The Following are the SSI Rules Pertaining to
Special Needs Trusts/Supplemental Needs Trusts.
Please

 

note that the rules must be carefully followed:

M MEDICAID TRUST EXCEPTIONS TO THE SSI TRUST PROVISIONS

Set forth below are the provisions for Supplemental Needs Trusts as set forth by the Social Security Administration for Supplemental Security Income Eligibility Purposes.  As you will note, the rules are similar to those found under Medicaid.  The SSI provisions quoted below are useful to understand how a reviewer may evaluate a Supplemental Needs Trust.  For information as to the administration of these trusts, please see the outline located on this web page.

On 12/14/99 the President signed into law the Foster Care Independence Act of 1999 (P.L. 106_169).  Section 205 of this law provides generally, that trusts established with the assets of an individual (or spouse) will be considered a resource for SSI eligibility purposes.  It also addresses when earnings of or additions to trusts will be considered income.  This provision is effective for trusts established on or after 01/01/00.  Read this message which provides instructions for processing Medicaid trust exceptions to the new law in conjunction with EM-99-143, issued 12/27/99.  Specifically, this transmittal provides instructions for developing exceptions to SSA's new trust policy for: trusts established under section 1917(d)(4)(A) of the Social Security Act (SSACT) (commonly called special needs trusts); and pooled trusts established under section 1917(d)(4)(C) of the SSACT.

We refer to the exceptions discussed in this message as Medicaid trust exceptions because sections 1917(d)(4)(A) and (C) of the SSACT set forth exceptions to the general rule of counting trusts as income and resources for purposes of Medicaid eligibility and can be found in the Medicaid provisions of the SSACT.  While these exceptions are also SSI trust exceptions, we refer to them as Medicaid trust exceptions to distinguish them from other trust exceptions provided in the SSI law (e.g., undue hardship) and because the term has become a term of common usage. IMPORTANT:  Field offices must continue to hold trusts that are subject to the new law that do not meet these exceptions until further instructions are received.

B.   POLICY-GENERAL

1.   Effective Date

The new trust provisions apply to certain trusts established on or after 01/01/00. 

If, on or after 01/01/00, an individual's (or spouse's) assets are transferred to an existing trust, the corpus of which does not contain property that was transferred from the individual prior to 01/01/00, that trust is considered to have been established on or after 01/01/00 and is subject to the provisions of this section.

Example:  Robert Gates is a disabled child.  His grandmother established an irrevocable $2,000 trust, of which he is the beneficiary, in 12/97.  Robert won a lawsuit in 02/00 and the money from the judgment ($50,000) was placed in the trust established by his grandmother.  Since all of the judgment money was transferred from Robert to the trust after 01/01/00, deposit of the judgment funds ($50,000) is considered establishment of a trust on or after 01/01/00 for purposes of these provisions.  However, the funds deposited by his grandmother are not subject to these provisions since they are funds of a third party and are subject to evaluation under SI 01120.200.

These provisions do not apply to trusts established by the individual prior to 01/01/00, regardless of the individual's filing date for SSI.  Trusts established prior to 01/01/00 are treated under instructions at SI 01120.200. 

A trust established by an individual prior to 01/01/00, but added to or augmented on or after 01/01/00 is still considered established prior to 01/01/00.  (However, additions to such a trust may be considered a transfer of resources.)  Example:  Emily Lombardozi has a settlement agreement as a result of an automobile accident in 1994 in which she was paralyzed.  Under the agreement she receives a lump sum payment in March of each year.  Since 1994 the payments have been paid into an irrevocable trust.  The payments received in 03/00 and following are not considered establishment of a trust for purposes of these provisions.  They are additions to a trust established prior to 01/01/00 and are evaluated under SI 01120.200.

The new trust provisions do not apply to trusts established solely with the assets of a third party, either before or after 01/01/00. (See SI 01120.200 for development.)  However, if at any point in the future the individual's assets are added to such a trust, the trust then becomes subject to development under this section.

2.   Applicability

a.   Trusts to Which The New Trust Provisions Apply

Except as provided in D. below, the new trust provisions apply to trusts "established by an individual."  An individual is considered to have established a trust if any assets of the individual (or spouse) (regardless of how little) were transferred to a trust other than by a will.  

b.   Examples

An individual who was the plaintiff in a medical malpractice lawsuit is the beneficiary of a trust.  The trust states that it was established by the defendant doctor's insurance company so the settlement funds were never paid to the plaintiff directly.  However, for SSI eligibility purposes, the individual established the trust because the trust contains assets of the individual which he/she did not receive because of action on behalf of, in the place of, at the direction of, or on the request of the individual.

Likewise, the same result would occur if a court had ordered the settlement placed in a trust, even if the individual was a child and State law required the settlement placed in a trust for the child.

c.   Individual's Assets Form Only a Part of the Trust

In the case of an irrevocable trust where the assets of the individual (or the individual's spouse) were transferred along with the assets of another individual(s), the new trust provisions apply to the portion of the trust attributable to the assets of the individual (or spouse).  Thus in determining countable income and resources in the trust, you must prorate any amounts of income and resources, based on the proportion of the individual's assets in the trust to those of other individuals. Example:  Jimmy Smith is an adult with cerebral palsy.  His grandparents left $75,000 in an irrevocable trust for him in their wills.  Recently (after 01/01/00), Mr. Smith won an employment discrimination lawsuit and was awarded a $1,500 judgment which was deposited into the trust established by his grandparents.  The $1,500 of Mr. Smith's funds are subject to these provisions and could be a resource if payment could be made to or for Mr. Smith's benefit, while the $75,000 deposited by his grandparents is not subject to these provisions and is not a resource. 

In determining countable trust income (see B.3. below), we must prorate the income in proportion to the percentage of the funds placed in the trust by Mr. Smith.  Since this is an irrevocable trust, we will count 1.96% ($1,500 ( $76,500) of the trust earnings as income (if it could be paid to or for Mr. Smith's benefit) and not count 98.04% ($75,000 ( $76,500) of the earnings.  Disbursements from or additions to the trust may require recalculation of the percentages.

3.  Income

For purposes of the SSI program, income includes any earnings of and additions to a trust established by an individual:

of which the individual is a beneficiary;

which is a resource under the new trust provisions; and

in the case of an irrevocable trust, if any circumstances exist under which payment from the earnings or additions could be made to or for the benefit of the individual.

C.   POLICY-FOR THE BENEFIT OF/FOR THE SOLE BENEFIT OF

1.  For the Benefit Of

Consider a trust to be established for the benefit of an individual if payments from the corpus or income of the trust are paid to the individual or to another person or entity so that the individual derives some benefit from the payment.  For example, such payment could include purchase of food, clothing or shelter, or household goods and personal effects. It could also include services for medical or personal attendant care that the individual may need.

NOTE:  These payments are evaluated under regular income-counting rules.  However, they do not have to meet the definition of income for SSI purposes to be considered to be made for the benefit of the individual.

2.  For the Sole Benefit Of

Consider a trust to be established for the sole benefit of an individual if the trust benefits no one but that individual, whether at the time the trust is established or at any time for the remainder of the individual's life.  However, the trust may provide for reasonable compensation for a trustee(s) to manage the trust, as well as reasonable costs associated with investment, legal or other services rendered on behalf of the individual with regard to the trust.  In defining what is reasonable compensation, consider the time and effort involved in providing the services involved, as well as the prevailing rate of compensation for similar services considering the size and complexity of the trust.

A trust that provides for the trust corpus or income to be paid to a beneficiary other than the SSI claimant/ recipient is not considered to be established for the sole benefit of the individual.  However, payments to a third party that result in the receipt of goods or services by the individual are considered for the sole benefit of the individual.  The following disbursements or distributions are also permitted:

reimbursement to the State, after the individual's death, of medical expenses paid on the individual's behalf (see D. below);

retention of a certain percentage of the funds in a pooled trust established by a non-profit association in accordance with the trust agreement (see D.2. below); and

transfer of the remaining trust corpus to a residual trust beneficiary after the individual's death.

D.   POLICY-EXCEPTION TO COUNTING MEDICAID TRUSTS

1.   Trusts Under Section 1917(d)(4)(A) of the SSACT (Special Needs Trusts)

a.   General

Although this exception is commonly referred to as the special needs trust exception, the exception applies to any trust meeting the following requirements and does not have to be a strict special needs trust.  The resource-counting provisions of the new trust statute do not apply to a trust:

Which is established with the assets of an individual under age 65 and who is disabled; and

Which is established for the benefit of such individual by a parent, grandparent, legal guardian or a court; and

Which provides that the State will receive all amounts remaining in the trust upon the death of the individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State Medicaid plan.

b.   Under Age 65

To qualify for the special needs trust exception, the trust must be established for the benefit of a disabled individual under age 65.  This exception does not apply to a trust established for the benefit of an individual age 65 or older.  If the trust was established for the benefit of a disabled individual prior to the date the individual attained age 65, the exception continues to apply after the individual reaches age 65.  However, any additions to or augmentation of a trust after age 65 are not subject to this exception.  Such additions may be income in the month added to the trust, depending on the source of the funds (see B.3. above) and may counted as resources in the following months under regular SSI trust rules.  (Additions or augmentation does not include interest, dividends or other earnings of the trust or portion of the trust meeting the special needs trust exception.)

c.   Disabled

To qualify for the special needs trust exception, the individual whose assets were used to establish the trust must meet the definition of disabled for SSI purposes.

d.   Established For the Benefit Of the Individual Under the special needs trust exception, the trust must be established for the benefit of the disabled individual. (See C.1.above.) 

e.   Who Established the Trust

To qualify for the special needs trust exception, the trust must have been established by the disabled individual's:

parent(s);

grandparent(s);

legal guardian(s); or

a court.

The special-needs trust exception does not apply to a trust established by the individual himself/herself.  The person establishing the trust must have legal authority to act with regard to the assets of the individual.  An attempt to establish a trust by a person or entity without the legal right or authority to act with respect to the assets of the individual may result in an invalid trust.

f.   State Medicaid Reimbursement Requirement

To qualify for the special-needs trust exception, the trust must contain specific language that provides that upon the death of the individual, the State will receive all amounts remaining in the trust, up to an amount equal to the total amount of Medical assistance paid on behalf of the individual under a State Medicaid plan.

NOTE:  Labeling the trust as a Medicaid pay-back trust, OBRA 1993 pay-back trust, trust established in accordance with 42 USC 1396, or as an MQT, etc. is not sufficient to meet the requirements for this exception.  The trust must contain language substantially similar to the language above.  An oral trust cannot meet this requirement.

2.   Pooled Trusts Established Under Section 1917(d)(4)(C)

a.   General

The provisions of the new trust statute do not apply to a trust containing the assets of a disabled individual which meets the following conditions:

The trust is established and maintained by a nonprofit association;

Separate accounts are maintained for each beneficiary, but assets are pooled for investing and management purposes;

Accounts are established solely for the benefit of the disabled individual;

The account is established by the individual, a parent, grandparent, legal guardian, or a court; and

The trust provides that, to the extent any amounts remaining in the beneficiary's account upon the death of the beneficiary are not retained by the trust, the trust will pay to the State the amount remaining up to an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under a State Medicaid plan.

b.   Disabled

Under the pooled trust exception, the individual whose assets were used to establish the trust must meet the definition of disabled for purposes of the SSI program.

c.   Nonprofit Association

The pooled trust must be established by a nonprofit association.  For purposes of the pooled trust exception, a nonprofit association is an organization defined in section 501(c) of the Internal Revenue Code (IRC) and that also has tax-exempt status under section 501(a) of the IRC.

d.   Separate Account

A separate account must be maintained for each beneficiary of the pooled trust, but for purposes of investment and management of funds, the trust may pool the funds in the individual accounts.   The trust must be able to provide a separate accounting for the individual.

e.   Sole Benefit

Under the pooled trust exception, the individual trust account must be established for the sole benefit of the disabled individual. (See C.2. above.)  If the account provides a benefit to any other individual, the pooled trust exception does not apply.

f.   Who Established the Trust Account

To qualify for the pooled trust exception, account in the trust must have been established by the disabled individual's:

parent(s);

grandparent(s);

legal guardian(s); 

a court; or

the disabled individual himself/herself.

The person establishing the trust account on behalf of the individual must have legal authority to act with regard to the assets of the individual.  An attempt to establish a trust account by a person or entity without the legal right or authority to act with respect to the assets of the individual may result in an invalid trust.

g.   State Medicaid Reimbursement Provision

To qualify for the pooled trust exception, the trust must contain specific language that provides that to the extent that amounts remaining in the beneficiary's account upon the death of the individual are not retained by the trust, the trust will pay to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan.

NOTE:  Labeling the trust as a Medicaid pay-back trust, OBRA 1993 pay-back trust, trust established in accordance with 42 USC 1396, or as an MQT, etc. is not sufficient to meet the requirements for this exception.  The trust must contain language substantially similar to the language above.  An oral trust cannot meet this requirement.

3.   Income Trusts Established Under Section 1917(d)(4)(B)

Income trusts, sometimes called Miller trusts (after a court case), established under section 1917(d)(4)(B) of the SSACT are not excluded from resources for SSI eligibility purposes.  However, some States may exclude these trusts for Medicaid eligibility.

E.   POLICY-DISBURSEMENTS FROM A TRUST THAT IS NOT A RESOURCE

If a trust is not a resource because it meets one of the trust exceptions in this EM, disbursements from the trust may be income to the SSI recipient beneficiary, depending on the nature of the disbursements.  Regular income-counting rules apply to determine when income is available.  See SI 01120.200E.1.

F.   POLICY-EARNINGS/ADDITIONS TO TRUSTS THAT ARE NOT RESOURCES

If a trust is not a resource because it meets one of the trust exceptions in this EM, the policy in SI 01120.200G.1. applies to trust earnings and additions. NOTE: If funds are added to a special needs trust that is not a resource after the individual attains age 65, regular SSI trust income and resource rules may apply to that portion of the trust  added after age 65.

G.   PROCEDURE-DEVELOPMENT

1.   General Development-Written Trust

Follow development instructions in SI 01120.200J.1.a through c.

2.   General Development-Oral Trusts

The Medicaid trust exceptions in D. above do not apply in the case of an oral trust since these exceptions require written evidence as part of the trust document.  Therefore, continue to hold cases involving oral trusts for further instructions.

3.   Determine Whether Trust is Revocable or Irrevocable

Although there is a Federal statute on how to count trusts, you must still determine whether a trust is revocable or irrevocable based on the terms of the trust and State law considerations, e.g., State grantor trust rules (see SI 01120.200D.3.).

H.   PROCEDURE-SUMMARY OF GENERAL DEVELOPMENT

The following section is a summary of trust development presented in a step-by-step format. 

1. Obtain and review a copy of the trust and all related documents.

2. Determine if the trust contains any assets of the individual.

* If no, follow instructions in SI 01120.200. (NOTE:  If any assets of the individual are added to the trust at a later time, redevelop the trust under these instructions.)

* If yes, go to step 3.

3. Determine the date the individual's assets were transferred to the trust.

If any of the individual's assets were transferred prior to 01/01/00, follow instructions in SI 01120.200.

If all of the individual's assets in the trust were transferred  on or after 01/01/00, go to step 4.

4. Consult national and regional POMS to determine if the trust is revocable or irrevocable. (See SI 01120.200.)

If you are unable to make a determination, consult with your RO programs staff.

If the trust is revocable, go to step 5.

If the trust is irrevocable, go to step 6.

5.  The trust is a resource unless an exception applies.  Go to I. below.

6. Does the trust also contain assets of a third party?

* If yes, determine the amounts in the trust attributable to the individual and the third party (See B.2.c. above).  Develop the portion attributable to the third party under SI 01120.200.  Go to step 7 for the portion of the trust attributable to the assets of the individual.

* If no, go to step 7.

7.  Are there any circumstances under which payment from the individual's assets in the trust could be made to or for the benefit of the individual?

If no, the trust is not a resource.  Review the case to see if a transfer penalty is applicable. If so, hold the case for further instructions.  If yes, the trust is a resource in the amount that could be  paid from the individual's assets unless an exception applies.

Go to I. below.

I.   PROCEDURE-DEVELOPING EXCEPTIONS TO RESOURCE COUNTING

1.   Special Needs Trusts Under Section 1917(d)(4)(A) of the SSACT

a.  Was the trust established with the assets of an individual under age 65? (See D.1.b. above.)

If yes, go to b.

If no, go to g. below.

b.  Was the trust established with the assets of a disabled individual? (See D.1.c. above.) If yes, go to c.

If no, go to g. below.

c.  Is the disabled individual beneficiary of the trust? (See D.1.d.)

If yes, go to d.

If no, go to g. below.

d. Was the trust established by a parent, grandparent, legal guardian or a court? (See D.1.e. above.)

If yes, go to e.

If no, go to g. below.

e. Does the trust provide specific language to reimburse the State for medical assistance paid upon the individual's death as required in D.1.f. above?

If yes, go to f.

If no, go to g. below.

f.  The trust is not a countable resource to the extent that the assets of the individual were put in trust prior to the individual attaining age 65.  Complete processing of the case.  Any assets placed in trust after the individual attained age 65 are countable. Go to g. below for treatment of assets placed in trust after age 65.

g.  The trust (or portion thereof) does not meet the requirements for exclusion from counting as a resource under the special-needs trust exception.  Determine whether the pooled trust exception in I.2. below applies.

2.   Pooled Trust Established Under Section 1917(d)(4)(C) of the SSACT

a.   Was the trust established with the assets of a disabled individual? (See D.2.b.)

If yes, go to b.

If no, go to h. below.

b.  Was the pooled trust established and maintained by a nonprofit association? (See D.2.c. and development instructions in J. below.)

If yes, go to c.

If no, go to h. below.

c.  Does the trust pool funds yet maintain an individual account for each beneficiary and can they provide an individual accounting?  (See D.2.d.)

If yes, go to d.

If no, go to h. below.

d.  Is the disabled individual the sole beneficiary of the trust account? (See D.2.e.)

If yes, go to e.

If no, go to h. below.

e.  Was the trust account established by the individual, parent(s), grandparent(s), legal guardian(s) or a court?  (See D.2.f.)

If yes, go to f.

If no, go to h. below.

f.  Does the trust provide specific language to reimburse the State for medical assistance paid upon the individual's death from funds not retained by the trust as required in D.2.g.?

If yes, go to g.

If no, go to h. below.

g.  The trust meets the requirements for exclusion from counting under this exception.  It is not a countable resource.  Complete processing of this case.

h.  The trust does not meet the requirements for exclusion from counting as a resource under this exception.  Continue to hold the case for further instructions.

J.   PROCEDURE-NON-PROFIT ASSOCIATIONS

When a trust is alleged to be established by a non-profit, tax-exempt organization, check regional instructions to determine if a precedent on the organization's IRS section 501(c) tax-exempt status is listed.  If so, document the evidence screen in MSSICS per GN 00301.286 ff. or the paper file in other cases.  If a precedent has not been established, contact the organization  and request a copy of its IRS section 501(c) tax-exempt certification.  Annotate the evidence screen and forward a copy to the regional office for inclusion as a regional precedent.  Do not re-contact an organization if there is already a regional precedent.

K.   PROCEDURE-DOCUMENTATION

1.   MSSICS

Document the existence of a trust in MSSICS by answering Yes on the RMEN screen to the Other Resources question.  A Yes answer will bring the ROTH screen into the path.

Complete the applicable trust questions on the ROTH screen.

If an exception applies, enter the value of the trust in excluded amount and type of exception, e.g., 1917(d)(4)(A) trust, in exclusion reason.

Record all information used in determining whether the trust is or is not a resource or creates income.  Record your conclusions in the FILE DOCUMENTATION REMARKS section of the ARMK screen or on the DROC screen and evidence on the EVID screen.

2.   Paper Forms

Document the existence of a trust on the appropriate resources question or in the remarks section of the form.  Record all information used in determining whether the trust is or is not a resource or creates income.  Record your conclusions on an SSA-5002 or SSA-553

3.   Documentation in all Cases

See SI 01120.200J.4.

K.   PROCEDURE-SYSTEMS CODING

1.   Paper Environment

Code a Q and the date of establishment of the trust in the Third Party Liability (PT) field of the SSR.

2.   MSSICS

The Q code will post to the SSR from the ROTH (Other Resources) screen discussed in MSOM 125-A.

3.   CG Field

Code RE06 or RE07, as applicable in the CG (case characteristics) field to indicate a revocable or irrevocable trust, respectively.

L.   PROCEDURE-MEDICAID DETERMINATION

1.   Do Not Make Medicaid Eligibility Determination

If the individual resides in a section 1634 State (in which SSA makes Medicaid determinations on behalf of the State), do not attempt to make a Medicaid eligibility determination since the Medicaid determination regarding the trust may differ from the SSI eligibility determination.  (See SI 01715.010A.3. for a discussion of section 1634 States.)

2.   Notice Requirements in Section 1634 States

See notice requirements in SI 01730.048E. NOTE.

3.   Send Trust Information to State

a.   Section 1634 States

Copy the trust information and send it to the same address used for assignment of rights (AOR) and third-party liability (TPL) information.  See regional instructions or contact your RO staff for the correct address.

b.   Section 209(b) and SSI Criteria States

In States where SSA does not have an agreement to make the Medicaid eligibility determination, copy the trust information and see regional instructions (e.g., SI R01150.110) or contact your RO staff for the correct address to send the information.  (See SI 01715.010A.1. and 2. for a discussion of section 209(b) and SSI Criteria States.)

M.   QUESTIONS

Direct all questions about this emergency teletype to your RO support staff. 

POMS Sections Affected:  SI 01120.200

Jay J. Sangerman, PLLC
171 East 84th Street - Unit 21B
New York, New York 10028
Telephone (212) 922-0711
Facsimile (212) 439-0056



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