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Presents Terminations of First and Third Party SNTs With Travis Finchum Sponsored by:

March 18, 2014. Presents Terminations of First and Third Party SNTs With Travis Finchum Sponsored by:. For purposes of this discussion we will address three different types of Special Needs Trusts.

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Presents Terminations of First and Third Party SNTs With Travis Finchum Sponsored by:

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  1. March 18, 2014 Presents Terminations of First and Third Party SNTs With Travis Finchum Sponsored by:

  2. For purposes of this discussion we will address three different types of Special Needs Trusts.

  3. For purposes of this discussion we will address three different types of Special Needs Trusts. 1. Special Needs Trusts for Individuals Under Age 65, or d4A Trusts 2. Pooled Special Needs Trusts, or d4C Trusts 3. Third Party Special Needs Trusts

  4. We will make a distinction between the “termination” of an SNT and the “early termination” of an SNT.

  5. A termination is the ending of an SNT.

  6. A termination is the ending of an SNT. This can occur when the funds are completely exhausted, its purposes have been completely fulfilled or the trust has been fully distributed according to its terms.

  7. This can occur before or after the death of the beneficiary.

  8. Upon the death of the beneficiary of a SNT, we know there are certain requirements that must be met under the Social Security Act.

  9. 42 U.S.C. 1396 p (d)(4)(A) states the State must: receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter. (Medicaid)

  10. This is clarified a little more in the POMS at SI 01120.203 B 1 and 2.

  11. This is clarified a little more in the POMS at SI 01120.203 B 1 and 2. POMS is the Program Operations Manual System of Social Security: https://secure.ssa.gov/apps10/poms.nsf/chapterlist!openview&restricttocategory=05

  12. This is clarified a little more in the POMS at SI 01120.203 B 1 and 2. The State(s) must be listed as the first payee and have priority over payment of other debts and administrative expenses except as listed in SI 01120.203 B. 3. a.

  13. The administrative expenses that are allowed to be paid before the Medicaid lien under B. 3. a. are: Taxes due from the trust to the State(s) or Federal government because of the death of the beneficiary; Reasonable fees for administration of the trust estate such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with termination and wrapping up of the trust

  14. We need to make sure that the Medicaid payback provision is not limited to an amount, percentage or state.

  15. Once all of the above criteria have been satisfied upon the death of the beneficiary, the trust document can provide for the remaining funds to go to anyone or any organization.

  16. What is an “early termination” provision in a SNT? It is a clause in a SNT that allows for the SNT to terminate before the death of the beneficiary.

  17. Early Termination • “If this trust shall become uneconomical to continue to administer during the lifetime of the beneficiary this trust shall terminate and be distributed to the beneficiary (or a third party, or shall be retained by the pooled trust)…”

  18. Early Termination • “If this trust shall be found to render the beneficiary ineligible for SSI (or other public assistance programs) the beneficiary shall be deemed to have died and the trust shall be distributed in accordance with section…”

  19. Early Termination • “If the beneficiary shall no longer be disabled and under no means-tested public assistance programs this trust shall terminate and the remaining funds shall be distributed to the beneficiary outright and free of trust.”

  20. Early Termination • Generally speaking a Third Party SNT can terminate at any time in accordance with the terms of the document.

  21. Early Termination • The bigger concern is the termination of SNT’s with the funds of the disabled beneficiary; the d4A or d4C. • “Sole Benefit” is the concern.

  22. Early Termination • The first concern is whether the trust instrument contains language about early termination

  23. Early Termination • Social Security added a section to the Program Operations Manual System (POMS) in February, 2013 and modified it in May, 2013 where it has since remained unchanged.

  24. Early Termination • Social Security added a section to the Program Operations Manual System (POMS) in February, 2013 and modified it in May, 2013 where it has since remained unchanged. • The POM is SI 01120.199 https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120199

  25. Early Termination • Prior to the publication of SI 01120.199 there are many examples of Social Security still finding that early termination provisions in d4A’ and d4C’s caused the SNT to be a countable resource

  26. Early Termination • SNT’s that were previously accepted by SSA, but have a defective early termination clause, are given a one-time 90 day period to amend the trust to comply without a loss of benefits.

  27. Early Termination • Many Regional Chief Counsel Precedents give examples of d4A and d4C trusts being found to be countable because of early termination clauses. • PS - Title XVI Regional Chief Counsel Precedents https://secure.ssa.gov/apps10/poms.nsf/lnx/1601825000

  28. Early Termination • Section SI 01120.199 F. 1. provides that if a d4A or d4C trust document allows for early termination the trust instrument must comply with the following language:

  29. Early Termination • 1. Upon early termination, the State(s), as primary assignee, would receive all amounts remaining in the trust at the time of termination up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan(s); and

  30. Early Termination • 2. no entity other than the trust beneficiary may benefit from the early termination (i.e., after reimbursement to the State(s), all remaining funds are disbursed to the trust beneficiary); and

  31. Early Termination • 3. The early termination clause gives the power to terminate to someone other than the trust beneficiary.

  32. Early Termination • However, this POM doesn’t necessarily address the administration of the SNT, absent specific language.

  33. There are just a few SSA Chief Counsel Precedents that discuss faulty administration, absent poor language in the SNT.

  34. It would seem logical that the administration of the SNT must follow the language of the early termination POM, whether the trust document specifically addresses early termination or not.

  35. Support (866) 296-5509 support@specialneedsplanners.com Contact Travis: Travis@SpecialNeedsLawyers.com

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