The Social Security Administration has recently amended its “Program Operating Manual System” (POMS) to allow for the early termination of a (first party) special needs trust prior to the death of the beneficiary (a “first party” special needs trust is one established for a disabled person, funded with assets belonging to the disabled person). Prior rules only permitted the termination upon the death of the beneficiary. This change is a logical approach to handling situations where keeping the trust in place no longer makes sense. For example: (1) the trust has diminished in size to such an extent that keeping the trust active is not practical or is too expensive; (2) the beneficiary has overcome his/her disabling condition, and continued receipt of Medicaid benefits are no longer needed or desired; or (3) the trust is large enough and Medicaid benefits needed are minimal so that the strict rules of the trust along with Medicaid compliance creates too many constraints on the freedom of use of the trust assets. These types of situations might suggest the early termination of the SNT.
The POMS specific rules which must be included in the language of the trust in order to allow for early termination are as follows:
- Upon early termination, (i.e., termination prior to the death of the beneficiary), the State(s), as primary assignee, receive all amounts remaining in the trust at the time of termination up to an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State Medicaid plan(s); and
- Other than payment for those expenses listed in SI 01120.199F.3. [specifically, (i) taxes due from the trust to the State(s) or Federal government due to the termination of the trust and (ii) reasonable fees and administrative expenses associated with the termination of the trust], no entity other than the trust beneficiary may benefit from the early termination (i.e., after reimbursement to the State(s), all remaining funds are disbursed to the trust beneficiary; and
- The early termination clause gives the power to terminate to someone other than the trust beneficiary.
Existing trusts might be amended with the consent of the Oklahoma Department of Human Services to include “early termination” language, if deemed appropriate.
Curtis J. Shacklett, Esq.
Barber & Bartz, P.C.
525 S. Main St., Ste. 800
Tulsa, OK 74103-4511
Telephone: (918) 599-7755
Facsimile: (918) 599-7756
Email: cshacklett@barberbartz.com
Website: www.barberbartz.com
