From the Raleigh News and Observer:
Floyd Brown was awarded millions of dollars after being wrongfully incarcerated. But for weeks he couldn’t get money to buy flowers for his mother’s grave.
His $4.5 million has been earning interest while Brown, who is 49 and mentally disabled, lives on $733 a month in Supplemental Security Income benefits. ...
Brown has an IQ of less than 60 and the mind of a 7-year-old. ...
In 2012, when Brown was awarded damages for wrongful incarceration, his mental abilities once again defined his future. Brown’s attorneys asked a federal judge to create a type of Special Needs Trust often set up for people with disabilities. It allows Brown to remain eligible for public benefits, including Supplemental Security Income (SSI) and Medicaid.
But it comes with strict guidelines about how his money is spent.
Strictly speaking, none of it could go toward flowers for his mother’s grave. The money can only be used to benefit Brown....
After Brown’s repeated requests for flowers went unanswered, his sister Frances Staton contacted the Observer. Staton, who has been her brother’s legal guardian since 1994, questioned why he has so much money but can’t use it. “The attorneys are getting paid. Why isn’t Floyd?”
The Observer contacted Charlotte attorney Tony Giordano, who administers the trust. “I’ve got regulations I have to live by,” Giordano said. “If you read the terms of the trust, it has to be used to enhance his life.” ...
Asked why a less restrictive trust wasn’t set up, Giordano said the decision was made jointly among himself, Rudolf and Cogburn. “It was only because he had public benefits (related to his disability); that was the sole motivating reason,” Giordano said. “Hindsight is great.”
To gain flexibility, Brown would forfeit SSI and Medicaid benefits. Staton said there is no reason why her brother, who has millions, should be on public assistance – especially if it’s hindering his access to his money.
“Floyd doesn’t need to be on Medicaid,” she said. “Floyd needs a home.” ...
15 comments:
Another wonderful SSI story. Let's keep someone on federal welfare while they have millions in a trust - geez. Thank goodness his sister has some sense and maybe this guy's circumstances will improve going forward.
This makes no sense. Even if the trust had to be administered by a professional and was subject to those rather large fees, that much principle would accrue plenty of interest income in even safe investments to take care of the guy the rest of his life and leave a nice bit of money to whomever/whatever he wanted at his passing.
Seems like bad lawyering, or at least lawyering by people who have only had mid and low income clients with gov't benefits they want to keep.
The judge and lawyers involved may have been concerned that it would be construed as malpractice or worse if they DID NOT ensure that the public benefits for which the beneficiary was eligible would be obtained. 9:15 has a point in that many of us spend much of our careers representing low income/indigent clients that we may lose perspective.
I think requiring spending to "enhance his life" might be a good idea, to prevent other people from ripping him off. However, if he wants to put flowers on his mother's grave, then I would say that that enhances his life. He could but flowers for himself, couldn't he?
There is precedent in Texas and Illinois that an attorney who gives a few million to a client without setting up an SNT can be liable for malpractice.
He could live for another 50 years. He probably needs a personal care assistant and other help. $4.5 million (before OR after taxes) isn't going to take care of him for life with that level of need. Agreed that the attorney might not have had options other than setting up a SN trust...and now that it's set up, not sure it can be unset. Plus the money remaining in the trust probably can't be passed down when he dies. Disagree that the trustee has to be so strict--seems like he could buy flowers for the man, who could then choose where to put them.
The problem with wanting to have your cake and eat it too. This money was issued in 2012 when he was age 47. 4.5 million. Would generate a lot more in interest income than $733 a month, but would it cover the rest of the public assistance payments made on his behalf for the rest of his life? Who cares? When he ran out of money, he could file for SSI again. And also, why isn't he getting CDB benefits on a deceased parent and on Medicare?
2:02 has it
this guy will always qualify for benefits. if the corpus started getting low, he could file.
I am all about expanding our social safety net and having a much more robust welfare state (color me socialist), but stories like this, as well as rich older folks who find every way to game SS/Medicare to get every last gov't dollar (don't give me that "they paid in" nonsense--those healthy, rich, mostly white folks exceed their contributions and the growth on those contributions much more often than not) incense me. This man has substantial assets. He should be required to use at least most of them before receiving gov't money.
@ 8:46 Just about everyone who gets an SS benefit for more than a few years gets a whole lot more out than they paid in, and actually with diminishing return aspect of the PIA comp, those who pay higher taxes see a much lower return than those who pay lower taxes. The tier system, the bend points determine that the lower wage earners already get a higher return on their contributions.
It is also ridiculous that any attorney would even THINK that keeping this man living a poverty level life would be the best thing for him.
I had a man come to me because of a SSI overpayment of $15,000. His story was that he had a stroke ten years ago and lost brain function, so went on SSI. As part of his treatment post eligibility, he took a prescription drug that caused him more problems. He got an attorney and got a $1 million settlement from the pharma company in the form of an annuity that pays over $5000 per month I believe until he dies.
That attorney put his money in a SNT to preserve his SSI/Medicaid benefits. His SSI was reduced by the Presumed Maximum Value rule because the SNT made mortgage payments on his behalf (somebody told him he could buy a condo now that he was a millionaire). And he had lots of out-of-pocket medical costs because of things Medicaid/Medicare won't pay for or require a copay.
So his SSI was reduced to $440-something each month that he could live on and he has to beg the SNT for stuff, despite the fact that he COULD be having over $5000/month in income going directly to him if there was no SNT. He thought he could pay for his medical care and living expenses and everything else on his own for that much.
He was pissed that he was stuck in a SNT, and I asked an elder law attorney whether he could have it taken apart, but she said that was pretty tough.
And sure enough, he owed the SSI overpayment, although the ALJ reduced it by $7000 due to an calculation mistake by the field office.
It's just crazy that folks can be trapped like this.
I find that a lot of attorneys and other advocates simply aren't well-versed enough in the (admittedly numerous and complex) programs at play--Medicaid/Medicare/SSI/DIB/RIB/State laws, etc.
Sadly, people likely need more than one expert to help them. Attorney, financial advisor, maybe even an accountant. Many that can afford those want to skimp, and the vast majority don't have the money, time, access, whatever, to get all the help they need. There's lots of people offering one-size-fits-all approaches, but anyone that knows the first thing about elder (not just elder, but mainly) law issues knows individual circumstances make huge differences in the appropriate strategies to employ.
I frequently ran into SNT's when I was a CR. They are mainly set up to keep the claimant on SSI and preserve the settlement money for the family at the claimant's demise, all at taxpayer expense. The funds were rarely used to "enhance" the claimant's life in any visible or significant way.
The most recent SNT I read was for a man who was getting $60,000 in a malpractice settlement. He paid some hot shot attorney $10,000 to create the trust, got his mother to be the trustee and included a clause about things that he could do to enhance his life.
As soon as the money hit the trust, he and his mother took it all out, bought him a car and he took a vacation with his wife. They submitted stacks of receipts including lots of visits to fast food restaurants on the road trip. He blew through the $50,000 in 10 days and the attorney got the $10,000 to set up this stupidity.
In the past, the reason to keep someone on SSI and Medicaid had to do with the fact that the beneficiary would not be able to be insured under pre-Obamacare insurance rules. It was never so much about the SSI monthly benefit as it was about having medical care. Now, with the prohibition on refusing coverage for pre-existing conditions, and the overall increased coverage options under the ACA, it probably is not as necessary to set up a trust to protect the lump sum.
2:31
You're right. These trusts are used to keep medical assistance from the states and it seems logical to dissolve these trusts because of ACA insurance rules. My only thought is, most of these people who have these established are very mentally disabled and would most likely be able to blow through their money and obtain benefits once they have done so. SNT's allow the states that provided medical benefits to be repaid when the person dies. If we deny them of benefits until they spend down the money, then the states never get reimbursed.
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