Special needs and elder law

Trust funding and control need separate review

Identify whose property will fund the trust. Under SSA guidance, having someone else establish a trust does not turn the beneficiary's own property into third-party property.

For a third-party trust, SSA guidance excludes principal from SSI resources when the beneficiary cannot revoke or terminate the trust or direct its assets for personal support and maintenance.

That review depends on the trust instrument and applicable state or Tribal law. Separately evaluate any enforceable payment right that can be sold. Revocability by the person funding the trust alone does not make principal the beneficiary's resource.

Bring the complete trust instrument and records tracing proposed contributions to the review. Keep questions about ownership, control and future payments together.

A trust using the beneficiary's own assets has different conditions

The federal first-party special needs trust exception requires assets of an individual under 65 who meets the statutory disability definition.

The trust must benefit that individual and be established by the individual, a parent, grandparent, legal guardian or court. At death, remaining funds must reimburse the State up to total Medicaid assistance paid for the individual.

This exception concerns specified Medicaid trust-counting provisions, and SSI cross-references it. It does not automatically establish eligibility. SSA guidance also requires review under ordinary resource rules.

A qualifying trust established before 65 can continue afterward. Additions after 65 generally do not qualify for this exception and need separate income and resource analysis.

Trust earnings are not additions for this purpose. SSA guidance also preserves its stated treatment for annuity, support and Survivor Benefit Plan payments irrevocably assigned to the trust before 65.

ABLE balances and benefit decisions

SSA guidance excludes up to $100,000 of an ABLE account balance from SSI resources. The excess is countable.

SSI is suspended when excess resources attributable to the ABLE account cause ineligibility. Medicaid continuation applies when the individual would receive SSI but for that suspension, rather than to every cause of SSI ineligibility.

Gather the account statement and benefit decisions before comparing an ABLE account with a trust. Record the intended expenses so the discussion addresses how the money will actually be used.

Home eligibility treatment and estate recovery are separate questions

A home's exclusion when determining Medicaid eligibility does not itself settle later estate recovery. The recovery estate includes the state probate estate and, at state option, specified nonprobate interests held at death.

Those interests may include property passing through joint tenancy, survivorship, a life estate or a living trust, to the extent of the deceased person's interest.

For a care discussion, gather ownership records alongside benefit notices. Ask for separate explanations of eligibility treatment and the state's recovery rules before making decisions about the family home.

Two related terms

• Third-party special needs trust

  A trust funded with property belonging to someone other than the beneficiary or the beneficiary's spouse, under SSA guidance. Its name does not establish benefit exclusion.

• ABLE account

  An eligible individual's account maintained under a qualified ABLE program, subject to its eligibility, contribution, expense and benefit rules.

EstatePlanner.com resources for your next step

• How third-party special needs trusts receive family wealth

  Open this guide when planning an inheritance for a relative with a disability. Use it to organize questions about the source of the money and the proposed trust.

• How ABLE accounts work alongside special needs trusts

  Read this next when the family is considering both arrangements. Bring your intended expenses and benefit records to make the comparison specific to the person's daily needs.

• How Medicaid long-term care rules affect family assets

  Choose this guide when a parent's care needs raise questions about the home or other family property. Use it to prepare distinct questions about eligibility, transfers and recovery.

• Disability, family wealth and elder care checklist

  Use this checklist before a family or adviser meeting to gather care plans, trust instruments, pooled trust joinder agreements, benefit decisions, disability evidence and actual authority documents.

Listen before proposing a plan

Start a family discussion by hearing the person's preferences and the caregivers' practical concerns. This talk offers a useful perspective on listening before presenting your own ideas.

"so first listen take stuff in be influenceable um and then be open-minded to changing what you were going to tell them and then you'll be much more influential when you've listened first"

Frequently asked questions

• What happens when a trust pays cash directly to an SSI beneficiary?

  SSA guidance treats direct cash payments, including amounts added to the beneficiary's personal debit card, as unearned income in the month received or added, subject to applicable statutory income exclusions.

  Excluding trust principal as a resource does not settle distribution income treatment. Do not assume every cash payment reduces SSI dollar for dollar.

• Does a representative payee automatically control trust assets?

  No. A representative payee's appointment concerns designated Social Security or SSI benefit payments and does not establish authority over trust property or confer a power of attorney.

  SSA investigates the proposed payee and requires adequate evidence that appointment serves the recipient's interest. The benefits are paid for the recipient's use and benefit, regardless of legal competency or incompetency.

• Does a guardian have unlimited authority?

  In Minnesota, for example, a guardian remains subject to court control, and the court grants only powers necessary for demonstrated needs. Other states differ.

  In Minnesota, actual guardianship authority depends on the court's grant. Gather the appointment and authority documents for review.