This article assumes a basic knowledge of both SSI and Medicaid for the disabled person. We also assume you have some knowledge of a Supplemental Needs Trust; if not, simply click here.

If your client receives $75,000.00-$100,000.00 or more, the cost for an attorney to draft a Supplemental Needs Trust and if necessary, to obtain court approval will be an acceptable cost for the client.  With smaller awards however, the legal fee for the trust coupled with bookkeeping and income tax preparation costs may simply be cost prohibitive.

Often the most difficult concept for the disabled client to understand (usually the client with a mental health disability) is “why can’t I have my money.”  My wife (a psychologist) has told me many times you simply cannot rationalize with the irrational. The answer is  “You cannot have the money because you are receiving Medicaid/SSI; that’s the law.  I can just give you the money now, and then you lose your  Medicaid and SSI; that’s the law.”

That is the answer.

SSI rules are governed by the Program Operation Manual System (POMS).  They are not federal regulations and therefore do not have Chevron ‘deference’ rather they “warrant respect.” See Wash. v. St. Dept., 537 U.S. 371, 385 (2003).

State Medicaid regulations cannot be more restrictive than the SSI regulations, and more often than not they simply mirror the POMS.

HOW TO ADDRESS THIS PROBLEM

A)   SPEND THE MONEY

B)   POOLED TRUST

A)   SPEND THE MONEY………….This is sometimes referred to as a spend-down. The client has until the end of the month of receipt to spend down his award . See        POMS §SI  01120.005A&B. The month starts the first day his funds clear your client funds account.  The month ends the last day of that month.  So, for example if the award is deposited into your client funds account on the 28^th day of May, but does not clear your bank until June 5^th, then June is the month of receipt. The client has until June 30^th to spend down the money.  On the other hand, if the funds were deposited by you on May 15^th, and cleared your bank on May 22^nd, the client would have to spend down his money by May 31^st.

Therefore, timing is important.

For a description of what can be used to spend down client awards see attorneythomasrmullen.com and look for the big red box labeled ‘Free Trusts Guide’.

There are significant difference  between the Medicaid rules and the SSI rules. All Medicaid rules (except those for nursing home eligibility) permit outright gifting of money.

I suggest if your client is in a nursing home, you skip down to the Pooled Trust section of this essay. After all, if you are in a nursing home, other then a prepaid funeral, what does the client really need?

On the other hand, the SSI rules totally disqualify the person from SSI if they give away their money.

Under both programs, the client must never have more than $2,000.00 by the end of the month.

B)   POOLED TRUSTS………………Federal law specifically authorizes pooled trusts which must be managed by only a non-profit entity which has IRS 501-C status.  The trust itself exists already and is managed by the non-profit. They are the trustee.  They charge an entrance fee and a yearly management fee.  They also charge an exit fee when the client passes away. Recall federal law mandates Supplemental Needs Trusts for accident victims  must have pay-back provisions.  Only after both the exit fee and the pay-back have been made do the client’s heirs receive any money from the trust.  The law is designed to enhance the life of the disabled person, not to provide a windfall for the heirs.

Pooled trusts also have minimum entry amounts.  When the net proceeds are less than twenty thousand dollars, it is simply best to immediately purchase large ticket items like an automobile, a  large screen television, clothes and a prepaid funeral.

Now the disclaimer.  Every person’s case is different and every state has its own nuances and quirks.  You cannot rely on this article for advice.  This article merely provides you with a general understanding of the law.  I’m Attorney Tom Mullen of Quincy, Mass. and I welcome your telephone calls at 617-770-1050

Thomas R. Mullen

Thomas R. Mullen has been an attorney since 1977 and has devoted his practice exclusively to elderlaw since 1988. He is nationally recognized as one of the foremost experts on Medicaid planning. His additional Practice areas include estate planning and trusts for disabled people, as well as assisting attorneys with Medicaid lien allocations and the Medicare Secondary Payer Act. In the Spring 2013 issue of the National Academy of Elder Law Attorneys (NAELA) Journal, Attorney Thomas R. Mullen of Quincy, Mass. was described by the Academy’s Massachusetts past president and law professor William J.Brisk as being “a prominent and innovative elderlaw attorney.”