RED FLAGS FOR SPECIAL NEEDS TRUSTS
by: Thomas D. Begley, Jr.
In May of 2012 the Social Security Administration (“SSA”) changed the POMS with respect to reimbursement to family members for expenses incurred in visiting a beneficiary of a first-party special needs trust. At about the same time SSI recipients began receiving notices that their benefits were being terminated, because their trusts provided for payments to family members as caregivers. Other SSI recipients received termination notices, because their trusts provided that family members could be reimbursed for expenses incurred in taking a vacation with the trust beneficiary. Still other SSI recipients received notices of termination based on the fact that parents or other family members were reimbursed for expenses incurred by the parent on behalf of the beneficiary for legitimate expenses. Finally, SSA announced, at a conference in October, that funds in a special needs trust could not be used to reimburse Social Security for previous overpayment of benefits.
Let’s discuss these issues individually:
- Reimbursement for Family Travel to Visit Beneficiaries. On May 21, 2012, SSA amended the POMS to prohibit a self-settled special needs trust from paying for travel for family members to visit a beneficiary. SSA concluded that payment for such travel violated the “sole benefit of” rule. In conversation with members of the Regional Support Team for the SSA, the author was informed that the Baltimore Office of Social Security informed the Regions that, “Immediate family members who are authorized reasonable out-of-pocket travel and lodging expenses for visits to the beneficiary at his place of residence would violate the sole benefit of rule. While we pay for travel expenses for the beneficiary to visit or travel, such payment does not extend to paying for family to visit or travel. We would, however, pay for someone who is a skilled healthcare-trained professional, if a travel companion for beneficiary is necessary.”
- Family Caregiver. At about the same time SSA took the position that it is a violation of the sole benefit of rule for a first-party special needs trust to pay a family member as caregiver, unless the family member is “medically-trained.” In conversations with the author, the Regional Support Team for SSA stated, “We do not pay family members for rendering necessary care unless they are skilled healthcare-trained professionals. They would need to be licensed or qualified appropriately.” With respect to the issue as to what constitutes an acceptable level of training, the author was advised, “For now we are accepting that the parent would be educated to the same level of care as what would be required if an outside individual was hired.” If a child requires skilled RN-level of care (feeding tube, vent) and the mother has been caring for the child for 15 years, the question is whether this would constitute adequate training. The answer was “no.” In this instance, someone else should be hired to provide the care. SSA stated, “For other levels of care, there are Medicaid-certified courses that are 40 hours. This is reasonable.” At least some Regions have taken the position that a self-settled special needs trust cannot pay for the parent to receive the necessary medical training.
- Vacation. Historically, SSA has permitted distributions from a self-settled special needs trust to reimburse parents for the expense of one adult to accompany a trust beneficiary on a vacation, if the trust beneficiary is unable to travel alone. Recently, SSA has taken the position that the trust can only pay for a skilled healthcare-trained professional if a travel companion for the beneficiary is necessary.
- Reimbursement. SSA has recently taken the position that if a trustee reimburses a third party, such as a parent or other family member, for expenses incurred on behalf of a disabled trust beneficiary, then such reimbursement constitutes unearned income to the trust beneficiary. This has the effect of reducing or eliminating the beneficiary’s SSI payment. The solution to this problem is to obtain a credit card for the family member. Charge the items on the credit card, but rather than have the family member pay the credit card and be reimbursed by the trustee, have the trustee pay the credit card company directly.
- Overpayments. In a bizarre interpretation, SSA has taken the position that a special needs trust cannot be used to reimburse Social Security for overpayments made to the trust beneficiary.
Fortunately, a national advocacy group is having a series of meetings with the central office and all of these positions are under review. In the meantime, practitioners should be careful in drafting trust documents and in administering trusts.
 POMS SI 01120.201.2.