Special Needs Trusts must be well-drafted

Posted on: May 27th, 2016 by Mark R. Friedman

The Social Security Administration (SSA), which acts as a gatekeeper for disability benefits for many people, has been reviewing both new special needs trusts (SNT) and old, long-settled SNT’s with a fine-tooth comb.  SSA looks for technicalities that they allege violate SSA rules, and use that as a basis to deny disability benefits, even to people who are already receiving benefits.

SSA’s rules regarding special needs trusts are very technical, and can be found in the Program Operations Manual System (POMS).  SSA has been applying these rules very harshly of late.  For example, with first-party SNT’s (often used to hold lawsuit proceeds), when the beneficiary dies, the SNT must be used to repay the State for the cost of Medicaid over the beneficiary’s lifetime.  Many trust agreements include provisions providing that, after Medicaid is repaid, if any trust funds remain, those funds can be used to pay for funeral expenses.  Those provisions have never caused problems in the past, but now SSA is reportedly claiming in some cases that those provisions violate Medicaid repayment rules, and the beneficiary therefore is disqualified from disability benefits.  There are numerous other examples of provisions that never caused problems in the past, but that SSA is now claiming disqualify the trust beneficiary from public assistance.

I suspect this is the result of political and financial pressure on SSA to rein in costs, which they’re doing by trying to pare back the number of Supplemental Security Income (SSI) beneficiaries.  The take-away for lawyers and people with disabilities is that SSA is reviewing trusts more closely than ever now, so it’s of paramount importance to get a well-drafted special needs trusts that complies with the POMS.

To learn more about special needs trusts or discuss your situation, feel free to call or email FriedmanLaw today.

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