Special Needs Trusts and SSI Eligibility
A
special
needs trust can be an important part of a comprehensive
estate
plan,
especially for Utah parents of minors or adult children with special
needs. A person who qualifies for disability benefits such as SSI or
Medicaid faces restrictions on the assets and income that the person
can
have without losing these government benefits. When established and
administered correctly, a special needs trust can make it possible to
improve the quality of life for the disabled person, without losing
eligibility for government benefits. The contents of this page should
be taken only as general
information, and should not be viewed as legal advice. For the best
answers to legal questions relating to special needs trusts or other
estate planning issues in Utah, a personal
consultation
with an attorney is
strongly advised.
Contact
us today to see how the right
lawyer
can help
you.
Determining Eligibility for for Needs-Based SSI / Medicaid
The
first step to qualifying for needs-based SSI benefits or Medicaid is
to demonstrate status as "categorically needy." In
addition to being disabled, blind, or 65 years of age or older, a
person must also meet qualifications relating to income and
assets. A special needs trust that violates these eligibility
rules can disqualify the trust beneficiary from receiving needs-based
government benefits. Violations can occur through the way
trust assets are titled, the way trust assets are administered, or
through the trust language itself. Care should be taken not
only to ensure that the trust is established and funded correctly, but
also to educate the trustee on principles of proper trust
administration. (Please note that the numbers and limits below are
current as of 2017, but are subject to adjustment based on inflation or
based on legislative changes.)
INCOME TEST - In order to maintain eligibility, a disabled person
cannot have
income greater than $1,170 per month and a blind person cannot have
income greater than $1,950. (These numbers are adjusted
annually for inflation.)
ASSET TEST - Eligibility rules require that a single person have no
more than $2,000 in available assets. Some assets are
considered “non-countable” for purposes of determining eligibility,
including the beneficiary’s home, one vehicle, household furnishings
and personal effects, tools or equipment used in employment, and
pre-paid burial plans, funds, or life insurance up to $1500 set aside
for funeral expenses. (Each of these asset categories may be
subject to exceptions and special rules.)
SPEND DOWN AND EXCESS PAYMENTS - A person who exceeds the monthly
income limits or accumulates assets in excess of countable resource
limits may still be able to qualify for benefits. But
eligibility will require first that the person spend down their assets
to below the $2,000 limit and/or pay their excess monthly income either
to the State or to a medical provider to cover eligible medical
bills. (Note that payment of excess income will only help in
qualifying for Medicaid, not SSI; and not all states allow this
practice.)
FIVE-YEAR “LOOK BACK” - Medicaid eligibility rules provide a five-year
“look back” period. The purpose of the look back period is to
discourage people from giving away assets (often to family members)
just to qualify for Medicaid. Transfers of assets for less
than fair market value can result in a delay in qualifying for
benefits. The length of the delay is based on the value of
assets transferred for less than adequate consideration.
Maintaining Eligibility with a Special Needs Trust
A special
needs trust should be set up, funded, and administered in a way that
does not destroy eligibility for SSI or other government benefit
programs. Distributions from the trust should be made in a way that
avoids having such distributions count either as assets of or income to
the beneficiary.
FOOD AND SHELTER - Any payment from a trust to a third
party provider for goods or services considered necessities similar to
food and shelter (sometimes referred to as in-kind support and
maintenance, or ISM), are treated as countable income. Payments
for food, mortgage (including insurance), real property taxes, rent,
heating fuel, gas, electricity, water, sewer and garbage removal would
all be treated as countable income. In general, these items should be
paid for using funds or income received from disability payments or
benefits.
EXTRAS - Funds from a trust are not be treated as
countable income when used to provide clothing, phone, cable, internet
services, purchasing a vehicle, auto insurance, vehicle maintenance,
and gas (gas-company credit card), pre-paid burial and funeral
arrangements, school tuition, books, tutoring, household furnishing,
television, computers and electronics, durable medical equipment, care
management (limitations may apply if payments are made to family
members), alternative therapy, medications, and treatments (only if not
regulated by the state), taxes, legal guardianship and trustee
fees. Funds from a special needs trust can also be used for
travel and entertainment, but there is concern about hotel and
restaurant payments as they may be considered shelter and food
expenses, and states may have limitations on companion
travel.
LOANS - A loan will generally not count as income for the
SSI or Medicaid programs, so a trust can make a loan of cash directly
to the beneficiary. A written agreement to pay the loan back is
required, and the loan must be considered feasible (meaning that it
must
have terms that the disabled person can reasonably be expected to be
able to meet). If a loan is
forgiven, then the amount of the loan being forgiven will count as
income to the beneficiary at that time the forgiveness is granted. The
funds borrowed also must be used within that month or the unspent
amount can be counted against the resource/asset limit ($2,000 for an
individual) and may affect your eligibility.
CREDIT
AND DEBIT CARDS - Credit cards and debit cards are treated differently
for purposes of maintaining SSI eligibility. A purchase made by a
beneficiary using a credit card is treated as a loan that must be paid
back to the credit card
company, so it is not considered as income to the beneficiary at time
of
purchase. An exception to this general rule arises when a credit card
is used to purchase items that are classified as food or shelter. If
these purchases are paid for by the trust, they can be treated as
in-kind support and maintenance. A debit card issued through the trust
can give the beneficiary access to the trust's bank account, which
might then be considered an asset of the beneficiary. The beneficiary's
use of a debit card may also be treated as income directly to the
beneficiary.
GIFT
CARDS - A gift card purchased by the trust and provided to a
beneficiary may or may not be considered to be a distribution of income
to the beneficiary. SSI rules are not yet clear on the issue of gift
cards. A gift card could be treated like a line of credit
established with a vendor that is paid for by the trust (similar to a
credit card). A gift card might also be treated as granting access for
an in-kind purchase of goods or services by the trust on behalf of the
beneficiary. Either way, a trustee should avoid using a gift card to
provide items that could be classed as food or shelter. A trustee
should also keep receipts for items purchased via a gift card, and
should be prepared for potential adverse treatment of the purchase.
Learn More:
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