SSI Application Process Streamlined by SSA

The Social Security Administration (SSA) issued a notice in August 2023 announcing its plan to embark "on a multi-year effort to simplify the Supplemental Security Income (SSI) application process."  

Approximately 8 million people currently receive SSI benefits. SSI benefits are needs based and are reserved for low-income individuals with limited assets. SSI contrasts with Social Security Disability Insurance (SSDI) benefits, which are not needs-based, and are reserved for those who have worked/paid corresponding taxes for the appropriate work quarters, and do not have any associated income or asset limitations

Given that qualifying for SSI is based on financial need, individuals must meet a complex set of criteria and supply a great deal of detailed information to the SSA. The application is time-consuming and cumbersome.  Applicants are often required to provide information that is ultimately unnecessary, and may find that other information.  For seniors and younger people living with disabilities, the difficulties presented when applying for SSI can become a major barrier to access.

First Phase: iSSI

Going forward, the SSA intends to create a fully accessible online SSI application for all. By late 2023, the hope is to put into place the first phase of this initiative, the SSI Simplification Phase I Initiative (iSSI). This initial phase seeks to simplify the SSI application process for low-income applicants who are over age 65 and/or have long-term or permanent disabilities.

By integrating several online portals, the SSA will be able to pre-populate some of the applicant’s information, streamlining the number of basic questions the applicant needs to answer. The system will allow individuals to apply for themselves, or on behalf of a loved one, all without having to visit a local SSA office.

According to the SSA, a greater number of people (including non-U.S. citizens) will be able to apply as a result, and in a timelier manner. In addition, individuals who are starting the SSI application process will no longer need to gather as extensive an amount of paperwork ahead of time, fill out any paper forms, or visit field offices in person.

For further details regarding how iSSI is designed to work, visit the Office of the Federal Register website.

Social Security Announces 2019 Changes

The Social Security Administration (SSA) has released the 2019 benefit changes.   Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2017 through the third quarter of 2018, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 2.8 percent increase or COLA for the year 2019. 

SSA also announced an increase in the SSA taxable maximum amount to $132,900. The indivdiual's amount for SSI for 2019 will increase to $771 per month. 

The tax rate for most people is 7.65%, the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount. The Medicare portion (HI) is 1.45% on all earnings. Also, as of January 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes (not reflected in the 7.65% combined rate reported above). 

The detailed fact sheet is available here.

Understanding "Third Party" Special Needs Trusts

There are three types of special needs trusts: first-party special needs trusts, third-party special needs trusts, and pooled trusts.  All three are designed to manage resources for a person with special needs so that the beneficiary can still qualify for public benefits like Supplemental Security Income (SSI) and Medicaid.  While first-party special needs trusts and pooled trusts hold funds that belong to the person with special needs, third-party special needs trusts, as the name implies, are funded with assets that never belonged to the trust beneficiary, and they provide several advantages over the other two types of trusts.

Third-party special needs trusts are set up by a donor – the person who contributes the funds to the trust.  A typical donor is a parent, grand-parent, or sibling of the special needs beneficiary.  These trusts are typically designed as part of the donor's estate plan to receive gifts that can help a family member with special needs while the donor is still living and to manage an inheritance for the person with special needs when the donor dies.  Third-party special needs trusts can be the beneficiaries of life insurance policies, can own real estate or investments and can even receive benefits from retirement accounts (although this process is very complicated and not typically recommended unless there aren't other assets available to fund the beneficiary's inheritance).  There is no limit to the size of the trust fund and the funds can be used for almost anything a beneficiary needs to supplement her government benefits.  Upon the beneficiary's death, the assets in a third-party special needs trust can pass to the donor's other relatives as the donor directs.

One of the key advantages of a third-party special needs trust is the ability of the donor to direct the assets available upon the beneficiaries death without risk of resource recovery-the right of the state to recover assets to pay the state back for benefits paid during the beneficiary's life.  Because the funds in the trust never belonged to the beneficiary, the government is not entitled to reimbursement for Medicaid payments made on behalf of the beneficiary upon her death, unlike with a first-party or pooled trust.  This allows a careful donor to benefit her family member with special needs while potentially saving funds for other people who don't have the same needs.

Whereas first-party special needs trusts can only be established by the beneficiary's parent, grandparent, guardian or a court, anyone other than the beneficiary can set up a third-party special needs trust.  First-party trusts must be established for the benefit of someone who is younger than 65, but third-party trusts don't have age limits.  In some states, first-party trusts must be monitored by a court, but third-party trusts almost never have to go through this same process, especially while the donor is still alive.  In addition, while the donor is living, funds in the trust usually generate income tax for the donor, not for the beneficiary, avoiding the complication of having to file income tax returns for an otherwise non-taxable beneficiary and then explain them to the Social Security Administration.

Although a third-party special needs trust has many advantages, it is not always a viable option for families of people with special needs.  One of the major drawbacks of a third-party trust is its absolute inability to hold funds belonging to the person with special needs.  So if the trust beneficiary receives an inheritance that wasn't directed into the special needs trust to begin with or if she settles a personal injury case, the funds have to be placed in either a first-party trust or a pooled trust, since even one dollar of a beneficiary's own money could taint an entire third-party trust.  But even with these restrictions, most people trying to help a family member with special needs are going to at least need to strongly consider drafting a third-party special needs trust.  Your attorney can help you understand how these important trusts fit into your other estate planning goals.

SSA Clarifies Its Position on Court-Established (d)(4)(A) Trusts

Responding to criticism from advocates that the Social Security Administration (SSA) was unfairly refusing to allow court-established (d)(4)(A) trusts to qualify as exempt resources for Supplemental Security Income (SSI) purposes, the SSA has issued an Administrative Message clarifying its policy regarding these trusts and ordering officials to approve the trusts if they meet the other (d)(4)(A) requirements and were not created prior to the order issued by the court.

Apparently based on the SSA's Trust Training Fact Guide, some SSA offices have recently been refusing to approve court-established (d)(4)(A) trusts because they were not created by a court "order."  Since people with disabilities are unable to establish their own (d)(4)(A) trusts, if the SSA's position were uniformly applied it would mean that no court could ever establish a (d)(4)(A) trust unless it did so on its own initiative.

The SSA has now issued an Administrative Message, first published by Illinois attorney and Social Security expert Avram L. Sacks on the NAELA members listserv, explaining that the rejection of court-established (4)(d)(A) trusts is inappropriate when the trust was not finalized prior to the court's action.  The message states that "[i]n the case of a special needs trust established through the actions of a court, the creation of the trust must be required by a court order for the exception in section 1917(d)(4)(A) of the Act to apply. That is the special needs trust exception can be met when courts approve petitions and establish trusts by court order, so long as the creation of the trust has not been completed before, the order is issued by the court. Court approval of an already created special needs trust is not sufficient for the trust to qualify for the exception. The court must specifically either establish the trust or order the establishment of the trust."

The message goes on to give four clarifying examples of situations where trusts may or may not fit this criteria.  In the first example, an SSI beneficiary's sister petitions the court to create and order the funding of a trust to hold the beneficiary's inheritance.  The sister provides a draft trust to the court.  When the court issues an order approving the petition and ordering the creation of the trust, it will meet the requirements of SI 01120.203B.1.f.  In the second example, a judge orders the creation of a trust to hold a settlement, and the trust document lists the settlement as the trust's original corpus.  This trust also passes muster with the SSA.  In the two negative examples, the SSA claims that when a court approves a trust that has already been created ahead of time, or when a court amends a defective trust with a nunc pro tunc order to make the amendment retroactive to the date the trust was originally created, the trusts will not qualify for the special needs trust exception.

Click here to read the SSA's entire message.

SSA's Guide for Evaluating Special Needs Trusts Problematic

The Social Security Administration (SSA) recently instituted a nationally uniform procedure for review of special needs trusts for Supplemental Security Income (SSI) eligibility, routing all applications that feature trusts through Regional Trust Reviewer Teams (RTRTs) staffed with specialists who will review the trusts for compliance with SSI regulations. 

The SSA has also released its Trust Training Fact Guide, which will be used by the RTRTs and field offices when they evaluate special needs trusts.  In an article in the July/August 2014 issue of The ElderLaw Report, New Jersey attorney Thomas D. Begley, Jr., and Massachusetts attorney Neal A. Winston, both CELAs, discuss the 31-page guide in detail and caution that while it is a significant step forward in trust review consistency, it contains “a few notable omissions or terminology that might cause review problems.”  Following is the authors’ discussion of the problematic areas:  

• Structured Settlements. The guide states that additions/augmentations to a trust at/after age 65 would violate the rule that requires assets to be transferred to the trust prior to the individual attaining age 65. It does not mention that the POMS specifically authorizes such payments after age 65, so long as the structure was in place prior to age 65. [POMS SI 01120.203.B.1.c].

• First-/Third-Party Trust Distinction. Throughout the guide, there are numerous references to first-party trust terms or lack of terms that would make the trust defective and thus countable. These references do not distinguish between the substantial differences in requirements for first-party and third-party trusts.

• Court-Established Trusts/Petitions. This issue is more a reflection of an absurd SSA policy that is reflected accurately as agency policy in the guide, rather than an error or omission in the guide itself. This section, F.1.E.3, is titled “Who can establish the trust?” The guide states that creation of the trust may be required by a court order. This is consistent with the POMS. It would appear from the POMS that the court should simply order the trust to be created based upon a petition from an interested party. The potential pitfall described by the guide highlights is who may or may not petition the court to create a trust for the beneficiary. It states that if an “appointed representative” petitions the court to create a trust for the beneficiary, the trust would be improperly created and, thus, countable. Since the representative would be considered as acting as an agent of the beneficiary, the beneficiary would have improperly established the trust himself.

In order for a court to properly create a trust according to the guide, the court should order creation of a trust totally on its own motion and without request or prompting by any party related to the beneficiary. If so, who else could petition the court for approval? The plaintiff’s personal injury attorney or trustee would be considered an “appointed representative.” Would a guardian ad litem meet the test under the guardian creation authority? How about the attorney for the defendant, or is there any other person? If an unrelated homeless person was offered $100 to petition the court, would that make the homeless person an “appointed representative” and render the trust invalid? The authors have requested clarification from the SSA and are awaiting a response.

Until this issue is resolved, it might be prudent to try to have self-settled special needs trusts established by a parent, grandparent, or guardian whenever possible.

• Medicaid Payback/Administrative Fees and Costs. Another area of omission involves Medicaid reimbursement. The guide states that “the only items that may be paid prior to the Medicaid repayment on the death of the beneficiary of the trust are taxes due from the trust at the time of death and court filing fees associated with the trust. The POMS, [POMS SI 01120.203.B.1.h. and 203B.3.a], specifically states that upon the death of the trust beneficiary, the trust may pay prior to Medicaid reimbursement taxes due from the trust to the state or federal government because of the death of the beneficiary and reasonable fees for 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 the termination and wrapping up of the trust.

While noting that the guide, in coordination with training, “is a marked improvement for program consistency for trust review,” Begley and Winston caution advocates that “the guide should be considered as a summarized desk reference and training manual and not a definitive statement of SSA policy if inconsistent with the POMS.”