Posts Tagged ‘Social Security Administration’

Good News: The IRS Simplifies Its Proposed ABLE Act Rules


The Achieving a Better Life Experience (ABLE) Act initially looked like it would provide important opportunities to people with disabilities. Although much work was left to the Internal Revenue Service, the Social Security Administration and individual states, advocates hoped that it might open up a simple choice for beneficiaries to save money, and enhance autonomy.

The IRS issued its proposed regulations last June, and those hopes appeared to be shaky. The proposed regulations required a lot of administrative oversight, and made it look like the cost of managing ABLE Act accounts might make them look unattractive to individuals, family members and even state governments.

This week the IRS reconsidered, and issued something it calls “interim guidance” on ABLE Act regulations. The proposed regulations will now be revised to focus on ease of administration, opening up possibilities for the future, once states have finalized their ABLE Act plans.

What changed? Three important things, listed below. In addition, the Social Security Administration (which also has to adopt ABLE Act regulations) has given an exciting hint about how it might interpret the Act — making the possibilities for positive impact even greater. Here are the new developments:

  1. Simplified reporting by ABLE Act custodians and state programs. The proposed regulations published in June would have required someone — presumably the ABLE Act account managers in each state — to review each distribution from an ABLE Act account to determine whether it was proper. Advocates were concerned that this would dramatically increase the cost of ABLE Act programs (perhaps to the point of crippling those programs), and slow down distributions for needed — and usually unquestioned — disability expenditures. The IRS heard that complaint, and has let us know that the final regulations will require the ABLE Act beneficiary to keep track and file appropriate tax returns. That’s excellent news for the usefulness of ABLE Act accounts.
  2. Detailed information about contributors no longer required. The original proposed regulations would have required any person making a contribution to an ABLE Act account to provide a Social Security number. The IRS’s concern: the possibility that excess contributions might be made in a given year, and earnings would need to be reported when the excess was returned. Instead, the new regulations will allow contributors to skip the Social Security number requirement so long as the state program has a mechanism to prevent excess contributions in the first place.
  3. No need to prove disability to the ABLE Act custodian. An ABLE Act account can only be opened for a person who has a disability. That will usually mean that the beneficiary is receiving Supplemental Security Income (SSI) or Social Security Disability (SSD) payments, but some beneficiaries will have to establish their eligibility by providing diagnosis information — and they will have to show that their disability began before age 26. The original regulations would have required the ABLE Act custodian to collect, review and maintain those medical records. After advocates pointed out that this was unnecessarily complicated and might sometimes even be dangerous, the IRS changed direction and decided to require that the person opening the ABLE Act account should simply be required to swear that the beneficiary qualifies, under penalty of perjury. The same record-keeping will be required, but records can stay with the beneficiary or family members instead of being held in a central office at a financial institution or state agency.
  4. Then there is the potentially excellent news from the Social Security Administration. While SSA’s proposed regulations have not been issued, there are hints that they will agree that ABLE Act distributions for housing-related expenses are not disqualifying for SSI purposes. That could mean terrific possibilities for family assistance with the cost of housing — a perennial problem for SSI recipients under current regulations. It’s too early to know for sure exactly how Social Security will decide this question, but it’s exciting news nonetheless.

Before we leave the topic, let’s review the ABLE Act itself. There is plenty of information available on the history of the Act, how it changed over time, and the financial compromises Congress made in passing the Act, but the real importance is how the Act will work as finally adopted. Here are some highlights:

  1. States can set up ABLE Act accounts, but are not required to do so. Arizona is moving more slowly than most other states, but is considering how to authorize an ABLE Act program. Advocates are hopeful that patience will be rewarded in the next legislative session, beginning in January, 2016.
  2. Persons with disabilities — and their families and concerned friends — can make a total of up to $14,000 in contributions to an account in a given year. The $14,000 maximum is as to the total of all contributions, not the contribution for each person. Still, that raises the possibility of about $1,000/month in assistance for a person receiving SSI and/or Medicaid (AHCCCS, in Arizona), or for significant savings by the person with a disability.
  3. Total contributions over the life of the ABLE Act account are capped, but at very high numbers (currently over $400,000 for Arizona). If the ABLE Act account grows to be more than $100,000 there are other problems, but that simply can’t be an issue for the next seven years or so.
  4. The ABLE Act account will ordinarily be managed by the person with a disability, not by donors, family members or others. There will be special procedures for beneficiaries who are minors or incapacitated, but those rules aren’t yet written.
  5. One big downside: whatever is left in the ABLE Act account at the beneficiary’s death will revert to the state, to the extent that Medicaid/AHCCCS benefits have been received. That will make the ABLE Act account unattractive in some situations, but not by any means in all cases.

There is more — lots more. But the new direction from the IRS is promising, and makes advocates for people with disabilities hopeful about the future of ABLE Act accounts. Stay tuned.

State Court Does Not Control Social Security Payments

MAY 12, 2014 VOLUME 21 NUMBER 17

At Fleming & Curti, PLC, we do not handle divorce cases. From time to time, though, a divorce case raises the same kinds of issues that we see in the guardianship, conservatorship and probate cases we do handle.

A recent Arizona Court of Appeals decision is a case in point. It involves the divorce of a Navajo County, Arizona, couple, Donna and Edward. When the couple divorced in 2009, Donna was awarded custody of their four children. Edward was ordered to pay child support.

When Edward began collecting Social Security benefits on his own account, the children were entitled to receive $362 each per month. Social Security named Edward as “representative payee,” which meant that the children’s checks were made payable to him and he was required to account to the Social Security Administration each year.

Donna filed a petition with the divorce court to modify the support and visitation orders. She also alleged that Edward had been taking the children’s Social Security money and spending it as he saw fit — and that she should be the representative payee since she had sole custody of the children. At some point she apparently applied to Social Security to become the payee, and the payments were switched to her name. Still, she wanted Edward to account for — and return — the payments received for a nine month period starting right after the divorce.

The judge in the divorce court agreed, and entered a judgment against Edward (and in favor of Donna) for the amount of the payments he found to have been “misappropriated.” The judge also held Edward in contempt for failing or refusing to turn over the Social Security.

Edward appealed, and the Arizona Court of Appeals briefly reviewed the interrelationship of Social Security, state law and state courts. According to the appellate judges, Arizona state courts do not have any jurisdiction to review the management of Social Security payments made to a representative payee. The proper place to challenge Edward’s use (or possible misuse) of those funds was before the Social Security Administration itself. Peace v. Peace, May 8, 2014.

The Arizona appellate court, incidentally, was very candid in its assessment of the legal principles. It noted that some state courts (not in Arizona) have decided that they do have jurisdiction over Social Security representative payees, and others have held that state courts are preempted by federal law from intervening. The Arizona opinion specifically mentions a minority opinion in a 2013 Vermont case, LaMothe v. LeBlanc, which reviewed the holdings in several states — including Alaska, Maine, North Carolina, Ohio, Iowa and Tennessee.

What is the significance of the recent Arizona holding in probate court? An analogous situation arises frequently. Suppose that a parent with a disability receives Social Security benefits, and that his or her minor child is entitled to Social Security benefits. Now suppose that a grandparent or other family member has become guardian for the child, or that a professional fiduciary has become conservator to handle a personal injury settlement. Can the Arizona probate court order the parent to turn over Social Security payments, or to prove that they were expended for the child’s benefit, or even to relinquish authority as representative payee? The Peace decision would seem to say that none of those decisions are within the purview of the probate court — the guardian’s, conservator’s or custodial parent’s dispute is with Social Security, not the state courts.

Planning for Retirement: Does the Three-Legged Stool Work?


For decades accountants, financial planners, lawyers and government workers have talked about Social Security and the “three-legged stool.” The metaphor had a simple attraction, especially when Social Security was a young program. The three legs? Social Security, private retirement programs and personal investments. You should have some of each, according to conventional wisdom.

The problem with the metaphor, of course, is that such a large portion of retirement-age Americans have just one leg, or maybe one strong leg and part of a second. According to the Social Security Administration, about half of retirees get more than half of their income from Social Security alone. In fact, Social Security makes up more than 90% of all income for about a quarter of elderly recipients.

Is the three-legged stool important? Maybe, but it was viewed as received wisdom as early as 1949. More modern metaphor development recognizes the predominance of Social Security in retirement planning by turning the three-legged stool into a pyramid.

According to this new view, Social Security can be seen as the broad base of the pyramid, with other sources of retirement income as higher levels. Actually, “income” may be the wrong word — better to think of retirement “resources.” The next tier of the Investment Company Institute’s pyramid, for example, is home ownership. And that analysis comes from an industry group interested primarily in encouraging individual investments in retirement accounts. The reality, though, is that ownership of the home is the second-most-common bedrock resource for retirees.

In addition, there seems to be a growing recognition on the part of near-retirees that they will need to build substantial resources for their impending retirements. Defined benefit retirement plans, once the mainstay of private pension arrangements, are shrinking as a percentage of available benefits. As a result, fewer and fewer retirees will be able to count on a pension-like retirement benefit, and more and more will come to rely on the contributions they have managed to make to their own Individual Retirement Accounts and 401(k) and 403(b) plans.

Still, the news about the private retirement plan level of the pyramid is not all bad. According to the Investment Company Institute analysis mentioned above, Americans have accumulated $20.9 trillion in assets earmarked for retirement (and that’s not counting Social Security). That investment has increased much faster than inflation or the number of potential retirees since 1975.

The private pension part of the retirement pyramid is broken out as two separate parts: employer-sponsored retirement plans (like defined-benefit plans, 401(k) and 403(b) plans) and individual plans (IRAs). The top level of the pyramid, narrow but important for those who have been able to build personal wealth, is described as “other assets.” One commentator suggests that perhaps we should include another level: part-time employment. That may sound cynical, but reflects the reality that many retirement-age adults will have to work at least part-time — a notion that was not contemplated in the original three-legged stool metaphor.

One other point about rethinking the metaphor: it inevitably leads to thinking about maximizing the Social Security level of the pyramid. And not just maximizing the individual retiree’s share, but consideration of how to maximize a married couple’s benefits when taken together. Today there is a cottage industry of websites and individual advisers reviewing retirement options and strategies for maximizing a couple’s (or an individual’s) Social Security benefits.

For the 10,000 Americans turning 62 each day, it is increasingly important to think about how to maximize Social Security (and total retirement resources), what tax consequences will flow from different strategies, and how to think about the difference between not working (“retirement”) and drawing benefits (“retirement”). It is a complicated and confusing area, but thoughtful planning (and information collection) can literally be rewarding.


Posthumously Conceived Twins Denied Survivors Benefits

MAY 28, 2012 VOLUME 19 NUMBER 21
The United States Supreme Court doesn’t very often weigh in on Social Security rules, so when it does those of us in the elder and disability law community pay attention. Last week’s decision by the Court, interpreting Social Security regulations as applied to posthumously conceived children, addressed interesting questions of law, science and public policy.

Here are the bare facts: Robert and Karen Capato lived in Florida. Robert was being treated for esophageal cancer, and before chemotherapy and radiation treatment began the couple preserved a sample of Robert’s sperm. That way, Karen would be able to conceive another child (the couple had one child together already) by Robert even if his treatment left him infertile — or even if he died.

Robert Capato did die of cancer. Nine months after his death Karen became pregnant using his banked sperm. Eighteen months after Robert’s death she delivered twins.

Karen applied for Social Security survivors benefits for the twins. Citing Florida law on inheritance rights, the Social Security Administration denied the benefits (presumably the couple’s child conceived and born before Robert’s death qualified for benefits). The federal District Court agreed with Social Security, but the federal Court of Appeals reversed that decision and ruled in favor of Karen and the twins. The U.S. Supreme Court sided with Social Security, reversed the Court of Appeals and sent the entire case back for a final determination. Astrue v. Capato, May 21, 2012.

But what’s most interesting about the Supreme Court’s decision may be what it doesn’t decide. It does not rule that no child conceived and born after the death of the child’s father can ever receive Social Security benefits on that father’s work record. It does not bar careful planners from preserving future benefits for children born as a result of in vitro fertilization. Instead, it holds that the basic test is whether state law — usually the state law where the father dies — controls whether the posthumously conceived child is entitled to Social Security survivors benefits.

The Court unanimously ruled that Social Security is only available to survivors who are determined to be heirs of the deceased worker. In Florida, said the Justices, that would not include children conceived after the death of their father. Florida’s probate code expressly excludes after-conceived children, and Robert Capato’s will did not make reference to children who might be conceived after his death.

But does Florida law apply in this case? Probably — but the Justices left open the possibility that the trial judge could find otherwise after a new hearing. Interestingly, Karen Capato moved to New Jersey while pregnant with the twins, and she argued (unsuccessfully, so far) that New Jersey law should apply to the determination of paternity.

Can we infer the answers to some of the obvious questions you might ask? Perhaps — but not conclusively, of course.

If Florida changed its law to make posthumously conceived children entitled to intestate inheritance, would that change the result for the Capato twins? Probably not — but it should change the result for future Florida residents in similar circumstances.

If Robert Capato’s will had specifically mentioned the children he might have in the future, would that have changed the outcome? Hard to say, but tantalizingly interesting. Apparently, Robert and Karen specifically mentioned their intention to preserve sperm for future in vitro fertilization to the lawyer who prepared Robert’s will. Should he of she have included the unknown future children as beneficiary’s of Robert’s estate? Perhaps that would have changed the result.

What if Robert Capato had lived — and died — in Arizona? It’s not clear. Arizona’s probate code does not expressly define posthumously conceived children as either included or not included in the list of intestate heirs. No Arizona appellate case has decided the question, either (though there is at least one reported Arizona case involving the status of sperm intended to be preserved for possible future in vitro fertilization).

What about the laws of intestate succession in other states? Well, we’re not qualified or inclined to render legal opinions about other state laws. But we will note that the Supreme Court specifically pointed to the intestacy laws of several states as dealing with posthumously conceived children. Among the states with some treatment of the question (in addition to Florida) the Court included California, Colorado, Georgia, Idaho, Iowa, Louisiana, Minnesota, New York, North Dakota, South Carolina and South Dakota. There is no mention of New Jersey law — the law Karen Capato would like to apply to the twins’ claim.

Want to read the entire opinion — or even listen to the oral argument before the Supreme Court? Look to the excellent Oyez multimedia website maintained by the IIT Chicago-Kent College of Law.

Massachusetts First on Modern Conception and Inheritance


If a husband and wife “bank” sperm so that the wife may conceive artificially, and the wife conceives through insemination of this sperm after the husband dies, will children resulting from such a pregnancy enjoy the inheritance rights of “natural” children in Massachusetts?

Last week the Massachusetts Supreme Judicial Court answered this question of law at the request of the federal District Court, holding that children conceived after their biological father’s death have the same rights to inherit as children conceived naturally if the genetic relationship is established and then proof is given that the deceased parent consented to the conception and to the support of the resulting children. Woodward v. Commissioner of Social Security (1/02/02) is the first published opinion of its kind in the country.

In 1993, Warren Woodward was diagnosed with and died from leukemia. He and his wife, Lauren, “banked” sperm before his treatment started given the likelihood of sterility thereafter. In late 1995, Ms. Woodward gave birth to twin girls conceived through artificial insemination of Mr. Woodward’s sperm.

Ms. Woodward applied for but was denied federal Social Security “child’s” and “mother’s” benefits in 1996. Despite a probate and family court adjudication of paternity, SSA denied the claim. Ms. Woodward asked the federal District Court to order release of the benefits, and that Court asked the Massachusetts Supreme Judicial Court to decide the legal question.

The Massachusetts high court finds middle ground between Ms. Woodward’s view that all children conceived posthumously should inherit under state law, and the government’s view that, since such children do not exist at the time of the parent’s death, they should be strictly denied the right to inherit.

The Woodward court embraces foremost the legislature’s concern that all children get the same rights and treatment under the law regardless of ‘accidents of birth.’ The Court reasons that children conceived posthumously should be entitled to the same rights to financial support as are children conceived before a parent’s death. However, the Woodward Court also weighs the state’s interest in timely administration of estates as well its interest in insuring the integrity of the decedent’s reproductive rights. The Court speculates that limitations periods for paternity claims against estates may affect claims from posthumously conceived children. The Court also emphasizes that genetic paternity alone is not enough; the deceased parent must have had some intent to have and to support children.

Arizona has no precedent to guide similar questions. Medical technology will continue to challenge a slow-moving legal system in all states unless state legislatures take the initiative.

Evidence Rebuts Presumption Of Paternity For Social Security


Sometimes lawyers remind their colleagues and clients that legal problems would arise less frequently if individuals would simply lead more orderly lives. Clarence Schoenfeld and family helped prove that basic legal maxim.

Clarence “Clay” Schoenfeld was 50 and a professor at the University of Wisconsin when he married graduate student Sheryl Smith in 1969. Prof. Schoenfeld had children from his first marriage, and he and his new wife agreed that they would not have children.

Eventually Mrs. Schoenfeld began to think she might want to have children after all. In 1978 she moved out of Prof. Schoenfeld’s home and began to look into the possibility of adoption or artificial insemination.

In 1979, on a vacation in Rome, Mrs. Schoenfeld met Michael Mandeville, who told her that he was a CIA operative and native Australian. Mr. Mandeville told Mrs. Schoenfeld that he would like to have children himself, but that his work prevented him from being a “traditional” father. The two agreed that they could solve one another’s dilemmas if Mrs. Schoenfeld was inseminated with Mr. Mandeville’s sperm.

Mrs. Schoenfeld used a syringe to complete the insemination and in October, 1980, her first child was born. Although Prof. and Mrs. Schoenfeld had been sexually intimate during the period of conception, the child’s birth certificate listed Mr. Mandeville as the father and he was given the Mandeville name. A month later Prof. and Mrs. Schoenfeld were legally separated, though not divorced.

In 1982 Mrs. Schoenfeld repeated the process, with the result that a child was born in October of that year. In May of 1985 her third child was born in the same manner. Mr. Mandeville was listed as the father on each birth certificate. Prof. Schoenfeld moved to a nursing home between the births of the second and third children, though he and Mrs. Schoenfeld were sexually intimate through the time of conception of each child.

Prof. Schoenfeld died in 1996. His widow applied to Social Security on behalf of her children for survivors benefits, and for herself as mother of his surviving children. After an initial round of hearings benefits were awarded, but the Social Security Administration ultimately determined that the children were not Prof. Schoenfeld’s and terminated benefits.

In Wisconsin as in most states (including Arizona), there is a strong presumption that children born during a marriage are the children of the mother’s husband. In this case, the Seventh Circuit Court of Appeals ruled on appeal, that presumption could be overcome by evidence of the actual paternity. Mrs. Schoenfeld’s children would not receive Social Security benefits as a result of her husband’s death. Schoenfeld v. Apfel, January 11, 2001.

Arizona law is similar to the law of Wisconsin. While there is a strong presumption that children born during a marriage are the children of the husband, it can be overcome by “clear and convincing” evidence to the contrary.

Elder Law Q&A


Question: What is the difference between guardianship, conservatorship, power of attorney and representative payee? Which is “better” for my clients and family members?

Answer: Guardianship and conservatorship are court proceedings. The former gives the guardian power over health care and placement decisions, the latter over financial matters. Both require that the subject of the proceeding be incapacitated or unable to handle matters without assistance. Neither can be done voluntarily, in the sense of signing up for guardianship or conservatorship (though the subject of the proceedings may choose not to object).

Power of attorney is the simple act of appointing someone else to handle one’s financial and/or medical matters. By definition, one must be competent to execute a power of attorney, and must be willing to delegate authority. By signing a power of attorney, one does not relinquish any control but merely designates another with overlapping authority; guardianship and conservatorship transfer authority to the guardian or conservator.

Representative payee is a designation given by some pension and other benefits programs. The most familiar of these, of course, is the Social Security Administration, which may determine that a beneficiary is unable to handle his or her own checks based on a doctor’s letter. “Rep payee” status does not require a court proceeding, and is therefore less intrusive and expensive.

Which of these choices is “better” for someone with diminished capacity usually makes no difference. Competent people can not have guardians or conservators appointed, and incompetent patients can not execute powers of attorney. Representative payee status is usually preferable to conservatorship, but will not work for bank accounts or other financial matters; representative payees are also not bonded or required to report in as much detail as conservators.

Send your legal questions to us for future discussion in Elder Law Issues.

Wrong Medications Cost Seniors Billions

Results of a study on elder care conducted by the U.S. General Accounting Office show that 17.5% of older Americans are prescribed inappropriate or questionable medications resulting in more than $20 billion of unnecessary medical costs. The GAO also said that older Americans are six times more likely to be prescribed the wrong medication than are their younger counterparts, and that 3% of all hospitalizations result from adverse drug effects.

The study concluded the reason for this phenomenon is that doctors in every field of specialization see some elderly patients on a regular basis, but are not necessarily versed in the unique needs of the elderly. The report calls for education and awareness of the specific needs of older Americans through:

  • counseling for patients about the proper drug usage;
  • managed care systems and primary physicians who monitor drugs prescribed by others treating the same patient; and
  • drug utilization and review systems, possibly through a pharmacy monitoring program.

ALTCS Eligibility Ordered

APRIL 24, 1995 VOLUME 2, NUMBER 42

Wayne Greer was an Arizona nursing home resident. Since his assets were limited, his wife Janet applied for Arizona’s long-term care Medicaid program, ALTCS.

ALTCS calculated that the Greers’ assets should be limited to $14,148.00. Unfortunately, Greer had an interest in a piece of real property he owned jointly with his brother and sister. The property had been listed for sale since 1987, but had not sold.

ALTCS denied eligibility based on the availability of the jointly-owned property in February, 1993. The final agency decision (after appeals) came in August, 1993. Despite Greer’s death, his widow brought a federal court action to challenge the ALTCS determination.

Last month (just over two years after Greer should have been found eligible) the Federal District Judge ruled in favor of Greer’s estate.

Despite regulations that provide for a new determination of the availability of property that is difficult to sell, the Court ruled that ALTCS is bound to use the same procedure adopted by the Social Security Administration in SSI determinations. Under that approach, the fact that the property had been continuously offered for sale without buyers was sufficient to establish eligibility. Estate of Greer v. Chen, USDistrict Court, Arizona, 3/27/95.

Ed. Note–the same result should have obtained if Greer’s siblings simply refused to sell their interests in the property. This case points out that regulations can be wrong, and even insoluble problems sometimes have more than one legal solution.

Delaying Social Security

Social Security is available, at a permanently reduced rate, to those who decide to retire at 62 instead of 65. Many seniors are confused about whether the early retirement option makes economic sense for them.

A recent article in The Wall Street Journal included a thoughtful economic analysis of the question, with suggestions on how to make the choice. More information is available to Elder Law Issues readers who want details, but the suggested factors to consider include:

  • Whether you are likely to work again.
  • The age of your spouse.
  • Your family health history.

Other available sources of retirement income, and the types of investments you currently have.
The author’s general advice? Despite common notions that it always pays off to delay retirement, for most people the economic considerations make it “pretty much a toss-up.”

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