A U.S. District Court holds that a special needs trust is not valid because it was created by the parents of the beneficiary while the parents were acting as agents under a power of attorney. Draper v. Colvin (U.S. Dist. Ct., D. S.D., No. 12-4091-KES, July 10, 2013).
Stephany Draper suffered a brain injury after a car crash. She named her parents as her agents under a power of attorney. Two years later, her parents attempted to create a special needs trust and fund it with money Ms. Draper received from the crash settlement. Ms. Draper applied for Supplemental Security Income benefits, but the Social Security Administration (SSA) denied her application due to excess resources. The SSA claimed that the trust did not meet the criteria for a special needs trust, so the principal of the trust was not shielded as a resource.
Ms. Draper appealed, and the hearing officer agreed with the SSA, finding Ms. Draper's parents were acting as her agents when they funded the trust. To be valid, a special needs trust cannot be created or funded by the beneficiary. Ms. Draper appealed to court, arguing that her parents were acting as parents when they set up the trust, not as her agent under the power of attorney.
The U.S. District Court for the District of South Dakota affirms, holding that the agency's interpretation of the trust is entitled to deference. The court rules that the parents were acting as Ms. Draper's agents under the power of attorney because the power of attorney gave the parents the power to create a trust and the parents could not have exercised control over Ms. Draper's resources without the power of attorney.
For the full text of this decision, go to: click here.
Did you know that the ElderLawAnswers database now contains summaries of more than 2,000 fully searchable elder law decisions dating back to 1993? To search the database, click here.
Subscribe to the Knowledge Bank.
