I have been asked this question numerous times by professional trustees and parent-trustees of special needs trusts (“SNT”). The answer is: “it depends.”
First of all, an SNT established by a parent or other “third party” and not funded by assets belonging to the disabled person is not subject to the “sole benefit” rule that governs what are called “first party” SNT’s. A first party SNT is one that is statutorily authorized and is established for the sole benefit of the disabled person and funded with assets/resources that belong to the disabled person. This type of trust is a “Medicaid pay-back” trust and the assets contained in it are not treated as an available resource to the disabled person and thus do not hinder receipt of SSI and/or Medicaid. However, these first party trusts (sometimes called d4A trusts) must be established for the “sole benefit” of the disabled person and no other person can be a co-beneficiary with the disabled person as long as the disabled person is alive. It is this “sole benefit” rule that gets in the way of providing compensation to a parent as a caregiver.
Generally, the law requires a parent to care for his/her minor child (whether disabled or not) without any compensation for doing so. Sometimes, however, if both parents are working, and in particular, if they are doing so because of economic necessity, it creates considerable hardship if substantial expense is incurred for specialized care-giving services for a live-at-home disabled child. This may result in not much economic benefit to one of the parents for continuing to work, when much of the income from employment is spent on caregivers. In addition, a parent may feel (and often does) that he/she can provide far better care giving services to their disabled child than those they would otherwise hire to provide care. Thus, two questions arise: (1) “Can I quit my job, stay at home with and take care of my disabled child, and be compensated from my disabled child’s Medicaid-payback SNT?”; and (2) “If, so, how much can I be paid?”
If the disabled child is an adult (i.e., of legal age-i.e. at least 18 years old), there is currently no requirement by SSA (Social Security Administration) or Medicaid to provide care and support for that child by the parent. Thus, obtaining consent or approval by SSA or Medicaid for parental compensation from the SNT may be more likely to be approved (subject to considerable scrutiny by SSA and Medicaid). However, if the disabled child is a minor, due to the legal obligation of support placed upon all parents, a parent obtaining consent to be compensated from a first party SNT is far less likely. In addition, because of the “deeming” of income rules by SSA the child may experience a reduction in his/her SSI benefits if the parent is paid from the SNT. In the event the parent is approved to receive compensation from a first party SNT, in all events the parent could not be paid more than that charged by independent qualified/trained caregivers. Further, the parent may not be able to be paid for more than forty (40) hours per week since it will be assumed that the parent can provide care for the child on nights and weekends, etc. Because the “sole benefit” rules are a potential hindrance to compensation to a care giving parent, and somewhat vague as to how they might apply to specific circumstances, we suggest you check with our office and discuss your particular circumstances before assuming that compensation from a first party SNT to a parent will be allowed. (also see SSA POMS: SSI 01120.201F)
Curtis J. Shacklett
Barber & Bartz
525 S. Main, Suite 800
Tulsa, OK 74103
(918)599-7755
cshacklett@barberbartz.com
