How the 2018 POMS Update Affects Trust Beneficiaries
By Cameron Lindahl, M.S. and David Lillesand, J.D
The Social Security Administration (SSA) released amendments to the Program Operations Manual System (POMS) this year and changed many of the ways recipients of Supplemental Security Income (SSI), and in some cases Medicaid, can utilize their Special Needs Trusts (SNT). It’s important to note that this text does not address all the changes to the POMS. However, the purpose of this text is to address some of the most impactful changes to Trust Beneficiaries of Pooled Special Needs Trusts (First and Third Party). The new POMS are a big win for persons with disabilities as it provides more flexibility to Trustees and individuals living with disabilities across the country.
Sole Benefit Vs. Primary Benefit
If you have any experience with SNTs, you are familiar with the term “sole benefit”. This term refers to the policy by SSA that a first party trust must be created for the “sole benefit” of the disabled person. Although the trust must be established for the sole benefit of the disabled person, naming only the disabled person as lifetime beneficiary, not all disbursements from a Special Needs Trust must solely benefit only the disabled Trust Beneficiary (i.e. the individual benefiting from a trust). SSA has specifically abandoned the sole benefit rule in making distributions and replaced with the requirement that a distribution must be for the “primary benefit” of the named sole beneficiary (SI 01120.201.F.3.a.). The new SSA rule is that Trustees may now purchase products and services that may partially benefit a third party of necessity. Now instead of the Trust Beneficiary having to be the only individual benefiting from a product or service, the requirement for Trustees is for products and services to benefit the Trust Beneficiary the most.
For example, according to SSA’s new rule it is acceptable to purchase a new TV for a Trust Beneficiary if they are the primary person using it, even if someone else in the home occasionally watches it. It is important to note that this does not guarantee that a Trustee will automatically approve a disbursement that resembles this example because there is a wide variety of factors to consider that this text does not address. Normal fiduciary good practices and legal requirements still apply.
In the past, SSA had taken the stance that only one companion can accompany a Trust Beneficiary at the expense of an SNT and it was customary for the Trustee to require a doctor’s recommendation to be on file. Further complicating the issue, SSA felt that it was inappropriate for Trust Beneficiary of an SNT to have more than one companion on a trip. If you have ever traveled with someone with a serious disability that required assistance with their daily care while navigating a crowded airport with a wheelchair and heavy bags, you know that in many cases it is completely necessary to have more than one companion when traveling.
In short, the new POMS allow Trustees to now pay for more than one companion when they see it necessary and has lifted the restrictions of requiring a doctor’s note (SI 01120.201.3.a.). It is often the first wish of a family with a minor who is a Trust Beneficiary of an SNT to visit Disney World/Land. In this scenario, a Trustee may make the decision to pay for both parents to accompany the minor if his/her disability requires this level of care. However, the SNT can still not pay for siblings because this would violate the primary benefit rule because they are not needed as companions for the disabled individual. Admission tickets to the theme park for the disabled beneficiary and the companions are now allowed by specific examples in the new, liberalized POMS.
Achieving a Better Life Experience (ABLE) Accounts
ABLE accounts are a useful tool for certain Trust Beneficiaries. They offer great flexibility and is a common way for some SSI recipients to avoid a Presumed Maximum Value (PMV) reduction for items related to rent, utilities, and food. Since disbursements for rent, utilities, and food from an ABLE account are classified as Qualified Disability Expenses they do not trigger a reduction in SSI benefits or an increase share of cost for Medicaid. The new POMS solidified this strategy by stating that transfers from an SNT to an ABLE account are excluded (SI 01120.200.C.1.c). Please note, not all Trust Beneficiaries of an SNT qualify to utilize an ABLE account. Please speak with a CPT Trust Officer or a qualified attorney if you would like to explore this strategy in more detail.
TrueLink© Debit Cards
A cardinal rule of SNTs is that a Trustee cannot provide a Trust Beneficiary with cash without impacting his or her eligibility for SSI and/or Medicaid. Instead Trustees can reimburse a Third-Party such as a credit card (or secured credit card), a family member or friend, or the entity providing the service or product directly. However, this poses a problem for a variety of cases. For example, if a minor is utilizing an SNT and his or her parent(s) do not have the necessary resources to cover the expenses related to the injury of their child? They can use a Credit Card or a Secured Credit Card, but many families cannot qualify for a traditional credit card and cannot get a secured credit card with a high enough limit to purchase the products and services required for the minor’s monthly needs. In the past, the only option was utilizing other friends and family members and/or having a Trustee purchase products and services directly for the Trust Beneficiary. SSA has now approved the use of secured debit cards, like TrueLink©, to be used with SNTs (SI 01120.201.I.1.e). In other words, Trust Beneficiaries like the example above now have more flexibility in the ways they access their account. Given this change to the POMS, CPT Institute will begin utilizing TrueLink© cards starting in Fall of 2018.
- SNT earnings from the investment portion of his or her account are not considered income (SI 01120.200.B.20). This applicable only if the Trust Beneficiary can not have access to the earnings.
- Unfunded Third-Party SNTs do not need to be reviewed by the Social Security Administration (SI 01120.200.N.2.b). In addition, SSA reiterated that Medicaid has no right to recover funds placed into a valid Third-Party SNT upon the death of the disabled beneficiary.
- Attorney trust or escrow accounts may or may not be considered a countable resource to an SSI or Medicaid recipient (SI 01120.201.B.4). In the past, it was thought that a recipient of SSI and/or Medicaid could Spend Down or Partial Spend Down excess resources by having the assets parked in an attorney trust account while they are lining up their purchases (i.e. homes, cars, past debt, etc.). This was never a correct conclusion because attorney trust accounts are not d4A or d4C trusts. SSA removed any doubt that attorney trust accounts are a safe option and such purchases will need to be planned for before settlement funds are released to a claimant or plaintiff attorney. When the funds in the attorney’s trust account are free to be released to the disabled beneficiary plaintiff, they may no longer be kept as an unavailable exempt resource. Sometimes funds in an attorney’s trust account are subject to resolution of continuing litigation liens. In that case, where the funds cannot legally be released to the beneficiary, they are not an “available resource,” the legal standard for when an asset or resource counts.
- A Trustee can pay designated individuals to visit a Trust Beneficiary to ensure his/her safety or medical well-being (SI 01120.201.F.3.c).” However, there are restrictions on who the designated individual can be and under what circumstances that this would be appropriate. Specifically, a Trustee may pay for “Travel for a service provider to oversee the trust beneficiary’s living arrangements when the beneficiary resides in an institution, nursing home, other long-term care facility (for example, group homes and assisted living facilities), or other supported living arrangements.” Furthermore, A Trustee of an SNT may pay for “travel for a trustee, trust advisor named in the trust, or successor to exercise his or her fiduciary duties or to ensure the well-being of the beneficiary when the beneficiary does not reside in an institution (SI 01120.201.F.3.c). In the United States, this is a powerful and necessary tool as the Baby Boomer generation continues to age and studies reveal the prevalence of abuse in the United States (National Center of Elder Abuse).
Generally speaking, Trustees across the country are enthused by the changes described in this text. Furthermore, the new POMS, in multiple locations, direct the SSA staff to accept the determination of the Trustee in making a distribution, and imposes on the SSA staff a “reasonableness” standard to avoid second-guessing the actions of the Trustee administering the SNT. These changes permit Trustees to assist Trust Beneficiaries living their lives with more self-determination and we look forward to future changes continuing this course. If you have further questions please look at the “Further Reading” section below, call a qualified attorney, or contact a CPT Institute Trust Officer for more information.
Lillesand, D. (2018). The SSA’s Long-awaited New Rules on SNTs Have Been Released: What this Means for Special Needs Planners. Academy of Special Needs Planners. Retrieved from
Urbatsch, K., & Fuller, M. (2016). Administering the California special needs trust: A guide for trustees and those who advise them (2nd ed.). Bloomington, IN: IUniverse.
DISCLAIMER: The information provided by CPT Institute is for informational purposes only and is intended to be used as a non-legal guide prior to consultation with an attorney familiar with your specific legal situation. CPT Institute is not engaged in the practice of law or in rendering legal advice or counsel. No such legal advice or counseling is either expressly or impliedly intended. This form is not a substitute for the advice or counsel of an attorney. If you require legal advice, you should seek the services of an attorney. © 2018 CPT Institute All rights reserved.