Annuity Payments to Pooled Trust Aren't Income for SSI Purposes, But Payments From Trust Are

A federal district court rules that payments from an annuity to a pooled special needs trust are not income for purposes of determining Supplemental Security Income (SSI) benefits, although payments from the pooled trust to the beneficiary's guardian for food and shelter are countable income. Williams v. Colvin (N.D. Ill., No. 12C7852, March 31, 2014).

Dietrich Williams began receiving payments from two structured settlement annuities after successfully litigating a personal injury claim following an accident that left him permanently disabled.  In March 1999, Mr. Williams' guardian obtained a court order approving the transfer of the annuities and the payments they generate into the Illinois Disability Pooled Trust.  At that time, the court also approved a budget for Mr. Williams that called for the trust to distribute $525 per month to his guardian for groceries, household supplies and drinking water, and another $300 per quarter for clothes.  

Mr. Williams applied for SSI in 2008 but his application was denied because the Social Security Administration (SSA) determined that the payments to his guardian from the trust were countable income.  After a lengthy series of appeals, the SSA finally found that although Mr. Williams may have been eligible for SSI in several months during which he did not receive trust income, he was completely ineligible for benefits because the payments from the annuities to the pooled trust were income.  The SSA based its decision on POMS Section SI 001120.200(G)(1)(d), which makes legally assignable payments to trusts countable income if the payments are not irrevocably assigned.  In arguments before the district court after the SSA rejected his final appeal, Mr. Williams claimed that the payments were irrevocably assigned by court order and by the terms of the pooled trust itself, while the SSA changed course and now argued that the payments could not be legally assigned at all.  Mr. Williams also claimed that the SSA should have considered the payments from the trust to his guardian as in-kind support and maintenance and not direct income.  Both parties filed motions for summary judgment.

The U.S. District Court for the Northern District of Illinois reverses the SSA's decision treating the annuity payments into the pooled trust as income.  The court finds that "the Appeals Council overlooked the ample evidence - found in the documents that created and funded [Mr. Williams'] trust, including court orders, the Master Trust Agreement for the IL Trust, and the Joinder Agreement - demonstrating that the assignment of the annuities was irrevocable."  However, the court also determines that "[s]everal provisions in the POMS support the Commissioner's position that a guardian or conservator is considered an agent for SSI purposes, such that payments to the guardian, as agent for the ward, would constitute payments to the ward, rather than as reimbursement to a third-party. . . Thus, this Court affirms the ALJ's determination that the monthly payments from the IL Trust for groceries, and the quarterly payments for clothing, to the guardian on behalf of Mr. Williams should be counted as unearned income for the purposes of determining SSI benefits."

For the full text of this decision, go to:https://law.justia.com/cases/federal/district-courts/illinois/ilndce/1:2012cv07852/274873/43