. I just wanted to point out that those problems seem to go away when the "shelter" portion of the residential fee is a separate line item on the monthly bill and when the shelter portion is a small enough value so that deemed income issues don't come into play. How high the total monthly bill is doesn't matter. There is no limit on how much the 3SNT might pay toward other professional services. Correct?

DAC Medicaid has a very specific meaning in our state and if categorized as such, the individual will NOT be in a Medicare Savings Program, rather DAC Medicaid covers the entire Medicare bill. Maybe your state is different. There have been numerous instances where adult children in our state formerly on SSI who transitioned to RSDI DAC were not coded properly as DAC Medicaid and improperly put on a Medicare Savings Program and had money taken out of their RSDI check because the state incorrectly did not code them as DAC Medicaid.

If the beneficiary is paying his own basic shelter expenses, then no, my understanding is that there would not be an ISM penalty. There is no "in kind" support happening.

I have learned that there are many instances where a third party special needs trust could pay for basic shelter expenses without it impacting Medicaid, for example, in my state, if the individual is on waiver Medicaid, or is a DAC Medicaid recipient. This makes trusts much more useful and less restrictive for trustees and the beneficiaries they serve, however I have found from my own personal research that most corporate trustees take a one size fits all approach and are reluctant to pay shelter expenses out of the trust, because they are assuming ISM penalties of SSI which obviously do not affect all.

Statistics: Posted by JBTX — Thu Oct 10, 2024 11:01 pm — Replies 61 — Views 3395