Rebecca Morgan on Special Needs Trusts

Rebecca Morgan on Special Needs Trusts

Special Needs Trusts can provide an enhanced quality of life to individuals with disabilities without impairing their public benefits. In this Analysis, Professor Rebecca Morgan, former President of NAELA, examines some special issues that can be encountered in this area, such as working with a structured settlement broker, the "sole benefit" rule, and the beneficiary's role in decision-making. She writes:

§ 7.03 Special Issues in Administration

[1] Spending Issues

     Many trust expenditures are commonplace-caregiving services, assistive devices, technology, travel, clothing, etc. Often, however, a trustee will receive unusual requests for spending from the SNT. In addition to the issues involving continuing eligibility for public benefits, the sole benefit rule and the rules regarding in-kind support and maintence (ISM), the trustee needs to consider, among other things, the amount of money in the SNT, market conditions, the continued availability of family caregivers (if any), the unique needs of the beneficiary and the life expectancy of the beneficiary. Budgeting is an important part of determining expenditures and can provide a framework for the trustee in reviewing expenditure requests.

[2] Quality of Life

     The beneficiary may be able to engage in social activities that would enhance the beneficiary's quality of life. The trustee may be asked to pay for vacations, dues in organizations, movie tickets, hobby supplies, companionship, therapies and more. Reasonable expenses for such would be appropriate. The trustee should include these expenses in developing the budget.

     With vacations, the trustee needs to determine if the expenses are reasonable, the trip will be appropriate for the beneficiary (such as whether the venue is accessible), how the beneficiary will travel (car, plane, etc.), and whether the trust can pay for someone to accompany the beneficiary on the vacation. Usually the trust will need to arrange for direct payment of vacation costs, including pre-paid hotels, airfares and other transportation costs, and even meals. One common issue that the trustee will face is when the family asks that the trust pay their expenses on vacation as well. The logic of this, from the family's perspective, is usually that since this is a family vacation, they all need to accompany the beneficiary on vacation (perhaps to provide care for the beneficiary) or the beneficiary wants them to be there. The trustee would be able to pay for reasonable expenses for a vacation for a beneficiary. In the case of a (d)(4)(A) SNT, there may be a limit on the number of companions whose expenses may be paid by the trust, depending on the beneficiary's needs. The impact that such expenditures may have on public benefits eligibility must be considered, as well as the treatment of such expenditures, if not done correctly.

     . . . .

F. Policy-For The Benefit Of/On Behalf Of/For The Sole Benefit Of An Individual

1. Trust Established for the Benefit of/on Behalf of an Individual

     Consider a trust established for the benefit of an individual if payments of any sort from the corpus or income of the trust are paid to another person or entity so that the individual derives some benefit from the payment.

     Likewise, consider payments to be made on behalf of, or to or for the benefit of an individual, if payments of any sort from the corpus or income of the trust are paid to another person or entity so that the individual derives some benefit from the payment.

     For example, such payments could include purchase of food or shelter, or household goods and personal items that count as income. The payments could also include services for medical or personal attendant care that the individual may need which does not count as income.

     NOTE: These payments are evaluated under regular income-counting rules. However, they do not have to meet the definition of income for SSI purposes to be considered to be made on behalf of, or to or for the benefit of the individual.

     If funds from a trust that is a resource are used to purchase durable items, e.g., a car or a house, the individual (or the trust) must be shown as the owner of the item in the percentage that the funds represent the value of the item. When there is a deed or titling document, the individual (or trust) must be listed as an owner. Failure to do so may constitute evidence of a transfer of resources.


(footnotes and citations omitted)

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