A. PROCEDURE--DEVELOPMENT
1. General Development'”Written Trust
a. Review the Trust Document
Obtain a copy of the trust document and related documents and, if possible, review the trust to determine whether the:
- Trust was established before, on, or after 1/1/00;
Assets were transferred into the trust before, on, or after 1/1/00;
Trust contains assets of third parties;
Individual is grantor, trustee or beneficiary;
Trust is revocable or irrevocable;
Trust provides for payments to the individual or on his/her behalf;
Trust generates income (earnings), and if so, whether the individual has the right to any of the income;
Trust contains a spendthrift clause that prohibits anticipation of any trust payments; and
Trust is receiving payments from another source.
b. Which Instructions to Apply
| If the trust was established'¦ | And contains'¦ | Then follow instructions in: |
| On or after 1/1/00 | Any assets of the individual | SI 01120.201 - SI 01120.204 |
| # | Only assets of third parties | SI 01120.200 |
| # | Assets of the individual transferred before 1/1/00 | SI 01120.200 |
| Before 1/1/00 | Any assets of the individual all transferred on or after 1/1/00 | SI 01120.201 - SI 01120.204 |
| # | Only assets of third parties | SI 01120.200 |
c. Consult Regional Instructions (RO)
Consult any regional instructions that pertain to trusts to see if there are any State laws governing revocability or irrevocability, grantor trusts or other State law issues to consider. You may also consult the title XVI Regional Chief Counsel Precedents (PS 02000.000 ff.)
d. Referral to Regional Office
If there are unresolved issues that prevent you from determining the resource status of the trust, or there are issues which you believe need a legal opinion, follow your regional instructions or consult with your RO program staff. Many issues can be resolved over the phone. If necessary, they will tell you to refer the document with any relevant information or statements to your Assistant Regional Commissioner, Management and Operations Support (ARC, MOS) for possible referral to the Regional Chief Counsel. Do not contact or refer materials to the Regional Chief Counsel directly.
NOTE: When referring a trust to the RO, make sure to include all documentation and an SSA-5002 (Report of Contact), if necessary, identifying the claimant/recipient, source of funds/assets, relevant relationships of others named in the trust and a brief summary of the unresolved issue(s). 2. General Development'”Oral Trusts
a. State Recognizes as Binding
If the State in question recognizes oral trusts as binding (see regional instructions):
- Record all relevant information about the trust;
Obtain from all parties (e.g., alleged grantor, trustee, etc.) signed statements describing the arrangement; and
Unless regional instructions specify otherwise, refer the case, through the ARC, MOS, to the Regional Chief Counsel.
NOTE: The exceptions in SI 01120.203A. and SI 01120.203B. do not apply in the case of an oral trust since these exceptions require written evidence as part of the trust document.
b. State Does Not Recognize as Binding
If the State does not recognize oral trusts as binding (see regional instructions), see SI 01120.020 if an agency relationship is involved. Develop under regular resource-counting rules or transfer of resources rules, as applicable. 3. Determining Whether Trust Is Revocable or Irrevocable
Although there is a Federal statute on how to count trusts, you must still determine whether a trust is revocable or irrevocable based on the terms of the trust and State law considerations, e.g., State grantor trust rules (see SI 01120.200D.3.).
4. Determining if Trust Is or Is Not a Resource
Apply the policies in SI 01120.201C. and SI 01120.201D. and in any regional instructions to determine whether the trust is a resource.
Once you have established revocability/irrevocability:
If the individual''s assets were used to establish a revocable trust on or after 1/1/00, count the trust corpus as a resource unless one of the exceptions in SI 01120.203B. apply.
If the individual''s assets were used to establish an irrevocable trust on or after 1/1/00, and if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual or the individual''s spouse, count the portion of the trust attributable to the individual''s assets from which payment to or for the benefit of the individual or spouse could be made as a resource unless one of the exceptions in SI 01120.203B. or SI 01120.203C. applies.
If the individual''s assets were used to establish an irrevocable trust on or after 1/1/00, and if there are no circumstances under which payment from the trust could be made to or for the benefit of the individual or the individual''s spouse, develop the establishment of the trust for a potential transfer of resources penalty using instructions in SI 01150.100 ff.
NOTE: If you determine that the trust is a resource, you must determine if an exception or waiver in SI 01120.203 applies.
5. Developing Legal Instruments and Devices Similar to a Trust
a. Which Arrangements to Develop
Obtain any written documentation and review the arrangement to determine if it meets the requirements in SI 01120.201F.
If so, determine whether the arrangement is a countable resource under regular SSI resource-counting rules.
If it is a countable resource, develop the arrangement under the other applicable resource rules.
If it is not an otherwise countable resource, then develop the arrangement following the procedures for developing trusts.
NOTE: Only review arrangements established with an individual''s assets on or after 1/1/00. Do not develop legal instruments and devices similar to a trust established with an individual''s assets prior to 1/1/00 under instructions in SI 01120.200.
However, transfers to such an arrangement may be subject to the transfer of resources provisions (see SI 01150.100 ff.).
b. Referral to the Regional Office
If you are unsure that the arrangement is one that should be developed as a legal instrument or device similar to a trust, follow your regional instructions or consult with your regional office programs staff. Many issues can be resolved over the phone. If necessary they will tell you to refer the documentation and any other relevant information to your ARC, MOS for possible referral to the Regional Chief Counsel. As cases are resolved over time, precedents can be developed that make resolution of these issues easier. B. PROCEDURE'”SUMMARY OF TRUST DEVELOPMENT
The following is a summary of trust development presented in a step-action format. (See SI 01120.202A. for full development instructions.)
| STEP | ACTION |
| 1 | Obtain and review a copy of the trust and all related documents. |
| 2 | Does the trust contain any assets of the individual? If no, follow instructions in SI 01120.200. (NOTE: If any assets of the individual are added to the trust at a later point in time, the trust must be redeveloped SI 01120.201-SI 01120.204.) STOP. If yes, go to Step 3. |
| 3 | Determine the date the individual''s assets were transferred to the trust (See SI 01120.201C.1. and SI 01120.202A.1.b.). If any of the individual''s assets were transferred prior to 1/1/00, follow instructions in SI 01120.200. STOP. If all of the individual''s assets in the trust were transferred on or after 1/1/00, go to Step 4. |
| 4 | Consult national and regional instructions to determine if the trust is revocable or irrevocable (see SI 01120.202A.3.). If you are unable to make a determination, consult with your RO programs staff. If the trust is revocable, go to Step 5. If the trust is irrevocable, go to Step 6 (SI 01120.201D.2.). |
| 5 | The trust is a resource unless an exception applies. Go to SI 01120.203A. to see if an exception applies. (Also see SI 01120.201D.1. for treatment of revocable trusts.) |
| 6 | (See SI 01120.201D.2. for the policy on irrevocable trusts.) Does the trust also contain assets of a third party? If yes, determine the amounts in the trust attributable to the individual and the third party. Develop resource treatment of the portion attributable to the third party under SI 01120.200. Go to Step 7 for the portion of the trust attributable to the assets of the individual. If no, go to Step 7. |
| 7 | Are there any circumstances under which payment from the trust could be made to or for the benefit of the individual? If no, the trust is not a resource. Refer to SI 01150.100 ff. to see if a transfer penalty may be applicable. If yes, the trust is a resource in the amount that could be paid from the portion attributable to the individual unless an exception applies. Go to SI 01120.203. to see if an exception applies. |
C. PROCEDURE'”DOCUMENTATION
1. MSSICS
Document the existence of a trust in MSSICS by answering Yes on the RMEN screen to the Other Resources question. A Yes answer will bring the ROTH screen into the path.
Complete the applicable trust questions on the ROTH screen. If an exception applies, enter the value of the trust in excluded amount and type of exception, e.g., Medicaid payback trust or undue hardship, in exclusion reason. Record all information used in determining whether the trust is or is not a resource or creates income. Record your conclusion in the FILE DOCUMENTATION REMARKS section of the ARMK screen or on the DROC screen and evidence on the EVID screen.
2. Paper Forms
Document the existence of a trust on the appropriate resources question on the form or in remarks.
Record all information used in determining whether the trust is or is not a resource or creates income. Record your conclusions on an SSA-5002 or SSA-553 (Special Determination). Evidence should be documented on the EVID screen (see GN 00301.286) even on non-MSSICS cases.
3. Documentation in all Cases
Include in the file:
- A copy of the trust document, if any;
Copies of any signed documents between organizations making payments to the individual and the individual legally entitled to such payments, if the payments have been assigned, either revocably or irrevocably, to the trust;
Records of any payments or disbursements from the trust, as necessary; and
Any other pertinent documents.
D. PROCEDURE'”SYSTEMS CODING
1. Paper Environment
Code a Q and the date of establishment of the trust in the Third Party Liability (PT) field of the Supplemental Security Record (SSR).
2. MSSICS
The Q code will post to the SSR from the ROTH (Other Resources) screen discussed in MSOM 125-A.
NOTE: As of the issuance of these instructions, there may be a problem with the automatic posting of the Q code from the ROTH screen. If MSSICS does not automatically post the Q code to the PT field of the SSR, do a manual entry per SI 01120.202D.
3. CG Field
Code RE06 or RE07, as applicable in the CG (case characteristics) field to indicate a revocable or irrevocable trust, respectively. (See SM 01301.820 for a list of CG code entries.)
E. PROCEDURE'”MEDICAID DETERMINATION
1. Do Not Make Medicaid Eligibility Determination
If the individual resides in a section 1634 State (in which SSA makes Medicaid determinations on behalf of the State), do not attempt to make a Medicaid eligibility determination since the Medicaid determination regarding the trust may differ from the SSI eligibility determination. (See SI 01715.010A.3. for a discussion of section 1634 States.)
2. Prepare Manual Notice
Posteligibility discovery of a trust in a section 1634 State will not result in a correct automated notice paragraph. Suppress any automated notice and prepare a manual notice using Medicaid paragraph 1147 in NL 00804.110.
3. Send Trust Information to State
a. 1634 States Copy the trust information and send it to the same address used for assignment of rights (AOR) and third-party liability (TPL) information. See regional instructions or contact your RO staff for the correct address.
b. 209(b) and SSI Criteria States In States where SSA does not have an agreement to make the Medicaid eligibility determination, copy the trust information and see regional instructions (e.g., SI R01150.110) or contact your RO staff for the correct address to send the information. (See SI 01715.010A.1. and SI 01715.010A.2. for a discussion of section 209(b) and SSI criteria States.) F. EXAMPLES
1. Trust Principal Is a Resource
a. Situation
The 20-year-old claimant is the beneficiary of an irrevocable trust. The trust was established in 2/00 with the proceeds of the settlement of a lawsuit. The claimant''s parents, with whom she lives and who support her fully, filed a medical malpractice suit on her behalf against her doctor. The doctor''s insurance company settled the lawsuit before it went to trial for $400,000. The court approved the settlement agreement whereby the insurance company placed the money in trust for the claimant, naming her parents as trustees. The trust permits payments for the claimant''s special needs other than support and maintenance. The trust does not provide for reimbursement of Medicaid expenditures to the State on behalf of the claimant.
b. Analysis
The trust was established with assets of the claimant. Although she never received them directly, the settlement proceeds meet the definition of assets in SI 01120.201B.2. Her parents, acting on her behalf, approved the establishment of the trust. The proceeds were used to establish the trust after 1/1/00. Although the trust was legally irrevocable under State law, the trust permitted all of the funds in the trust to be disbursed for the benefit of the claimant. Therefore, the trust is a resource in its full amount, $400,000. The claimant is ineligible due to excess resources. 2. Individual''s Assets Form Only Part of the Trust
See example at SI 01120.201C.2.c.
3. Only Part of the Individual''s Assets in the Trust are Countable
a. Situation
Bill Murray is an SSI recipient. His wife, who is not eligible, won $150,000 in the State lottery, of which she received $85,000. She used the money to establish the Murray Family Irrevocable Trust. The trust stipulates that $40,000 can only be used for their daughter''s college education. The remainder of the money can be used for a number of purposes at the discretion of the trustee including supplemental needs for Bill, income payments to his wife, etc.
b. Analysis
Since Mrs. Murray established the trust with her assets and only $45,000 at most can be paid to or for the benefit of Mr. Murray, we will count $45,000 as a resource. The remaining $40,000 in the trust is considered a transfer of resources that must be evaluated under SI 01150.100 ff. 4. Trust Principal Is Not a Resource
a. Trust Established by a Third Party
Situation Woody King is a young disabled adult. In 8/00, his parents established an irrevocable special-needs trust on his behalf with $100,000 of their own funds. Prior to attaining age 18, he was ineligible because of the income and resources of his parents through deeming. Now that he has attained age 18, he is reapplying for SSI.
Analysis Mr. King''s resources do not include the trust established by his parents since it was not established with his own assets and it is irrevocable. As long as his other income and resources are within the limits, he is eligible for SSI. However, since the trust is not a resource, payments from the trust to or for the beneficiary may be income.
NOTE: A third-party trust does not have to be irrevocable to not be considered a resource as long as the beneficiary does not have the legal authority to revoke the trust or direct the use of the trust assets.
b. Trust Established by Self But No Payment Can be Made to or for the Benefit of the Individual
Situation Arnie Becker was injured in an automobile accident and is now permanently disabled. Mr. Becker received an insurance settlement in the amount of $3.5 million that was placed into 2 irrevocable trusts. The first trust is a discretionary trust providing $2.5 million for the education and welfare of his children. The second trust is a charitable trust containing $1 million. Earnings on the trust are to be distributed annually in the form of scholarships for students at a nearby college.
Analysis Although Mr. Becker''s trusts constitute a very large amount of money, none of it can be paid to him or used to provide for his or his spouse''s needs. SSA does not count the trusts as resources for SSI purposes. However, the establishment of the trusts is considered a transfer of resources under SI 01150.100 ff. Mr. Becker will likely be ineligible for SSI for at least 36 months. 5. Trust Includes Excluded Resources
a. Example 1
Situation
Mattie Walker, an SSI recipient, wishes to plan her funeral through a pre-paid agreement. In the State where she lives, recipients of public assistance, including SSI, must place the funds for their pre-paid agreement into a funeral trust. Ms. Walker enters into a contract for a casket and vault valued at $5,000 and the funeral services she wants valued at $1,500. She places the full amount in a revocable trust. As required by State law, the trust shows Ms. Walker as the grantor and the funeral home as the trust beneficiary.
Analysis
Under SSI burial trust policy in SI 01120.201H.2., the revocable funeral trust is a resource. This is the case because the trust was established with Ms. Walker''s assets and the trust is revocable. The purpose for which the trust was established is irrelevant for purposes of trust policy.
However, since the trust is an otherwise countable resource, the SSI burial exclusions can be applied to the funds. The vault and the casket can be totally excluded as burial spaces. The $1,500 for funeral services can be excluded under the $1,500 burial funds exclusion. The trust is excluded for burial. If the amount of funds for funeral services exceeds $1,500 (other than interest or appreciation), we could exclude up to $1,500 and the remaining amount would be countable. (See SI 01130.400 for the burial space exclusion and SI 01130.409-SI 01130.425 for the burial fund exclusion.)
NOTE: If a trust does not permit the use of the funds in the trust for burial, the burial exclusions are generally not applicable. Upon the individual''s death, the individual would no longer be a beneficiary of the trust unless the trust specifically provides otherwise. Therefore, individuals cannot designate $1,500 of an otherwise countable trust as a burial fund unless the trust permits such a use. If you are unable to make this determination, consult with your RO programs staff.
b. Example 2
Situation
Armand Gonzales, a disabled adult SSI recipient, is awarded a $250,000 judgment in a lawsuit in 6/00 and the money is paid into a trust for his benefit. The trust does not meet any of the exceptions to the general SSI trust policy, so the trust would be a countable resource for SSI purposes and Mr. Gonzales is determined to have excess resources in 7/00 (the month after the month that the trust is established). The trustee uses all of the money in the trust to purchase a house for Mr. Gonzales (which is titled to the trust) and he moves into the home in 1/01 when construction is completed. He contacts SSA and informs us of what has happened.
Analysis
Mr. Gonzales is ineligible due to excess income in 6/00 and excess resources from 7/00 to 1/01. When he moves into the house in 1/01, he is considered to be living in his own home because he has an equitable ownership interest under a trust (see SI 01120.200 F.1.). The house qualifies for the home exclusion as of 2/01 and Mr. Gonzales can be reinstated if he meets all other SSI eligibility requirements.
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