I’m Tom Mullen and here is some breaking news on Trusts for Disabled Persons.
If your trust for a disabled person does not comply with these new rules, the trust will
fail-it will not work.
If you are a personal injury or worker’s compensation lawyer, or the parent of a special needs child, this new information is for you.
Effective May 2013 the federal government has changed what happens if the trust pays someone other than the disabled beneficiary for travel expenses. It has also changed the way in which Special Needs
Trusts terminate. If you already know what a Special Needs Trust is and what the POMS are, skip down to the section “Here Are The Changes”; otherwise start here.
A Special Needs Trust (sometimes called a Supplemental Needs Trust) is one of two types. One is drafted by parents of a disabled person and is only activated when both parents pass away. The
second type of trust is funded by the proceeds of a personal injury or worker’s compensation award
for the benefit of the attorney’s disabled client.
Both trusts work the same way. The proceeds can be used for anything other than that which would disqualify the recipient (beneficiary-the disabled person) for public benefits such as MassHealth or S.S.I.
The federal law for the second type of trust came into existence in 1993 and can be found
at 42 U. S. C. 1396p(d)(4)(a)
Even though this law was written in 1993, we have no federal regulations to assist us. Instead we are forced to look to the “POMS” (the Social Security Administration’s Program Operations Manual System) which is the publicly available set of operational instructions for administering, among other things, Special Needs Trusts.
POMS GN 02410.001(2002)
The United State Supreme Court has stated: “While these administrative interpretations are not products of formal rule making, they nevertheless warrant respect…”
Washington DSS v Keffler 123 S.Ct. 1017, 1027, 537 U.S. 371, 385(2003)
Here Are The Changes:
A) Third party travel expenses:
This new change comes about after a public furor occurred over a previously proposed change
which sought to totally disallow third party travel expenses. While no money can be paid for any purpose other than for the sole benefit of the disabled beneficiary, the new change permits the trust
to pay travel expenses to someone else in order to assist the beneficiary when they need medical
treatment; and to further permit that person to visit the disabled person to ensure that
beneficiary’s safety or well being. NOTE: these travel expenses for visits (not those for medical treatment) are permitted only if the disabled person does not live in his or her own home. Here’s what this all means: a relative can be reimbursed to fly from Florida to Boston to assist in the disabled person’s transportation to a dialysis treatment center, or if it’s necessary to visit them at an assisted living facility, hospital, or nursing home for a family or physician meeting regarding possible surgery or other prognosis of the disabled. No home, birthday, or holiday visits will be reimbursed.
B) Early Termination:
The beneficiary can have no power to terminate the trust. If a trust terminates while the beneficiary is still living the trust can only pay 1) state and federal income taxes of the trust, 2) the reasonable administrative fees associated with terminating the trust which includes trustee fees and legal fees, and 3) the beneficiary. The trust cannot pay the beneficiary’s income taxes nor can it pay any money to the beneficiary’s friends or relatives.
Prior to termination, the trust can pay for goods and services of the beneficiary but no one
else (the trust is only for the disabled person during his lifetime).
When the beneficiary passes away and after the State is fully reimbursed for all benefits it paid,
then and only then do funeral expenses and debts get paid. ( practice tip: purchase the funeral while the beneficiary is alive and be sure all debts, which include legal fees, are paid while the beneficiary
is alive).
Only after all this occurs do the heirs receive any funds from the trust. Remember the only purpose of
these trusts is to enable our disabled population to achieve their highest standard of living, while also allowing them to retain both their MassHealth and their monthlySSI check. It is not designed to enrich their heirs.
Remember, if your trust does not specifically comply with these new changes the trust will fail
and the disabled person will loose all their benefits including MassHealth and SSI. I will be glad
to review your trust, and if necessary make it comply with these new rules.
