The New Regulations Surrounding Special Needs Trusts

 May 29, 2014
Posted by M&LAdmin4

Thursday, May 29th, 2014

One of the most frequent topics of conversation at the office of M&L Special Needs Planning, LLC is the value and validity of the Special Needs Trust (SNT). As financial planning experts, M&L staff all agree that the SNT is perhaps one of the most useful and essential components of a well rounded special needs financial life plan; we all also agree that it can be one of the trickiest, and that the slightest mistake made while establishing the trust can do far more harm than good to the individual(s) it is intended to support.

Here at M&L, we feel very strongly about the SNT, and we strive to ensure that our clients, family, friends, and members of the general public are educated as to exactly what the SNT is, how it can be helpful, and the mistakes to avoid when establishing one.  We have published a number of resources on our website regarding the SNT; in our Special Needs Resource Guide, we have posted a comprehensive description of the SNT, and the different forms that the trust can take. We have also published a number of blogs on the topic, and have included the topic in many of our financial planning workshops and seminars. It is imperative that a special needs attorney who is knowledgeable on creating Special Needs Trust be the one to draft it. For a list of special needs attorneys in each state, please visit the Special Needs Alliance website.  If you are unsure about the SNT, please visit any of the above links to learn more, or contact us – we are more than happy to help!

Recently, however, the Social Security Administration made changes to the way that the Special Needs Trust is reviewed – we released a constant contact notification about these changes, but they are substantial enough for us to devote today’s blog to the topic. So, please join us as we talk a little bit about the SNT, how the SSA changed the way in which it is reviewed, and how this can affect your family with special needs.

A Quick Summary: The Special Needs Trust

A Special Needs Trust is a legal document that is established to protect the individual with disability’s eligibility for government benefits.

In order to gain a full appreciation of the form and function of the SNT, it is important to know this one fact: in order to qualify for state and federal benefits, an individual with disability must have less than $2000 in cash and assets in their name. This is because these benefits are needs-based, and come with a resource limit.

A Special Needs Trust is the only legal way for an individual with a disability to receive the benefit of unlimited income without exceeding this $2000 resource limit; when a Special Needs Trust is established correctly, it becomes its own entity and the assets and funds are not considered to be the assets of either the grantor (the person who establishes the fund) or the beneficiary (the individual with a disability).  The funds under the SNT are considered to supplement the federal and state benefits, rather than supplant. Note: For more information, please click here.

How has the Social Security Administration Changed the Regulations Regarding the Special Needs Trust?

On May 23rd, the Social Security Administration (SSA) issued an Emergency Message, #14026A. According to the document, the message is intended to provide “instructions for the Regional Centralization of SSI Trust Reviews workflow for SSI trust resource determinations including use of the SSI Trust Monitoring System (SSITMS).”

In other words, the message issues new instructions for how the SSA reviews the SNT, and outlines a new policy under which the SSA has established a Regional Trust Reviewer Team. This team now must review all resource determinations for trusts presented for initial Supplemental Security Income (SSI) claims. (To simplify this further – if an individual with a disability is applying for the SSI disability benefit, any and all SNT’s established with that individual as a beneficiary are now subject to a resource determination review by this new Regional Trust Reviewer Team).

Quite simply, this new team has been established to look at all special needs trusts – including First Party and Third Party SNTs – to determine whether or not the assets in the trust are countable when determining eligibility for SSI benefits. According to the SSA, these changes and the resulting new policy are intended to improve accuracy and consistency of SSI trust resource determinations.

How Can This Affect My Family With Special Needs?

Essentially, these changes mean that the SSA is becoming a little stricter, and are receiving more training as to how to correctly judge assets held under Special Needs Trusts. If you have a correctly designed special needs trust, then these changes to policy should have no effect on you at all.

Here at M&L, we emphasize the importance of ensuring that all special needs trusts are created by legal professionals, who have experience in creating these trusts and in working with families with special needs. It is vital to understand that an incorrectly designed trust can render individuals with disabilities as ineligible from receiving any state or federal benefits – especially in light of this new policy.

So, to summarize, if you are creating a SNT in the future please ensure that it is done correctly – and if you have one in place, you may wish to review it with a qualified legal professional to ensure that it follows all the legal requirements. If you would like advice as to contacting a legal firm that is experience in creating Special Needs Trusts, please contact us! We would be happy to help.

Where Can I Find More Information?

As this emergency message is rather recent (it was released on May 23rd) information regarding this policy change is rather scarce; the SSA has released a document, however, that is intended to help the members of this new team understand their new responsibilities and help them to determine how to review resources held under a SNT.

This new document, called the Trust Training Fact Guide, was released in the Emergency Message. This guide is a comprehensive explanation of how the Regional Trust Reviewer Team will examine all SNTs, and how they determine whether or not resources held under the SNT are countable when determining SSI eligibility. The Emergency Message itself can be viewed here.

As well, please do not hesitate to contact us at M&L if you have any questions about special needs trusts, or special needs financial and life planning in general. We are more than happy to provide you with the information that you require, and can make recommendations to other professionals that are experienced with handling the legal and financial resources of individuals and families with special needs. We can also keep you up to date on any other governmental policy changes that can affect any financial/life plans that you may have in place for your family with special needs. If you would like more information about the services that we provide, please take a moment to browse our services webpage, or look at our workshop series.

Thank you so much for taking the time to visit our blog today! Have a great day, and don’t forget to join us next week for a discussion of the ABLE act.







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