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.”

New Guides Help Those Appointed to Manage Someone Else's Money

Have you been officially asked to manage someone else's money? For example, have you been named as an agent under a power of attorney or appointed trustee of a trust? As our society ages, more and more people are being asked to take on these roles, but they come with both powers and responsibilities, and problems can arise.

If you're not a lawyer (and even if you are), the responsibilities of these positions can seem daunting. Luckily, the federal Consumer Financial Protection Bureau – the only federal office dedicated to the financial health of Americans age 62 and over -- recently released four guides for people who have been given the responsibility of managing money or property for someone else. The guides, which are free, are collectively called “Managing Someone Else's Money.”

The Managing Someone Else's Money guides are designed to help non-lawyers; they walk you through your new responsibilities, teach you how to protect the person in your care from financial exploitation, and give you links to additional resources. For example, the guides tell you, the agent, what to do to avoid problems with family and friends who think you are doing a bad job. The guides also help you coordinate with other agents who may have been assigned to work with you and any outside professionals whose help you may need (such as lawyers, brokers, and financial planners).

The guides include help for agents under a power of attorney, court-appointed guardians of property and conservators, trustees under a revocable living trust, and representative payees and VA fiduciaries (a person who manages someone else's government benefit checks). All four types of agents are fiduciaries, which means they owe four special duties to the people for whom they are managing money or resources: the duty to act in the individual’s best interest, the duty to manage the individual’s money and property carefully, the duty to keep the individual’s money and property separate from their own, and the duty to keep good records. Every guide includes detailed information about these four duties.

If you have been assigned to be an agent for someone, that assignment should come with a document (power of attorney, trust document, court order, etc.) that will tell you what you can and cannot do. It is important to stay within the limits that document sets for you. These four guides, which were developed for the Bureau by the American Bar Association Commission on Law and Aging, are not a substitute for legal counsel, but they can help keep you on the straight and narrow.

To download one or more of the guides, go to:
 http://www.consumerfinance.gov/blog/managing-someone-elses-money/