Greetings from a Kangaroo Sanctuary in Alice Springs, Central Australia…Yesterday, I got to meet an animal I find fascinating, the kangaroo. I spent the day at the Kangaroo Sanctuary since these marsupials are very timid and can be difficult to see up close in the outback. I also answered a question I get from time to time about Trusts.
I am the representative payee for my son who is 24 and gets SSI. My elderly aunt is revising her will and wants to leave my son several thousand dollars. I know that if he receives money it would probably make a difference for his SSI eligibility and payments. I heard that my aunt might be able to set up my son’s inheritance in a trust so that his SSI would not stop or maybe not change. What are the possibilities for a trust in my son’s situation?
You are correct in saying that income from an inheritance can have an impact on a Supplemental Security Income (SSI) recipient’s eligibility and payments. Normally, money from an inheritance counts as income for SSI the month it is received and, if kept, becomes a resource the next month.
What is a Trust?
A trust is a legal arrangement in which assets are held for and disbursed to an individual (a beneficiary) by someone else (a trustee) who can be a person or a financial institution and who manages those assets. Disbursements from the assets are set out in the trust document and can take various forms, including cash. Trustees normally charge fees.
Setting Up Trusts
A trust is a possibility in your situation, but be aware that trusts can be complicated, especially as they apply to public benefits such as SSI. Trust laws also differ from state to state and are subject to change. To plan and establish one you should consult an attorney, a financial advisor, or other professional with expertise in trusts. However, I can give some of the basic information and relevant SSI rules.
How Do Trusts Work with SSI Payments?
The critical SSI issues are if the assets in the trust are a countable resource and if any disbursements are countable income.
There are various types of trusts and depending on the type, the trust assets may or may not be considered a resource for SSI, and any disbursements from the trust may or may not be counted as income for SSI. In some cases, specialized Social Security Administration (SSA) staff has to review a trust to determine if or how it affects SSI eligibility or payments. (POMS SI 01120.200)
Trusts Set-Up and Funded by Third Parties
Trusts set up and funded by a third party normally will not count as a resource for SSI if the beneficiary does not have the legal authority to revoke, terminate, or direct the use of the trust assets for his or her support and maintenance. This may be the type of trust appropriate in your son’s situation – a testamentary trust:
- one established by a will effective at the time of death,
- the assets of which would never belong to your son.
Trusts Established with Assets of the Individual with a Disability
Trusts established with the assets of the disabled individual (or spouse) are normally considered a resource for SSI with certain exceptions, an example being irrevocable trusts with specific restrictions on use (as discussed later).
If a trust is excluded as a resource for SSI, disbursements to the beneficiary may still be counted as income for SSI depending on their nature; SSA would apply the regular SSI rules regarding countable income. For example, cash disbursements would count, but household items would not since they are excluded under the normal SSI rules for income. If SSA considers a trust to be a countable resource and the individual is still eligible for SSI, disbursements to the individual are not income but rather the conversion of a resource.
Special Needs Trusts
One type of trust that is excluded as a resource for SSI is called a Special Needs Trust (also known as a Supplemental Needs Trust or SNT). A SNT is an exception to the general rule that trusts created with a beneficiary’s own assets cannot be excluded for SSI. The trust must be irrevocable and the beneficiary must be:
- disabled and under age 65,
- solely for the beneficiary,
- set up by a parent, grandparent, legal guardian, or court.
Any assets in a SNT that originally belonged to the beneficiary must upon the beneficiary’s death be paid to the state to cover the amount of medical assistance paid on behalf of the beneficiary.
SNT assets are excluded as a resource for SSI, and a SNT typically limits the trustee’s discretion as to the purpose of the distributions in order to avoid affecting SSI. However, the disbursements may be countable income for SSI depending on their nature (as described earlier). Excluded disbursements are items or services that are normally excluded as income under SSI rules and include a broad range of possibilities. A few examples are recreational costs, educational expenses, computer equipment, professional services (such as attorneys and accountants), and medical costs not covered by Medicaid. (POMS SI 01120.200)
Closely related to a SNT is a pooled trust. This is a communal fund with each beneficiary having a separate account as part of the trust. A non-profit association established and certified by the state must manage a pooled trust which includes making sure any disbursements are appropriate. Otherwise the rules are similar to those for a SNT; the differences are that in some situations the trust may be set up by the disabled individual, and the age requirement of being under 65 does not apply. (POMS SI 01120.225) In Wisconsin, authorized non-profit agencies are WisPACT, Wish Fund, and ARC Milwaukee.
As I indicated earlier, trust laws are complicated and subject to change. Hopefully I’ve provided you with information that can serve as a starting point for you.