SOCIAL SECURITY WEATHER (POMS) REPORT: Partly Clear, Partly Cloudy

The SSA has issued a new POM section attempting to clarify the application of the “sole benefit” rule to first person trusts (Medicaid payback trusts established for the benefit of a disabled person receiving SSI and/or Medicaid benefits). 

In a prior post, I commented on SSA becoming very serious in its interpretation of the “sole benefit” rule.  This “rule” is, basically, an interpretation of the meaning of Congress’s use of the term “sole benefit,” found in the original 1993 enabling statute which authorized the creation of so-called “first party” special needs trusts [found at 42 USC §1396(p)(d)(4)(A) and (C)].  Congress has never defined “sole benefit,” and it is used in the (d)(4)(C) section of the statute.  Confusion [and in some cases, apparently, abuse (“Steffan Hobbs vs. Marsha Zenderman, [et al], Secretary of the Department of Human Services”)] has resulted in Trustees and parents using trust funds that sometimes benefit other persons or family members as much (or possibly more so) than the disabled person.  Thus, the SSA has tightened the interpretation of “sole benefit,” especially in the travel expense area.  Effective May 15, 2013, the newly issued POMS 1120.201(F)(b) and (c) read as follows:

“b. Exceptions to the sole benefit rule for third party payments

Consider the following disbursements or distributions to be for the sole benefit of the trust beneficiary:

·        Payments to a third party that result in the receipt of goods or services by the trust beneficiary;

·        Payment of third party travel expenses which are necessary in order for the trust beneficiary to obtain medical treatment; and

·        Payment of third party travel expenses to visit a trust beneficiary who resides in an institution, nursing home, or other long-term care facility (e.g., group homes and assisted living facilities) or other supported living arrangement in which a non-family member or entity is being paid to provide or oversee the individual’s living arrangement. The travel must be for the purpose of ensuring the safety and/or medical well-being of the individual.

c. Exceptions to the sole benefit rule for administrative expenses

The trust may also provide for reasonable compensation for a trustee(s) to manage the trust, as well as reasonable costs associated with investment, legal or other services rendered on behalf of the individual with regard to the trust. In defining what is reasonable compensation, consider the time and effort involved in providing the services involved, as well as the prevailing rate of compensation for similar services considering the size and complexity of the trust.

NOTE: You should not routinely question the reasonableness of a trustee’s compensation. However, you should consider whether compensation is being provided to a family member or if there is some other reason to question the reasonableness of the compensation.”  (Emphasis added.)

Part of the language in part “b” seems fairly clear.  However, we will have to assume that “medical” would include (for example) “dental,” or “mental health” since, for whatever reason, SSA did not define “medical” in this section, leaving the meaning of “medical” partly cloudy.

Section F.b. seems to severely limit travel expenses paid for the benefit of persons other than the disabled person.  Those limitations appear to be (presumably) for care givers to assist in travel expenses for the obtaining of medical treatment (however defined), or for persons to visit the disabled person to audit his/her caregiving. 

The sole benefit rule exception also includes expenditures or payments made to a third party for “goods or services” received by the disabled person.  Could the trust pay for the travel expenses of a family member or other caregiver to take the disabled beneficiary to Disney World or to Chicago to watch a Cubs game?  Sorry, it just became even cloudier—with no sun in the immediate forecast.

Curtis J. Shacklett, Esq.
Barber & Bartz, PC
525 S. Main St., Ste. 800
Tulsa, OK 74103-4511
Telephone: (918) 599-7755
Facsimile: (918) 599-7756
Email: cshacklett@barberbartz.com
Website: http://www.barberbartz.com/