We regularly help attorneys and families of disabled children or adults who have public benefits like Supplemental Security Income (SSI) and Medicaid. These programs have limits on the “countable” assets recipients may own to be eligible. When the size of a lawsuit settlement or inheritance is large enough that the funds cannot be spent down quickly, then a “special needs trust” may be used to hold the funds. The use of a special needs trust allows the disabled person to keep his/her personal countable assets below $2,000 and thereby keep SSI and Medicaid benefits, while the trustee of the trust can use the trust funds to purchase goods and services for the beneficiary.
Federal law places some limitations on the use of funds from a special needs trust that is funded with the recipient’s own funds. These rules have long been unclear and unevenly enforced by Social Security. However, the agency issued new policies at the end of April that clarified many questions regarding the use of special needs trusts. Here are some of the most significant changes in the new rules:
- A court order assigning some kinds of income to a trust may make the income non-countable. If, for instance, an SSI recipient has an award for child support or spousal alimony payments, the divorce court may be able to direct that those payments go into a special needs trust. If properly done, the payments may not be income for SSI purposes.
- Putting money on an SSI beneficiary’s pre-paid debit card is just liking giving cash. The key problem here arises when the debit card belongs to the SSI beneficiary. If the trust owns the card and controls its use, the answer may be different.
- In fact, one of largest changes involves a rule most people understood to be true before. If a prepaid debit card is controlled by the trustee, and is restricted to prevent use for food and shelter items, putting money on the card should be permissible. This is the True Link card model. We have utilized True Link cards for some of our special needs trust clients, and the new SSA policy provisions approve the program by name.
- Travel issues have concerned advocates for a long time. The new policies make clear that a special needs trust can pay for travel expenses for the beneficiary and necessary companions. It even acknowledges that sometimes there might need to be more than one companion. It also approves, in limited circumstances, travel by another person to visit the SSI recipient / trust beneficiary.
Administrative changes also help trustees
In addition to the substantive rule changes above, a number of administrative changes look hopeful. In general terms, the new rules make it easier for trustees to work with the SSA to help trust beneficiaries. Some examples:
- A given trust might have existed for years, without questions from the SSA. Now, if the case worker brings up new concerns based on changes in SSA’s interpretation, the trustee will normally have 90 days to make changes to the trust. That allowance has existed for some kinds of necessary changes, but the new rules have expanded the scope of changes that can be made within such a period.
- The rules for court establishment of a special needs trust have been eased. Before, a lot of ambiguity existed, and many SSA workers thought the key was to look at the specific words used by the court in the court order. The new provisions focus primarily on whether the trust was signed before the court ordered establishment of the trust (impermissible) or after (permitted).
We continue to stay “in the know” about these and other public benefit rules in order to assist clients with planning for all possible care resources. For now, though, it looks like the new Social Security provisions are beneficial for special needs trusts and their beneficiaries.