The Social Security Administration (“SSA”) recently revised its policy manual with regard to the administration of special needs trusts. This revision could have widespread implications for individuals with disabilities and their families.
A special needs trust is a trust that permits a disabled person to receive government entitled benefits, such as Medicaid and Supplemental Security Income (“SSI”) yet also have the benefit of money that is being held in the trust. Medicaid, which is a government health insurance program for needy individuals, and SSI, which is a cash-assistance government welfare program, are needs-based programs, meaning that the beneficiary must have limited assets in order to qualify for the programs.
If an individual owns assets with a value greater than $2,000, he typically will not qualify for Medicaid or SSI; however, if the disabled individual places his assets into a special needs trust, he can receive Medicaid and SSI despite that the fact that his special needs trust may hold thousands, hundreds of thousands, or even millions of dollars.
A disabled person may come into money because of a lawsuit or because of an inheritance from a family member. If the funds are not put into a special needs trust, the disabled person will lose or will not receive government entitlement benefits such as Medicaid and SSI. The money that he just received will then be used to pay for things for which Medicaid would have paid but for the fact that the disabled person received an award in a lawsuit.
The lawsuit may be based in the incident that gave rise to the disability. For instance, assume that Mr. Smith was involved in a severe car accident that was not his fault. As a result of the accident, Mr. Smith cannot work and cannot care for himself. He requires extensive personal care.
Mr. Smith—or, more likely, his guardian—sues the person at fault for the accident on Mr. Smith’s behalf. Assume that Mr. Smith wins $1,000,000 as a result of his lawsuit. If that money comes into the hands of Mr. Smith, he will not receive Medicaid. He will then have to use the money he just received to pay for the medical care for which Medicaid would have paid but for his lawsuit winnings. Ironically, Mr. Smith would not benefit at all from the lawsuit and once his money was expended, he would have no money whatsoever.
By placing the lawsuit winnings into a special needs trust, Mr. Smith can receive the benefits of Medicaid and the benefits of the lawsuit winnings to supplement his needs. Medicaid fails to pay for many services from which a disabled person would benefit, so the money in the trust can be used to supplement Mr. Smith’s needs.
Furthermore, the maximum monthly SSI benefit is about $800, and while it is designed to pay for food and shelter, only the most frugal and Spartan of individuals could ever subsist on the SSI benefit. But if Mr. Smith has money in a special needs trust, his trustee can use his money to supplement his needs and ensure that a meager, but livable, lifestyle is maintained.
The Social Security Administration runs the SSI program, and most of the rules governing the Medicaid program are from the SSI program. The two programs work very closely together.
Recently, the SSA put out a policy that forbids a special needs trust from paying for items for a family member of a special needs trust beneficiary. For instance, if the sister of a disabled person who lives inCaliforniawishes to visit her disabled brother inIowa, the SSA says that the special needs trust cannot pay for the sister’s plane ticket.
Now, these is no question that a special needs trust should only be used for the disabled person’s benefit. But it is also true that family members are often the best caregivers that a disabled person can have. If the sister is coming to visit her brother and a substantial purpose of the visit is to assist her brother with care needs, then I believe that the brother’s special needs trust should pay for the visit.
This change in policy is a call for further advocacy on behalf of the disabled.