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Are Amendments Needed For Self-Settled Special Needs and Pooled Trusts?

On October 1, 2010, a new Social Security Program Operatives Manual System (“POMS”) instruction was implemented regarding early trust termination provisions of certain “self-settled” special needs and pooled trusts funded with a disabled person’s own assets.

Under the new instruction, “self-settled” trusts that were created on or after January 1, 2000, and which have an early termination provision, will be considered a countable resource for purposes of an individual’s Supplemental Security Income (SSI) eligibility. An early termination provision is defined in the new POMS instructions as:

“An early termination provision or clause would allow a trust to terminate before the death of the beneficiary. Commonly, such provisions or clauses provide for termination of the trust when, for example, the trust beneficiary is no longer disabled or otherwise becomes ineligible for Supplemental Security Income
(SSI) and Medicaid, or when the trust fund no longer contains enough assets to justify its continued administration.”

Such “self-settled” trusts must meet certain criteria to continue being treated as an exempt resource for purposes of SSI eligibility. The new criteria for “early termination” provisions are as follows:
 

  • The trust must contain a payback provision which would allow the state to receive all amounts remaining in the trust on the termination date, up to the amount of medical assistance paid on behalf of the individual under the Ohio Medicaid plan;
  • Other than payment of taxes and administrative expenses, no one but the primary beneficiary can receive the trust assets on early termination; and
  • The early termination of the trust cannot be compelled by the primary beneficiary.
     

All of the potential consequences of this new POMS instruction have yet to be fully realized. Even more so since it is unknown how the Social Security Administration will be interpreting the new instruction. If you are a beneficiary of such a “self-settled” trust, please contact Philip S. Kaufmann or your Stark & Knoll attorney at 330-376-3300 to determine whether your trust meets the new criteria to be considered an exempt resource for purposes of SSI eligibility.

 

Stark & Knoll Co., L.P.A. 3475 Ridgewood Road Akron, Ohio 44333-3163
Phone: 330-376-3300 Fax: 330-376-6237

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