The Academy of Special Needs Planners’ (ASNP) Web site is reporting that the Social Security Administration recently made changes to POMS Section 1120.201 that threaten to upend countless first-party supplemental needs trusts that the SSA previously approved.
The SSA appears to have taken the position that it will reject any first-party supplemental needs trust containing a provision allowing payments that enable family members to visit the primary trust beneficiary. The revised Section 1120.201 contains two new examples in sub-paragraph F that outline this policy. In the first example, the "trust document includes a provision permitting the trustee to use trust funds in order to pay for the SSI recipients family to fly from Idaho and visit him in Nebraska." The SSA states that "[t]he trust is not established for the sole benefit of the trust beneficiary, since it permits the trustee to use trust funds in a manner that will financially benefit the SSI recipients family." In the second example, the new POMS states that a trust provision allowing payments for a personal care attendant would be permissible because "payments made for attendant care are considered a payment to a third party for goods or services."
The POMS changes have generated quite a bit of concern, especially because many special needs trusts contain broadly worded provisions outlining what types of payments can be made from the trust. These provisions sometimes state that funds can be used to pay for friends or family members to accompany the primary beneficiary on vacation or to special events, or to visit the trust beneficiary.
ASNP members have been discussing this dilemma on the Academy’s member listserv, and the general consensus seems to be that the descriptive language in trusts should be scaled back or limited as much as possible. ASNP member David Lillesand explains that "[w]e should probably start reducing the length of our trusts, and taking out, ‘For example, the trustee may pay for...’ all the specific examples . . . " Other members suggested limiting distributions to those permitted by the POMS, but California attorney Kevin Urbatsch pointed out that "[i]f the trust required that you comply with POMS and the POMS exceed SSA’s legal authority as set forth in the Social Security statute or regulations that trust could never challenge SSA’s internal procedures manual."
To view the changes made to Section 1120.201, click here.
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