I occasionally receive inquiries from parents serving as Trustee, as well as from professional (corporate) Trustees, about the legitimacy of expending trust funds for various items that one might consider mere “toys.”
The Social Security rules (“POMS”) [also followed by the Oklahoma Department of Human Services (OKDHS)], require that all funds held in a First Party Trust [a (d)(4)(A) trust] must be used “solely for the benefit of” the disabled beneficiary. This “sole benefit rule” continues to be a source of confusion and a trip-wire for the unaware. There are a few specific examples in the POMS addressing such things as hobby expenses, pet acquisition costs, or expenditures for collectibles [e.g., baseball cards, doll collections, etc.] Clearly, such things (including pets) may have a significant benefit to the disabled person in providing hours of companionship (e.g., pet animal), or entertainment (doll collection). One would be hard-pressed to say such things are “medically necessary,” but that is not required in the POMS as to permitted expenditures. If a flat-screen television (an item of entertainment) can be purchased for the beneficiary then why not other “items of entertainment,” e.g., doll collections, baseball cards, latch-hook rugs (my son’s preference), puzzles, crafts, pet expenses, etc.?
Actually, the POMS do provide some guidance as to what types of items are considered “household goods” or “personal property.” Although the list of permitted and exempted items (exempt from being considered as part of the $2,000 limit on resources) is not spelled out in great detail, we are given the following definition and examples:
SI 01130.430 (“Household Goods, Personal Effects, and Other Personal Property”)
C. Definition of Household goods and personal effects
1. Household goods
Household goods are items of personal property, found in or near the home, the householder uses on a regular basis. The householder needs household goods for maintenance, use, and occupancy of the premises as a home.
a. Examples of household goods
- Furniture;
- Appliances;
- Electronic equipment, for instance computers and televisions;
- Carpets;
- Cooking and eating utensils; and
- Dishes.
b. Items held because of their value or as an investment
Items that an individual acquires or holds because of their value or investment are not household goods, even if they otherwise meet the definition of household goods in SI 01130.430C.1.
2. Personal Effects
Personal effects are items of personal property ordinarily worn or carried by the individual, or items that have an intimate relation to the individual.
a. Examples of personal effects
Personal effects may consist of the following:
- Personal jewelry, including wedding and engagement rings;
- Personal care items and clothing;
- Pets, such as a cat, dog, hamster, horse, monkey, or snake;
- Educational or recreational items, such as books, musical instruments, or hobby materials; or
- Items of cultural or religious significance to an individual, such as ceremonial attire.
b. Items required because of an individual’s physical or mental impairment
Items required because of an individual’s physical or mental impairment, such as prosthetic devices or wheelchairs, are also personal effects.
c. Items held because of their value or investment
Items that an individual acquires or holds because of their value, or as an investment, are not personal effects; even if they otherwise meet the definition of personal effects in SI 01130.430C.2.
Section D of the referenced POMS, however, makes clear that not all items of personal property will be treated as exempt:
1. Other personal property may be a countable resource
Property that an individual acquires or holds because of its value or as an investment: is a countable resource and is not considered a household good or personal effect for the purposes of this exclusion.
- Gems;
- Jewelry that one does not wear or does not hold family significance;
- Animals for investment purposes, such as a horse or dog for breeding, for resale, or investment; and
- Collectibles.
Purchasing items by the Trustee of a “First Party Trust” may cause an “excess resource” problem if the purchased personal property would be classified as collectibles; for example, or items purchased for their value (jewelry), even if such items are purchased from the disabled persons own funds (e.g., funds from Social Security benefits or accumulated wages) to avoid a problem with expending funds from the First Party Trust. Doing so may still result in the acquired items not being treated as exempt and, therefore, their value being a part of the resource cap of $2,000.00.
CONCLUSION: The POMS authorize the acquisition of "pets" and "hobby materials." It would seem permissible, therefore, for a Trustee to expend trust funds (within some degree of reasonableness) to acquire or maintain these types of personal property. Items viewed as "investments" or "collectibles" will likely create problems for the beneficiary, however. Purchasing or receiving as gifts of non-excluded household goods or "other personal property" may result in a problems of excess resources, thus hindering continued receipt of SSI and/or Medicaid.
CONCLUSION: The POMS authorize the acquisition of "pets" and "hobby materials." It would seem permissible, therefore, for a Trustee to expend trust funds (within some degree of reasonableness) to acquire or maintain these types of personal property. Items viewed as "investments" or "collectibles" will likely create problems for the beneficiary, however. Purchasing or receiving as gifts of non-excluded household goods or "other personal property" may result in a problems of excess resources, thus hindering continued receipt of SSI and/or Medicaid.
Purchasing of “other personal property” by the Trustee, and holding title in the Trust for the benefit of the disabled person may be permitted by state trust law, but a loss in value may expose the Trustee to a claim of breach of fiduciary duty to either the beneficiary or to the remainder persons (possibly including the state Medicaid agency).
Thus, avoiding the purchase by the Trustee or purchase from the disabled person’s own personal funds, of “other personal property” (items/non-exempt resources) should generally be avoided.
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
