June 2017 Update
The most significant development came on December 13, 2016, when President Obama signed the bipartisan 21st Century Cures Act (Pub L 114–255, 130 Stat 1033). Section 5007 inserted the words, "the individual," after the words "for the benefit of such individual by." As a result, a person with a disability no longer has to have a parent or grandparent in order to establish the trust, or go to court and hope that a judge will establish it. Instead, he or she can establish it for him or herself. The amendment became effective for trusts established under 42 USC §1396p(d)(4)(A) on or after the date President Obama signed the Act. The 21st Century Cures Act impacts how practitioners and their clients weigh the alternative approaches to sheltering assets for purposes of SSI and Medi-Cal eligibility. In the typical case, a planner could present the alternatives of an individual "payback" trust established under 42 USC §1396p(d)(4)(A) or a "pooled" trust established under 42 USC §1396p(d)(4)(C), and describe the pros and cons of each. See chaps 8, 9, 11, 12, 15 and 18.
Welfare & Institutions Code §14131.10(b) has been amended and now Medi-Cal will cover acupuncture services. See §§3.4, 6.72, 8.19, 10.10, 14.50, 14.65, 14.67, 18.5, 18.16, and 18.27.
More substantially, Welf & I C §14009.5, along with other code sections, were amended by SB 833 (2016). The bill made major changes to the state's Medi-Cal recovery program effective January 1, 2017. See Stats 2016, ch 30. See §§3.79–3.81B, 6.57, 15.23, and chap 17. The most important changes include:
Eliminating recovery from assets held in a living trust.
Eliminating estate recovery on the estates of surviving spouses.
Limiting Medi-Cal recovery for medical services provided after a beneficiary was age 55 or older to only what is mandated by federal law.
Eliminating optional recovery for other Medi-Cal funded services.
Requiring the DHCS to waive its claims when the property subject to estate recovery is a homestead of modest value (a home valued at 50 percent or less of the average price of homes in the county where the home was located as of the date of the former beneficiary's death).
Limiting the amount of interest that can be charged on voluntary post-death liens under 22 Cal Code Regs §50965.
Requiring the DHCS to provide detailed claims information free of charge, to provide such information within 30 days of a request to both current and previous Medi-Cal beneficiaries, and to post the procedure for making such requests on the DHCS website.
Beginning July 1, 2017, Medi-Cal will cover certain nonmedical transportation to obtain covered Medi-Cal services. Welf & I C §14132(ad). See §§3.40, 17.32B.
Operative on June 27, 2016, Welf & I C §12301.02 was amended to suspend the IHSS 7 percent reduction in hours until July 1, 2019, as long as the managed care organization provider tax remains operative. See §3.124.
Two cases of note were added to chapter 4. Marriage of Cohen (2016) 3 CA5th 1014 held that when calculating temporary support, averaging out spouse's signing bonus over 2 years was proper. See §4.49. The court in Pratt v Ferguson (2016) 3 CA5th 102, held that a trust's "shutdown clause," which suspended payment of installments of principal during any period where they would be subject to enforceable creditor claims, can't be used to prohibit satisfaction of a child support judgment against the beneficiary. See §4.53.
The SNT planning flowcharts have been updated and now include information on ABLE accounts and the 21st Century Cures Act (Pub L 114–255, 130 Stat 1033). See §§8.22–25.
Due to recent changes in the law, the qualified settlement funds tax returns that previously had to be filed by March 15 are now required to be filed by April 15. The federal tax return is filed on IRS Form 1120-SF (U.S. Income Tax Return for Settlement Funds (Under Section 468B)) and the California tax return on FTB Form 541 (California Fiduciary Income Tax Return). See §8B.22.
In Orr v Colvin (ED Cal, Mar. 30, 2016, No. 2:14-cv-1251-EFB) 2016 US Dist Lexis 42786, the court held that a (d)(4)(A) SNT estate was a countable resource that made the beneficiary ineligible for SSI (and also subject to an overpayment obligation back to SSA) because "the trust permits the trustee to "pay any death taxes attributable to any part of the trust estate or otherwise, last illness and funeral expenses related to administration or distribution of the trust estate.'" The court did not address the point that some of the expenses allowed were in fact permitted by POMS SI 01120.203(B)(3)(a); however, the language of the trust did go beyond the payments allowed in the POMS, with the result that the court found a violation of the statute's "all amounts" repayment requirement. The trust also violated the rule that it be for the "sole benefit" of the disabled beneficiary. The court found that the trust violated the sole benefit rule because it contained common SNT language sometimes known as a "backstop" provision. A backstop provision is intended to protect the trust from attack and the beneficiary from disqualification. Unfortunately, in Orr it had exactly the opposite effect. Orr makes it clear that a backstop provision in the event of early termination, commonly used in a third party SNT, will almost certainly be fatal in a first-party (d)(4)(A) SNT because it allows someone other than the beneficiary to benefit from the trust. See §§9.20, 9.21, 17.17.
The complete trusts in chapter 18 have been revised based on the changes to law under Welf & I C §14009.5, 42 USC §1396p(d)(4)(A), and certain cases.