Recent changes in how the Social Security Administration (SSA) evaluates disbursements from trusts, particularly special needs trusts.
SSA regulations are published by the agency and compiled in the Program Operations Manual System (POMS). The POMS is a primary source of information used by Social Security employees to process claims for Social Security and Supplemental Security Income (SSI) benefits. The public version of the POMS, identical to the version used by Social Security employees with certain exceptions, can be found on the SSA website, at https://secure.ssa.gov/apps10/poms.nsf/Home?readform
Disbursements from trusts are governed principally by POMS section SI 01120.201 entitled “Trusts Established with the Assets of an Individual on or after 01/01/00.” Recent changes to this section of the POMS and several others, as summarized below, impact trust administrators and/or trustees who make disbursement decisions for beneficiaries of special needs trusts.
Sole Benefit Requirement (SI 01120.201F.3.a.): The general rule for a trust established for the sole benefit of a disabled person remains the same. That is, this section provides that: “[W]hen the trust makes a payment to a third party for goods or services, the goods or services must be for the primary benefit of the trust beneficiary.” The key change in this provision is that when the trust makes a payment to a third party for goods or services, the sole benefit rule does not prevent some collateral benefit to anyone else. This regulation imposes a balancing test.
Titling and Registration (SI 01120.201F.3.a.): Purchased goods that require registration or titling must be titled or registered in the name of the beneficiary or the trust(ee), unless State law does not permit it. Even if a third party is listed on the title, the purchased good must still be used for the sole benefit of the trust beneficiary.
Service Providers (SI 01120.201F.3.a.): A third party provider of services be a family member, a non‐family member, or a professional services company. Payment for third-party services is a valid expense, and medical training or certification for family members who receive payment to provide care is not required. Family members may normally do some of these things without compensation, but that does not prohibit the trust from paying for these services.
Third Party Travel Rules (SI 01120.201F.3.b.): The guidelines allow payment of third-party travel expenses to accompany the trust beneficiary to provide services or assistance necessary due to the beneficiary’s medical condition, disability or age. The key is that the service or assistance provided by the third party must be necessary to permit the trust beneficiary to travel. Travel expenses include transportation, food, and lodging.
Third-Party Travel Expenses to Visit a Trust Beneficiary (SI 01120.201F.3.c): Payment of third-party travel expenses to visit a trust beneficiary to ensure the safety or medical well-being of the trust beneficiary are allowed in the following situations:
Administrator-Managed Prepaid Cards (SI 01120.201I.1.e.): Trustees may offer administrator-managed prepaid cards to SNT beneficiaries. These cards are a type of restricted debit card that can be customized to block the cardholder’s access to cash, specific merchants, or entire categories of spending. The trustee is the owner and administrator and the SNT beneficiary is the cardholder.
Post-eligibility Changes (SI 01120.201K.2): If a trust that was previously determined by SSA to be an exempt resource is later determined to be a countable resource, SSA will offer a 90‐day amendment period. The trust assets are not counted as a resource during the amendment period. If the problem(s) with the trust is not fixed, trust assets may count as a resource retroactively.
Final Postmortem Disbursements: For the beneficiary of a first-party SNT who receives Medicaid:
1. Upon the death of the beneficiary, the only expenses that may be paid prior to the first-party SNT Medicaid payback (SI 01120.203E.1.) are: (a) Taxes due from the trust to the state(s) or federal government because of the death of the beneficiary; and, (b) Reasonable fees for the administration of the trust estate such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with termination and wrapping up of the trust.
2. Postmortem distributions that are expressly prohibited prior to the Medicaid payback (SI 01120.203E.2.) are: (a) Taxes due from the estate of the beneficiary other than those arising from inclusion of the trust in the estate; (b) Inheritance taxes due for residual beneficiaries; (c) Payment of debts owed to third parties; (d) Funeral expenses; and, (e) Payment to residual beneficiaries.
After Medicaid is paid back, distributions may be made as described in the trust agreement
Reopening Trust Determinations (SI 01120.202A.1.f.): The field office may receive a request by any party to the determination, including SSA, questioning the correctness of a trust determination. The request to reopen a determination must be: (1) in writing, and (2) within the applicable time limit.
Self-Settled Special Needs Trusts (SI 01120.203C. and I.2.): Effective with special needs trusts established on or after December 13, 2016, an individual may establish a special needs trust and have the assets in that trust count as exempt resources.
Additional Requirements Imposed by the States: In addition to the updated federal rules described above, be aware that individual states often impose additional requirements which applicants must meet in order to establish a valid SNT and attain or continue Medicaid eligibility.
If you have questions about special needs planning, please call us at 855.471.6771 or email us [email protected]
SSA regulations are published by the agency and compiled in the Program Operations Manual System (POMS). The POMS is a primary source of information used by Social Security employees to process claims for Social Security and Supplemental Security Income (SSI) benefits. The public version of the POMS, identical to the version used by Social Security employees with certain exceptions, can be found on the SSA website, at https://secure.ssa.gov/apps10/poms.nsf/Home?readform
Disbursements from trusts are governed principally by POMS section SI 01120.201 entitled “Trusts Established with the Assets of an Individual on or after 01/01/00.” Recent changes to this section of the POMS and several others, as summarized below, impact trust administrators and/or trustees who make disbursement decisions for beneficiaries of special needs trusts.
Sole Benefit Requirement (SI 01120.201F.3.a.): The general rule for a trust established for the sole benefit of a disabled person remains the same. That is, this section provides that: “[W]hen the trust makes a payment to a third party for goods or services, the goods or services must be for the primary benefit of the trust beneficiary.” The key change in this provision is that when the trust makes a payment to a third party for goods or services, the sole benefit rule does not prevent some collateral benefit to anyone else. This regulation imposes a balancing test.
Titling and Registration (SI 01120.201F.3.a.): Purchased goods that require registration or titling must be titled or registered in the name of the beneficiary or the trust(ee), unless State law does not permit it. Even if a third party is listed on the title, the purchased good must still be used for the sole benefit of the trust beneficiary.
Service Providers (SI 01120.201F.3.a.): A third party provider of services be a family member, a non‐family member, or a professional services company. Payment for third-party services is a valid expense, and medical training or certification for family members who receive payment to provide care is not required. Family members may normally do some of these things without compensation, but that does not prohibit the trust from paying for these services.
Third Party Travel Rules (SI 01120.201F.3.b.): The guidelines allow payment of third-party travel expenses to accompany the trust beneficiary to provide services or assistance necessary due to the beneficiary’s medical condition, disability or age. The key is that the service or assistance provided by the third party must be necessary to permit the trust beneficiary to travel. Travel expenses include transportation, food, and lodging.
Third-Party Travel Expenses to Visit a Trust Beneficiary (SI 01120.201F.3.c): Payment of third-party travel expenses to visit a trust beneficiary to ensure the safety or medical well-being of the trust beneficiary are allowed in the following situations:
- Reimbursement of travel expenses to oversee the trust beneficiary’s living arrangements when the beneficiary resides in a long-term care facility (for example an institution, nursing home, a group home, assisted living facility or other supported living arrangement).
- Travel for a trustee, trust advisor named in the trust, or successor, to exercise his or her fiduciary duties or to ensure the well-being of the beneficiary when the beneficiary does not reside in an institution.
Administrator-Managed Prepaid Cards (SI 01120.201I.1.e.): Trustees may offer administrator-managed prepaid cards to SNT beneficiaries. These cards are a type of restricted debit card that can be customized to block the cardholder’s access to cash, specific merchants, or entire categories of spending. The trustee is the owner and administrator and the SNT beneficiary is the cardholder.
Post-eligibility Changes (SI 01120.201K.2): If a trust that was previously determined by SSA to be an exempt resource is later determined to be a countable resource, SSA will offer a 90‐day amendment period. The trust assets are not counted as a resource during the amendment period. If the problem(s) with the trust is not fixed, trust assets may count as a resource retroactively.
Final Postmortem Disbursements: For the beneficiary of a first-party SNT who receives Medicaid:
1. Upon the death of the beneficiary, the only expenses that may be paid prior to the first-party SNT Medicaid payback (SI 01120.203E.1.) are: (a) Taxes due from the trust to the state(s) or federal government because of the death of the beneficiary; and, (b) Reasonable fees for the administration of the trust estate such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with termination and wrapping up of the trust.
2. Postmortem distributions that are expressly prohibited prior to the Medicaid payback (SI 01120.203E.2.) are: (a) Taxes due from the estate of the beneficiary other than those arising from inclusion of the trust in the estate; (b) Inheritance taxes due for residual beneficiaries; (c) Payment of debts owed to third parties; (d) Funeral expenses; and, (e) Payment to residual beneficiaries.
After Medicaid is paid back, distributions may be made as described in the trust agreement
Reopening Trust Determinations (SI 01120.202A.1.f.): The field office may receive a request by any party to the determination, including SSA, questioning the correctness of a trust determination. The request to reopen a determination must be: (1) in writing, and (2) within the applicable time limit.
Self-Settled Special Needs Trusts (SI 01120.203C. and I.2.): Effective with special needs trusts established on or after December 13, 2016, an individual may establish a special needs trust and have the assets in that trust count as exempt resources.
Additional Requirements Imposed by the States: In addition to the updated federal rules described above, be aware that individual states often impose additional requirements which applicants must meet in order to establish a valid SNT and attain or continue Medicaid eligibility.
If you have questions about special needs planning, please call us at 855.471.6771 or email us [email protected]
