The Surrogates Court, Kings County, recently decided the Matter of Samuel Erman; a proceeding that was brought for the purpose of appointing a Guardian to place German Reparations payments in a supplemental needs trust.
In order to fully understand the case, it is helpful to understand the rules regarding community Medicaid eligibility and supplemental needs trusts. In order to qualify for community Medicaid, an individual must have no more than $4,200 in assets and no more than $700 monthly income plus an additional $20 for the aged, blind or disabled. The excess income is known as “surplus” income and must be contributed toward the care of the Medicaid recipient. However, German reparations are exempt and are therefore not countable as monthly income nor are they treated as countable assets if accumulated over time.
Community Medicaid rules allow disabled recipients to contribute assets (whether the assets are exempt or not) to a supplemental needs trust without affecting the applicant’s eligibility. Any funds that are left in the supplemental needs trust upon the death of the Medicaid recipient are used to reimburse Medicaid for expenditures.
Samuel Erman, a retarded individual, was receiving compensation payments from Germany for the pain and suffering his family endured under the Nazi regime. Accumulated German reparations are exempt resources, though the income from the resources is countable. Mr. Erman accumulated funds from the reparations in his own bank accounts. The organization known as the New York State Association for Retarded Children, Inc. (NYSARC) petitioned the Court to appoint a guardian to access Samuel’s assets and place them in a supplemental needs trust.
The Guardian also had the choice of leaving the assets outside of the trust and using the funds for Samuel Erman’s benefit. Hence, the Court found no benefit to placing the reparations in a supplemental needs trust because the reparations payments are not countable income to a Medicaid/SSI recipient and they are not recoverable upon the death of the Medicaid recipient. Accordingly, the Court determined that it would be beneficial to appoint a guardian to handle Samuel’s funds without the need for establishing a supplemental needs trust.
While advocates for the elderly and disabled will often advocate for the establishment of supplemental needs trusts, in this particular case, the court stepped into the shoes of the disabled individual and concluded that it would be more beneficial for him to have access to the German reparations outright. Due to the fact that the reparations were exempt in any event and therefore not countable in the context of Medicaid and SSI eligibility, it did not make sense for such assets to be tied up in a trust with all of its inherent restrictions. Clearly this was a favorable ruling for disabled individuals and perhaps a reminder to anyone contemplating the creation of a supplemental needs trust that all angles of a particular plan must be analyzed in order to gain the proper perspective and thus maximize the benefits for a disabled individual.
Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts and wills. The firm has offices in Forest Hills, Great Neck, and Brooklyn, NY. Mr. Fatoullah has been named a “fellow” of the National Academy of Elder Law Attorneys and is a former member of its Board of Directors. He also serves on the Executive Committee of the Elder Law Section of the New York State Bar Association. Mr. Fatoullah has been certified as an Elder Law Attorney by the National Elder Law Foundation. Mr. Fatoullah currently chairs the Legal Committee of the Alzheimer’s Association, LI Chapter and is a co-founder of Senior Umbrella Network of Queens. This article was written with the assistance of Debby Rosenfeld, Esq., a senior staff attorney at the firm. The firm can be reached by calling 718-261-1700 or 516-466-4422, or toll free at 1-877-ELDER-LAW or 1-877-ESTATES.
* Certified as an Elder Law Attorney by the National Elder Law Foundation.
