by: Begley Law Group

by Thomas D. Begley, Jr., Esquire, CELA

[Article originally published in The Barrister] Social Security recently issued four Transmittals, SI 01120 TN 51 – 54. These clarify the Program Operating Manual System (POMS) of the Social Security Administration with respect to trusts, particularly Self-Settled Special Needs Trusts and Pooled Trusts, although there was some discussion of Third Party Special Needs Trusts.  Each Transmittal was effective April 30, 2018.

Transmittal TN51

  • Trust Reviews. TN 51 dealt primarily with the review of Third Party Trusts or First Party Trusts established prior to January 1, 2000, and incorporates the Regional Centralization of SSI trust reviews.  The significant clarification includes the following:
  • SSI payments are non-assignable by law, and SSI payments do not count as income for SSI purposes.
  • Direct deposit to a trust account does not constitute assignment of benefits.
  • Assignment of payments by Court Orders are considered by SSA to be irrevocable.
  • Special Needs Trust. A Special Needs Trust may be established to provide for a disabled individual’s supplemental needs other than food, shelter, and health care expenses that may be covered by public assistance benefits that the Trust beneficiary may be eligible to receive under various programs.
  • Reimbursements to a Third Party. Reimbursements to a third party from a trust for funds expended on behalf of the trust beneficiary are not income.
  • Home Ownership. SSI is intended for food and shelter.  Payment by a third party for food and/or shelter results in in-kind support and maintenance (ISM).  When the SSI recipient receives ISM, this reduces or eliminates the amount of the SSI benefit.  Certain types of distributions result in a reduction equal to the presumed maximum value (PMV), which is usually one-third of the federal benefit or $250.  If a trust purchases a home for the trust beneficiary, the beneficiary has an equitable interest in the home and the purchase results in the receipt of ISM in the form of shelter in the month of the purchase, but the ISM is valued at no more than the PMV, the individual does not receive ISM while living in the home in which he or she has an ownership interest.  So, therefore, there is no ISM after the month of purchase.  If a trust purchases a home with a mortgage, each mortgage payment would constitute ISM at no more than PMV.
  • Household Expenses. If a trust pays for household operating expenses, these payments are income in the form of ISM in the month of the trust beneficiary’s use.  If the trust pays for repairs, maintenance, improvements or renovations to the home, the trust beneficiary does not receive ISM. The reason is that these expenditures increase the value of the home.
  • Assignment of Income. Assignment of payments by Court Order is irrevocable.  For example, child support or alimony payments paid directly to a trust or trustee because of a court order, are considered irrevocably assigned and, thus, not trust income.  However, if the assignment is to an ABLE account, the payment is considered income. If the assignment is to a First Party Special Needs Trust, the payment is not considered income.
  • Trust Review Process. Claim Specialists evaluate all trusts that need a resource determination (such as new or amended trusts) in all initial claims. Claim Specialists submit their trust resource determinations to the Regional Trust Review Team (RTRT) for review. SSA may request a reevaluation by the central office or the office of General Counsel.

Transmittal TN52

This Transmittal clarifies the three exceptions to the sole benefitrule for third party payments.

  • Trust disbursements to a trust beneficiary’s personal debit card are the same as cash disbursements.
  • Survivor Benefit Plans and direct deposits of SSA by benefits to trusts are discussed.
  • When and how to use the 90-day amendment period is discussed.

These provisions do not apply to trusts established solely with the assets of a third party.

ABLE accounts are not trusts.

  • Sole Benefit Policy.
  • Third Party Payments for Goods and Services – Collateral benefit may result.
  • A third party service provider can be a family member, non-family member, or professional services company.The policy is all the same.
  • Companion services can be a valid expense.
  • Medical training or certification of family members is not requested by SSA.
  • There is no need to establish a business relationship.However, if it is relevant to SSI eligibility, SSA will request wage or self-employment evidence.
  • The key to evaluating whether payments to a third party violate the sole benefit of rule is that the distribution must be for the primary benefit of the trust beneficiary. Collateral benefit to other individuals is not prevented.  For example, if the trust buys a television set, other people can watch it.  On the other hand, it would violate the sole benefit rule if the trust purchased a car for the beneficiary’s grandson to take her to the doctor’s appointment twice a month, but he was also driving it to work every day.  Even if a person or entity, other than the beneficiary, is listed in the title of the vehicle, it must still be used for the sole benefit of the trust beneficiary.
  • SSA should not routinely question the reasonableness of a service provider’s compensation.If there is reason to question the reasonableness of the compensation, the time and effort involved, as well as the prevailing rate of compensation for similar services in the geographic area should be considered.
  • Payment of Third Party Travel Expenses to Accompany the Trust Beneficiary and Provide Services or Assistance that is Necessary due to the Trust Beneficiary’s Medical Condition, Disability or Age. In evaluating whether travel expenses are allowable and do not violate the sole benefit of rule, include transportation, lodging and food in travel expenses. Absent evidence to the contrary, accept a statement from the trustee that the service or assistance provided is necessary to permit the trust beneficiary to travel.  Do not request a physician’s statement concerning medical necessity.  Do not request evidence of medical training or certification for the person accompanying the trust beneficiary.  Use the reasonableness test in evaluating the number of people the trust is paying to accompany the beneficiary.  The fact that parents are caretakers who cannot afford to pay for their other children’s trip, or cannot leave them at home, is not a consideration relevant to the sole benefit requirement.
  • Payment of Third Party Travel Expenses to Visit Trust Beneficiary.Travel expenses do not violate the sole benefit of rule, if a third party service provider oversees the trust beneficiary’s living arrangements when the beneficiary resides in an institution.  Travel for a trustee, trust advisor named in the trust, or successor to exercise his or her fiduciary dutiesor to ensure the well-being of the beneficiary when the beneficiary does not reside in an institution.
    • Prepaid Cards. Administrator-managed pre-paid cards, such as True Link, are acceptable.  The trustee should be owner of the account.  If the card is used to take out cash, the cash is considered income.  If the card is used to buy food or shelter, it is considered ISM.
    • Credit Cards. If a trust pays a credit card bill for the trust beneficiary, whether the individual receives income depends on the items charged on the bill.  If the trust pays for food and shelter items on the bill, it is considered ISM.  Distributions to third party credit cards are treated in the same fashion.
    • ABLE Account. Funds transferred from a trust to an ABLE account are not income to the beneficiary.
    • Gift Cards or Certificates. Distributions to purchase gift cards or gift certificates are considered cash, and result in unearned income and/or a resource.
  • 90-Day Amendment. A trust that was previously determined to be exempt from resource counting shall continue to be accepted, provided the trust is amended to conform with policy requirements within 90 days.  The 90-day period begins on the day SSA informs the recipient or representative payee that the trust contains provisions that must be amended in order to continue qualifying for the exception.  Previously, there were only four instances when there was a 90-day amendment.
  • Extension to the 90-Day Amendment Period. An extension to the 90-day amendment period may be granted for good cause, such as the disqualifying issue cannot be resolved. For example, if a court must amend the trust and there is a wait to get on the court docket.

Transmittal TN53

This transmittal deals with the establishment of Special Needs Trusts by Court Orders and the establishment of trusts by individual beneficiaries.

  • The Special Needs Trust exception can be met when a Court approves a Petition and establishes a trust by a Court Order, as long as the creation of the trust has not been completed before the Court Order is issued.Court approval of an already created Special Needs Trust is not sufficient for the trust to qualify for the exception.  An individual may petition the court with a draft document of a trust, as long as it is unsignedand not legally binding.  A nunc pro tunc order does not meet the requirements for a court-established trust when the trust has previously been established by someone else. 
  • Beneficiary Establishing Trust. A person or entity establishing a trustwith the assets of the legally-competent disabled individual or transferring the assetsof the individual to the trust must have legal authority to act with respect to the assets of the individual.  Attempting to establish a trust with the assets of another individual without proper legal authority to act with respect to the assets of that individual, will generally result in an invalid trust under state law.  A Power of Attorney for a trust beneficiary may be used to establish a trust or transfer assets of the beneficiary to the trust, so long as the POA provides the proper authority to do so.
  • Establishment and Funding of Pooled Trusts. There is no age restriction for the establishment of a Pooled Trust, but some states, including New Jersey and Pennsylvania, impose a transfer of asset penalty for assets transferred after age 64.

Transmittal TN54

This transmittal clarifies the procedure for reviewing Pooled Trusts for SSI purposes.

Once a Master Trust has been reviewed and approved, it is precedent. SSA no longer needs to review the Master Trust in each individual case.  However, the Master Trust would have to be reviewed if there has been a policy change, since the precedent was established.