5 brown magical mystery tour - brown - 10.17...10/8/2019 1 2019 national conference on special needs...

10/8/2019

1

2019 National Conference on Special Needs Planning and Special Needs Trusts

AGUIDEDMAGICALMYSTERYTOURTHROUGHTHEPOMS

Kenneth A. Brown October 17, 2019

Ken retired from the Social Security Administration after an almost 40‐year career where he worked primarily with Supplemental Security Income policy. During his career, he was responsible for implementation of many pieces of legislation, wrote dozens of regulations and hundreds of POMS transmittals.

Ken has been a frequent lecturer on trusts and various aspects of the Supplemental Security Income program at the national, State and local level. He has presented multiple times at the Stetson University National Conference on Special Needs Planning and Special Needs Trusts and for groups such as the National Academy of Elder Law Attorneys, the Special Needs Alliance, the Academy of Special Needs Planners, the ABLE National Resource Center, the President’s Committee for People with Intellectual Disabilities, the ARC, the National Academy of Social Insurance and the National Association of State Treasurers.

www.law.stetson.edu/elderlaw

<Title>

<Text>

Along our route today, we will be making a lucky 13 stops, a bakers dozen. At each stop we’ll take a look at something different. Some of it may be very familiar to some of you, but we will see if we can’t find some new perspectives.

10/8/2019

2

Distributions From a TrustThe three great rules related to distributing money from a trust:

HOW DOES MONEY FROM A TRUST THAT IS NOT MY RESOURCE AFFECT MY SSI BENEFITS?

• Money paid directly to you from the trust reduces your SSI benefit.

• Money paid directly to someone to provide you with food or shelter reduces your SSI benefit but only up to a certain limit. No matter how much money is paid for these items, we subtract no more than $277.00 (in 2019) from your SSI check for the month you receive the items.

• Money paid directly to someone to provide you with items other than food and shelter does not reduce your SSI benefits. (Items that are not "food or shelter" include medical care, telephone bills, education, entertainment, etc.)

Source ‐ SPOTLIGHT ON TRUSTS ‐‐ 2019 Edition, available as part of Understanding SSI at www.ssa.gov.

In-kind Support and Maintenance (ISM)The second great rule of distributions states that money paid directly to someone to provide you with food or shelter reduces your SSI benefit. In order to avoid the trap of ISM or to use its rules to your client’s advantage, you must first achieve a mastery of the minutia of ISM policy. The place to start is with these gems:

• There are only two major rules for ISM‐counting, the VTR Rule and the PMV Rule; and

• There are only 10 items that receipt of result in ISM‐counting.

Disbursements that result in receipt of in-kind support and maintenance SI 01120.201 Trusts Established with the Assets of an Individual on or after 01/01/00

I. Policy for disbursements from trusts

1. Trust principal is not a resource

b. Disbursements that result in receipt of in‐kind support and maintenance

Food or shelter received as a result of disbursements from a trust to a third party is income in the form of in‐kind support and maintenance (ISM) and is valued under the presumed maximum value (PMV) rule. For instructions pertaining to the PMV rule, see SI 00835.300. For rules pertaining to a home, see SI 01120.200F.

10/8/2019

3

In-kind Support and Maintenance (ISM)SI 00835.001 Introduction to Living Arrangements and In‐Kind Support and Maintenance A. Policy on living arrangements and in‐kind support maintenance In‐kind support and maintenance (ISM) is unearned income in the form of food or shelter, or both. The Social Security Act (the Act) considers ISM, along with other forms of unearned income, when determining supplemental security income (SSI) eligibility and payment amounts. We use two rules to determine the value of ISM an individual receives:

• the Value of the One‐Third Reduction (VTR) rule, discussed in SI 00835.200; and

• the Presumed Maximum Value (PMV) rule, discussed in SI 00835.300.

NOTE: Based on a change in the SSI regulations, beginning 03/09/2005, we do not count receipt of clothing as ISM.

Value of the One-Third Reduction (VTR) Rule SI 00835.001 Introduction to Living Arrangements and In‐Kind Support and Maintenance

A. Policy on living arrangements and in‐kind support maintenance

1. Value of the one‐third reduction (VTR) rule

We reduce the applicable Federal benefit rate (FBR) by one‐third when an individual or couple:

• Lives throughout a month in another person's household; and

• Receives both food and shelter from others living in that household.

When the VTR Applies • When a claimant or couple lives throughout a month in another person's

household and receives both food and shelter from others living in the household,

• When the value of the one‐third reduction (VTR) applies, it applies in full or not at all.

• When the VTR applies, no additional in‐kind support and maintenance (ISM) is countable.

• When the value of the one‐third reduction (VTR) applies, no income exclusions apply to the VTR.

• The VTR may apply even if the individual receives part of his or her food and shelter from inside the household and part from outside. It is not necessary that an individual receive food and shelter from inside the household on each day of the month to apply the VTR.

10/8/2019

4

When the VTR does not apply • Individual lives in own household

• Individual lives in another's household but does not receive both food and shelter

• Individual does not live in a household

• Individual does not meet the throughout a month requirement

• Individual lives alone

Presumed Maximum Value (PMV) Rule SI 00835.001 Introduction to Living Arrangements and In‐Kind Support and Maintenance

A. Policy on living arrangements and in‐kind support maintenance

2. Presumed Maximum Value (PMV) rule

When a beneficiary or couple is eligible for payment and the VTR does not apply, use the PMV rule to determine the value of ISM received. The amount of the PMV is equal to one‐third of the Federal benefit rate for an individual or couple, plus $20. If the individual or couple successfully rebuts the PMV, value the ISM at the current market value (CMV) or the actual value (AV), whichever is less.

For a detailed explanation of the PMV rule, see SI 00835.300.

ISM and Households - Household Costs SI 00835.465 ISM and Households ‐ Household Costs

D. Policy — what are household costs

1. List of applicable items When computing household operating expenses for inside ISM or the CMV of household costs for outside ISM, the following 10 items are the only ones used in the applicable computations: • Food• Mortgage (including property insurance required by the mortgage holder) • Real property taxes (less any tax rebate/credit)• Rent• Heating fuel• Gas• Electricity• Water• Sewer• Garbage removal

10/8/2019

5

Temporary Absence from a Federal Living Arrangement

• If an individual meets the requirements to be considered temporarily absent from their permanent living arrangement, SSA will count any ISM received as if the individual was living in his or her permanent living arrangement.

• Any ISM received while temporarily absent does not count.

• So, if a trust pays for a temporarily absent individual’s hotel and food during a vacation, those payments do not result in the receipt of ISM.


SI 00835.040 Temporary Absence from a Federal Living Arrangement (LA)

C. Policy for temporary absence from a federal LA

1. Conditions for a temporary absence

a. General rule

A temporary absence exists if a claimant:

• has been in his or her permanent LA for at least one full calendar month prior to his or her absence; and

• intends to, and actually does, return to the permanent LA in the same calendar month he or she leaves or in the next month.


SI 00835.040 Temporary Absence from a Federal Living Arrangement (LA)

C. Policy for temporary absence from a federal LA

2. ISM during a temporary absence

During a temporary absence of ISM, we:

• continue to value ISM as if a claimant were physically in his or her permanent LA; and

• do not count ISM a claimant receives during the temporary absence.

Exceptions:

SI 00835.042A.2. ISM during a temporary absence due to school attendance

SI 00835.043B.2. ISM during a temporary absence due to medical confinement

10/8/2019

6

Related Policy - Gifts of Travel TicketsSI 00830.521 Gifts of Travel Tickets

A. Definition of Domestic and Non‐domestic Travel 1. Domestic Travel Domestic travel is travel in or between the 50 States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.

2. Non‐Domestic Travel

Non‐domestic travel is travel to any place other than those listed in SI 00830.521A.1.

Related Policy - Gifts of Travel TicketsSI 00830.521 Gifts of Travel Tickets B. Policy 1. Gift of Domestic Travel Ticket Not Converted To Cash The value of a ticket for domestic travel received by an individual, or his/her spouse, or parent whose income is subject to deeming is excluded from income if: • the ticket is received as a gift (SI 00830.521); and • the ticket is not converted to cash (e.g., cashed in, sold, etc.).

. . . . . 3. Gift of Non‐Domestic Travel Ticket The gift of a non‐domestic travel ticket that cannot be converted to cash (i.e., it is not refundable) or used to obtain food or shelter is not considered as income (SI 00815.001), even if the ticket was used for transportation. Travel tickets that can be converted are income and are counted as unearned income at the current market value (CMV) in the month of receipt (SI 00835.020 and SI 00835.310C.), whether or not the ticket was used for transportation.

Related Policy - Gifts of Travel TicketsOther Considerations When Paying Vacation Expenses

• Keep in mind POMS SI 01120.201F.3.b., Payment of third party travel expenses to accompany the trust beneficiary and provide services or assistance that is necessary due to the trust beneficiary’s medical condition, disability, or age when considering payment for travel companion services on vacation.

• When determining whether to pay for a vacation from a trust or the individual’s ABLE account in order to avoid income counting, keep in mind that ABLE distributions must be for qualified disability expenses. Qualified disability expenses (QDEs) are expenses related to the blindness or disability of the designated beneficiary and for the benefit of the designated beneficiary. Vacations do not fall under any of the explicitly enumerated categories of QDEs, so while you may avoid income counting for SSI, you may run into a problem with the IRS.

10/8/2019

7

Smart Use of ISM Payments From a Trust• Just because payment for food and/or shelter by a trust may result in counting

the food and shelter received as income for SSI purposes, you should not be afraid to allow for discretionary payment of food and/or shelter by the trust if it may result in a better life situation for the trust beneficiary.

• The first inclination may be to prohibit any distributions for food and/or shelter because it will reduce the amount of the SSI check. And by no means should the trust state that the trust will pay for food and/or shelter needs and risk the trust being considered a support trust.

• However, there may be distinct benefits to allowing a trustee to make discretionary payments for food and/or shelter, as the situation may require. In fact, the way the rules function, it would be malpractice to impose too restrictive rules on a trustee.

Smart Use of ISM Payments From a Trust<Text>Example: In the case of two similarly situated

individuals who both receive SSI and have received personal injury settlements. The settlement funds have been placed in a special needs trust that allows continued SSI eligibility. The trust drafted by Attorney A contains language that permits the trustee to make distributions to third parties to pay for the needs of the trust beneficiary, except that he may not make distributions for food and/or shelter that would reduce the SSI benefit. However, the trust drafted by Attorney B permits discretionary distributions for food and shelter. Neither beneficiary has other sources of income.

Smart Use of ISM Payments From a TrustWhat are some of the things that a trustee must consider in determining whether to make distributions for food and shelter and how much to distribute?

First and foremost, the trustee should be sure to maintain SSI and Medicaid eligibility. There may be certain circumstances such as eligibility for SSDI benefits or the receipt of other earned or unearned income valued at or above the PMV that would make trust disbursements for food and/or shelter and the resultant reduction in benefits due to ISM valued at the PMV inadvisable. Such distributions should be curtailed or the amount of the distribution reduced to coordinate with the receipt of other income and maintain eligibility, even the receipt of one dollar.

Second, the trustee must consider the amount available in the trust, the beneficiary’s life expectancy and the period of time that the trust is expected to provide for.

Note: The PMV is rebuttable, in other words, if the value of the food and shelter received is worth less than the PMV, the individual will be charged with the actual value of the food and shelter. Therefore, a reduction in the amount of the distribution may still permit a distribution to be made while maintaining eligibility for benefits.

10/8/2019

8

Income RulesThe next sections of POMS provide other income rules that interact with the third great rule on distributions;

• Money paid directly to someone to provide you with items other than food and shelter does not reduce your SSI benefits. This is true if the payer is a trust or other third party that is reimbursed by a trust.

• Receipt of items that would be considered a partially or totally excluded nonliquid resource in the month following the month of receipt are not income for SSI. For example, this could be a car, computer, furniture, medical assistive devices or a host of other items that may useful to the beneficiary. A list of excluded resources can be found at SI 01110.210.

• There is a little recognized income exclusion that provides that the first $30 per quarter of earned income or the first $60 per quarter of unearned income (if not otherwise excluded by another income exclusion) received infrequently or irregularly is excluded.

Disbursements that are not income

Disbursements from the trust that are not cash to the individual or are third party payments that do not result in the receipt of support and maintenance are not income. Such disbursements may include, but are not limited to, those made for educational expenses, some travel expenses, therapy, medical services not covered by Medicaid, phone bills, recreation, and entertainment (see SI 00815.400.).

Disbursements made from the trust to a third party that result in the beneficiary’s receipt of a non‐cash item (other than food or shelter) are not income if the non‐cash item would become a totally or partially excluded non‐liquid resource if retained into the month after the month of receipt. For instructions on receipt of certain non‐cash items, see SI 00815.550.

SI 01120.201 Trusts Established with the Assets of an Individual on or after 01/01/00



c. Disbursements that are not income

Disbursements that are not income SI 01120.201 Trusts Established with the Assets of an Individual on or after 01/01/00

For example, a trust purchases a computer for the beneficiary. Since we would exclude the computer from resources as a household good in the following month, the computer is not income. For instructions on household goods, personal effects, and other personal property, see SI 01130.430.

Funds transferred from the trust into an account established by the trust beneficiary under the Achieving a Better Life Experience (ABLE) Act are excluded from income to the trust beneficiary. For treatment of deposits into an ABLE account, see SI 01130.740.

10/8/2019

9

Bills Paid By a Third PartySI 00815.400 Bills Paid By a Third Party

A. Policy

Payment of an individual's bills (including supplementary medical insurance under title XVIII or other medical insurance premiums) by a third party directly to the supplier is not income. However, anything received in kind as a result of the payment is income if it is food or shelter.

Reimbursements to a Third Party SI 01120.201 Trusts Established with the Assets of an Individual on or after 01/01/00


1. Trust principal is not a resource g. Reimbursements to a third party

Reimbursements made from the trust to a third party for funds expended on behalf of the trust beneficiary are not income. In addition, reimbursements from the trust to pay a credit card belonging to a third party for purchases made for the trust beneficiary are not income.

Existing income and resource rules apply to items that a trust beneficiary receives from a third party. . . .

Receipt of Certain Noncash Items SI 00815.550 Receipt of Certain Noncash Items

A. Policy

The value of any noncash item (other than an item of food or shelter) is not income if the item would become a partially or totally excluded nonliquid resource if retained into the month after the month of receipt.

B. Reference

List of items excluded from resources, SI 01110.210.

10/8/2019

10

Infrequent or Irregular Income Exclusion SI 00810.410 Infrequent or Irregular Income Exclusion C. Policy – benefit payments beginning September 8, 2006

Beginning September 8, 2006, infrequent income is defined as income that an individual receives only once during a calendar quarter from a single source, and which the individual did not receive in the month immediately preceding that month or in the month immediately subsequent to that month, regardless of whether or not those payments occur in different calendar quarters.

Income is considered to be received irregularly if an individual cannot reasonably expect to receive it.

We exclude the following amount of income, which is received either infrequently or irregularly:

• The first $30 per calendar quarter of earned income; and

• The first $60 per calendar quarter of unearned income.

Using Trusts With ABLE Accountsand Vice-Versa

The enactment of the Stephen Beck Jr., Achieving a Better Life Experience Act at the end of 2014 provided trustees/beneficiaries/practitioners with probably the most useful tool in decades.

If an individual is eligible, there are not many situations where it would not be advantageous to have an ABLE account to use in conjunction with the trust.

Transfers From a Trust to an ABLE Account/ Income Avoidance

• The POMS explicitly permits transfers from a special needs or pooled trust to an ABLE account up to the annual contribution limit ($15,000 for 2019). The benefit to this arrangement is that a transfer that would otherwise count as income is excluded from income.

• If those same funds are subsequently disbursed from the ABLE account to directly pay for housing (shelter) expenses, the shelter received does not count as income in the form of in‐kind support and maintenance.

• CAUTION – Disbursed funds to pay for housing must be spent in the same month.

• The use of an ABLE account provides a legal way to “launder” money to avoid income counting for housing expenses. Of course, any other expenditure for an item that qualifies as a Qualified Disability Expense is also excluded.

10/8/2019

11

Transfers From a Trust to an ABLE AccountSI 01120.201 Trusts Established with the Assets of an Individual on or after 01/01/00



h. Disbursements transferred into an ABLE account

Funds transferred from the trust into an account established by the trust beneficiary under the ABLE Act are excluded from income to the trust beneficiary. For treatment of deposits into an ABLE account, see SI 01130.740.

Transfers From a Trust to an ABLE AccountSI 01130.740 Achieving a Better Life Experience (ABLE) Accounts C. When to exclude ABLE account contributions, balances, earnings, and distributions

1. Exclude contributions as income

b. Third party contributions

A third party contribution is not income to the designated beneficiary. Third party contributions are contributions made by persons other than the designated beneficiary. Further, third party contributions are made with funds that do not otherwise belong, or are not otherwise due, to the designated beneficiary; that is, they are made with the third party’s funds. Accordingly, an ABLE contribution by a person other than the designated beneficiary is treated as a completed gift.

A transfer of funds from a trust, of which the designated beneficiary is the beneficiary and which is not considered a resource to him or her, to the designated beneficiary’s ABLE account generally will be considered a third party contribution for ABLE purposes because the contribution is made by a person or entity other than the designated beneficiary (namely, the trustee) and because the designated beneficiary does not legally own the trust.

Income AvoidanceSI 01130.740 Achieving a Better Life Experience (ABLE) Accounts

C. When to exclude ABLE account contributions, balances, earnings, and distributions

4. Do not count ABLE account distributions as income

A distribution from an ABLE account is not income but is a conversion of a resource from one form to another. See SI 01110.600B.4.

Do not count distributions from an ABLE account as income of the designated beneficiary, regardless of whether the distributions are for a QDE not related to housing, for a housing expense, or for a non‐qualified expense.

10/8/2019

12

Income Avoidance - CAUTIONSI 01130.740 Achieving a Better Life Experience (ABLE) Accounts

D. When to count ABLE account balances and distributions

2. Count retained distributions for housing expenses or expenses that are not QDEs as a resource

A distribution from an ABLE account is not income, but is a conversion of a resource from one form to another. For more information see SI 01110.600B.4.

Count a distribution for a housing expense or for an expense that is not a QDE as a resource, if the designated beneficiary retains the distribution into the month following the month of receipt. If the designated beneficiary spends the distribution within the month of receipt, there is no effect on eligibility. However, apply normal SSI resource counting rules and exclusions to items purchased with funds from an ABLE account.

Income Avoidance - Support Payments• The use of a trust with an ABLE account provides a method to avoid income

counting for support payments such as child support or alimony.

• If a support payment is paid directly into an ABLE account, the payment is income because the ABLE account owner is the person legally entitled to receive that payment. Even if paid directly into the ABLE account, the individual is considered to have constructively received the payment prior to deposit into the ABLE account.

• However, if support payments are irrevocably assigned to a trust (a court order is deemed to be an irrevocable assignment), the payment is not income when deposited into the trust.

• The support payment can then be transferred into an ABLE account for the use of the trust beneficiary, avoiding income counting upon receipt, and if used correctly, avoiding income counting upon expenditure.

Income Avoidance - Support PaymentsSI 01130.740 Achieving a Better Life Experience (ABLE) Accounts

C. When to exclude ABLE account contributions, balances, earnings, and distributions

1. Exclude contributions as income

a. First party contributions

A contribution made by the designated beneficiary into his or her ABLE account is not income to the designated beneficiary. However, income received by the designated beneficiary and deposited into his or her ABLE account is income to the designated beneficiary. That is, the income is income in the first instance, but the contribution is not income.

An individual cannot use direct deposit to avoid income counting.

10/8/2019

13

Income Avoidance - Support Paymentsa. First party contributions (Continued)

So, when a payment that belongs or is due to the designated beneficiary is direct‐deposited into his or her ABLE account, the payment is considered to be received by the designated beneficiary, it is counted as income to the designated beneficiary as it otherwise would be, the designated beneficiary is considered the contributor for ABLE purposes, and the ABLE contribution is not considered income to the designated beneficiary.

Examples of payments that might be direct‐deposited into an ABLE account, but still are counted as income as they otherwise would be, include:

• Wages;

• Benefit payments (Title II, Veterans Administration, pensions, etc.); and

• Mandatory Support payments (child support or alimony).

Income Avoidance - Support PaymentsSI 01120.201 Trusts Established with the Assets of an Individual on or after 01/01/00

J. Policy for earnings on and additions to trusts


d. Assignment of income

A legally assignable payment to a trust or trustee is income for SSI purposes, unless the assignment is irrevocable. If the assignment is revocable, the payment is income to the individual legally entitled or eligible to receive the payment. For example, child support or alimony payments paid directly to a trust or trustee because of a court order are considered irrevocably assigned and thus not income. Also, Survivor Benefit Plan (SBP) payments assigned to a special needs trust are not income because assignment of SPB annuities is irrevocable.

The Home ExclusionThere are a number of policies associated with the home exclusion that interact with trust policy that may be advantageous to a trust beneficiary receiving SSI.

• An eligible individual does not receive ISM in the form of rent‐free shelter while living in a home in which he or she has an ownership interest. Accordingly, a trust beneficiary with an “equitable ownership interest in the trust principal” does not receive rent‐free shelter (ISM).

• Even if the trust beneficiary has an ownership interest in the home that he or she resides in, and is not receiving ISM in the form of rent‐free shelter, the purchase of the home or payment of the monthly mortgage by the trust is a disbursement from the trust to a third party that results in the receipt of ISM in the form of shelter.

10/8/2019

14

The Home Exclusion• If the trust, whose principal is not a resource, purchases the home outright and the

trust beneficiary lives in the home in the month of purchase, the home is income in the form of ISM, and reduces the trust beneficiary's payment no more than the PMV in the month of purchase only, regardless of the value of the home.

• If the trust, whose principal is not a resource, purchases the home with a mortgage and the trust beneficiary lives in the home in the month of purchase, the home would be ISM in the month of purchase. Each of the subsequent monthly mortgage payments results in the receipt of income in the form of ISM to the trust beneficiary living in the house, each valued at no more than the PMV.

• If the trust pays for repairs, maintenance, improvements, or renovations to the home, such as renovations to the bathroom to make it handicapped accessible, installation of a wheelchair ramp or assistive devices, or replacement of a roof, the trust beneficiary does not receive income. Disbursements from the trust for improvements increase the value of the resource and, unlike household operating expenses, do not provide ISM.

The Home ExclusionSI 01120.200 Information on Trusts, Including Trusts Established Prior to January 01, 2000, Trusts Established with the Assets of Third Parties, and Trusts Not Subject to Section 1613(e) of the Social Security Act

F. Policy for home ownership and purchase of a home by a trust

2. Rent‐free shelter

An eligible individual does not receive ISM in the form of rent‐free shelter while living in a home in which he or she has an ownership interest. Accordingly, an individual with an “equitable ownership interest in the trust principal” does not receive rent‐free shelter (see SI 01120.200F.1. in this section).

The Home ExclusionSI 01120.200 F. Policy for home ownership and purchase of a home by a trust (Cont.)

3. Receipt of income from a home purchase

Because the purchase of a home by a trust for the trust beneficiary establishes an equitable ownership interest for the trust beneficiary, the purchase results in the receipt of ISM, in the form of shelter, in the month of purchase. This ISM is valued at no more than the presumed maximum value (PMV). For ISM to one person, see SI 00835.400.

Even if the trust beneficiary has an ownership interest in the home that he or she resides in, and is not receiving ISM in the form of rent‐free shelter (because shelter is rent‐free when no household member has any ownership interest in, or rental liability for, the residence, see SI 00835.370B.1.). The purchase of the home or payment of the monthly mortgage by the trust is a disbursement from the trust to a third party that results in the receipt of ISM in the form of shelter (see SI 01120.200E.1.b. in this section).

10/8/2019

15

The Home ExclusionSI 01120.200 F. Policy for home ownership and purchase of a home by a trust (Cont.)3. Receipt of income from a home purchase

a. Outright purchase of a home

If the trust, whose principal is not a resource, purchases the home outright and the trust beneficiary lives in the home in the month of purchase, the home is income in the form of ISM, and reduces the trust beneficiary's payment no more than the PMV in the month of purchase only, regardless of the value of the home (see SI 01120.200E.1.b. in this section).

b. Purchase by mortgage or similar agreement

If the trust, whose principal is not a resource, purchases the home with a mortgage and the trust beneficiary lives in the home in the month of purchase, the home would be ISM in the month of purchase. Each of the subsequent monthly mortgage payments results in the receipt of income in the form of ISM to the trust beneficiary living in the house, each valued at no more than the PMV (see SI 01120.200E.1.b. in this section).

The Home ExclusionSI 01120.200 F. Policy for home ownership and purchase of a home by a trust (Cont.)3. Receipt of income from a home purchase

c. Additional household expenses

If the trust pays for other shelter or household operating expenses, these payments are income in the form of ISM in the month of the trust beneficiary’s use. For computations of ISM from outside the household, see SI 00835.350. For countable shelter expenses, see SI 00835.465D.

If the trust pays for repairs, maintenance, improvements, or renovations to the home, such as renovations to the bathroom to make it handicapped accessible, installation of a wheelchair ramp or assistive devices, or replacement of a roof, the trust beneficiary does not receive income. Disbursements from the trust for improvements increase the value of the resource and, unlike household operating expenses, do not provide ISM. For computations of ISM from outside the household, see SI 01120.200E.1.c. in this section.

Temporary Absence From the HomeIf an individual is temporarily absent from the home he or she owns, the home continues to be excluded as long as,

• If the individual is in an institution, a spouse or dependent relative is living in the home.

• If not institutionalized, the individual intends to return to the home or

• If the house is co‐owned, sale of the home would cause undue hardship, due to loss of housing for the co‐owner.

• If the individual has left his or her home due to domestic abuse, the individual has not established a new principal place of residence or otherwise has taken action rendering the home no longer excludable.

10/8/2019

16

Temporary Absence From the HomeSI 01130.100 The Home Exclusion A. Definitions

1. The home

An individual’s home is property in which he or she has an ownership interest and that serves as his or her principal place of residence. It can include:

• the shelter in which he or she lives;

• the land on which the shelter is located; and

• related buildings on such land.

2. Principal place of residence

An individual's principal place of residence is the dwelling the individual considers his or her established or principal home and to which, if absent, he or she intends to return.

Temporary Absence From the HomeSI 01130.100 The Home Exclusion B. Policy for excluding the home

5. Exceptions to the general rule for property that no longer serves as the principal place of residence

Even if the individual leaves the home with no intention of returning, the property remains an excluded resource for as long as:

a. a spouse or dependent relative of the individual continues to live there while the individual is

institutionalized; or

b. its sale would cause undue hardship, due to loss of housing for a co‐owner of the property; or

c. an individual leaves his or her home due to domestic abuse and has not:

• Established a new principal place of residence (for the definition of principal place of residence, see SI 01130.100A.2.); or

• Taken action to render the home no longer excludable.

Temporary Absence From the HomeSI 01130.100 The Home Exclusion E. Procedure for “intent to return” development

1. Obtain statement

Obtain the individual’s statement either signed or recorded on the DROC screen as to:

• when and why he or she left the home;

• whether he or she intends to return; and

• if he or she does not intend to return, when that decision was made.

If the individual has a representative payee, obtain the “intent” statement from the payee either signed or recorded on the DROC screen.

This statement governs the “intent to return” determination unless the statement is self‐contradictory

10/8/2019

17

Trust Policy Change Age 65

On April 09, 2019, SSA issued TN 56 (04‐19) to POMS Section SI 01120.203. This transmittal revised, for special needs trust purposes, the longstanding policy that an individual attains age 65 on the day preceding their 65th birthday. The new policy states that for special needs trusts, an individual attains age 65 on the anniversary date of his or her birth.

Trust Policy Change SI 01120.203 Exceptions to Counting Trusts Established on or after January 1, 2000

B. Policy for special needs trusts established under section 1917(d)(4)(A) of the Act before December 13, 2016

2. Under age 65

To qualify for the special needs trust exception, the trust must be established for the benefit of a disabled individual under age 65. For special needs trusts, an individual attains age 65 on the anniversary date of his or her birth. The special needs trust exception does not apply to a trust established for the benefit of an individual age 65 or older. If the trust was established for the benefit of a disabled individual prior to the date the individual attained age 65, the exception continues to apply after the individual reaches age 65.

Trust Policy Transfers to Trusts of Payments Continuing Past Age 65

• Generally, additions to or augmentations of a trust after age 65 are not subject to the Special Needs Trust exception. Such additions may count as income and as resources under regular SSI trust rules.

• Additions do not include interest, dividends, or other earnings of any portion of the trust meeting the special needs trust exception.

• If the beneficiary’s right to receive payments from an annuity, support payments, or Survivor Benefit Plan (SBP) payments is irrevocably assigned to the trust, prior to age 65, SSA will treat the payments paid to a special needs trust the same as payments made before the individual attained age 65.

• This is the case because upon irrevocable assignment, the trust becomes the owner of the right to receive future payments, considered a resource. The value of future payments is considered in the valuation of the resource.

10/8/2019

18

Trust Policy SI 01120.203 Exceptions to Counting Trusts Established on or after January 1, 2000


3. Additions to trust after age 65 Additions to or augmentations of a trust after age 65 (except as outlined below) are not subject to this exception. Such additions may be income in the month added to the trust, depending on the source of the funds (see SI 01120.201J.) and may count as resources in the following months under regular SSI trust rules.

Additions or augmentations do not include interest, dividends, or other earnings of the trust or any portion of the trust meeting the special needs trust exception. If the beneficiary’s right to receive payments from an annuity, support payments, or Survivor Benefit Plan (SBP) payments (see SI 01120.201J.1.e.), is irrevocably assigned to the trust, and such assignment is made when the trust beneficiary was less than 65 years of age, treat the payments paid to a special needs trust the same as payments made before the individual attained age 65. Do not disqualify the trust from the special needs trust exception.

Trust Policy Change Revised policy ‐ Disabled Individual

When the SSI Trust POMS rewrite was issued in April 2018 (TN 53 (04‐18)), Section SI 01120.203B.4. titled “Disability” required:

To qualify for the special needs trust exception, the individual whose assets were used to establish the trust must be disabled for SSI purposes under section 1614(a)(3) of the Act at the time the trust was established.

In cases where you need to develop for disability (for example, a special needs trust beneficiary files for SSI aged benefits), obtain a disability determination from the disability determination services (DDS) following procedure in SI 01150.121D.2.Develop disability as of the date on which the trust was established (unless you need to develop for an earlier period for another purpose).

Trust Policy Change Revised policy ‐ Disabled Individual

In June 2019, SSA issued revised instructions under TN 58 (06‐19), that changed the applicable date for consideration of when the individual must be determined to be disabled from “the date the trust was established” to “the date on which the trust’s resource status could affect the individual’s SSI eligibility.” They also added two examples to explain this policy change.

10/8/2019

19

Trust Policy Change - Disability SI 01120.203 Exceptions to Counting Trusts Established on or after January 1, 2000


4. Disabled

To qualify for the special needs trust exception, the individual whose assets were used to establish the trust must be disabled for SSI purposes under section 1614(a)(3) of the Act as of the date on which the trust’s resource status could affect the individual’s SSI eligibility.

In cases where you need to develop for disability, obtain a disability determination from the disability determination services (DDS) following procedure in SI 01150.121D.2. Develop disability as of the date on which the trust’s resource status could affect SSI eligibility.

Trust Policy Change - DisabilitySI 01120.203 Exceptions to Counting Trusts Established on or after January 1, 2000 B. Policy for special needs trusts established under section 1917(d)(4)(A) of the Act before December 13, 2016 4. Disabled

If DDS determines that the trust beneficiary was:

• disabled as of the date the trust's resource status could have affected SSI eligibility, the special needs trust meets the disability requirements for exception; or

• not disabled as of the date the trust's resource status could have affected SSI eligibility, evaluate the trust under instructions in SI 01120.201. Since the trust provisions take precedence over the transfer provisions (see SI 01120.201D.5.), depending on the terms of the trust, the trust may count as a resource or the transfer penalty may apply (see SI 01150.121.).

Trust Policy Change - Disability Example Scenario 1: Mark, a special needs trust beneficiary whose trust was established in 2015, applies for SSI Aged benefits in 2019. Even though disability is not a requirement for SSI Aged benefits, we must develop disability as of Mark's SSI application date in 2019 for purposes of the Medicaid trust exception.

Example Scenario 2: Sally has a special needs trust that was established in 2010 when she was 10 years old. At the time, she was not eligible for SSI Child benefits because of her deeming parents' income and resources. However, she applies for SSI Adult benefits in 2018. We must develop disability as of Sally's SSI application date in 2018. 2010 is not relevant because the trust did not present as a resource issue until the SSI application date in 2018.

10/8/2019

20

Transfer of Resources – Deemors When Congress passed the Omnibus Budget Reconciliation Act of 1993 and subsequently the Foster Care Independence Act of 1999 (P.L. 106‐169), they intended that the self‐settled trust provisions and the transfer of resources provisions to work hand in hand. However, there are provisions that can be used to avoid the provisions of either statute.

For example, POMS SI 01150.110.E. permits a deemor to transfer away their assets without penalty. In the case of personal injury/medical malpractice cases that often settle for large amounts for the injured child, but the parents have a derivative claim for 10‐20% of the child’s settlement (e.g., $200,000 of the child’s $1 million) so they are in danger by deeming to the child’s SSI and SSI‐related Medicaid. The exception allows them to gift it away, for example, to a third party (non‐Medicaid payback) trust that ends on the child’s 18th birthday, with a reversion back to the parents.

Transfer of Resources – Deemors SI 01150.110 Period of Ineligibility for Transfers on or After 12/14/99

E. Policy—types of transfers affected This provision applies to transfers made:

• by an individual;

• by the individual's eligible or ineligible spouse (SI 00501.150);

• by persons who are co‐owners of the resource being transferred;

• on behalf of the individual by a person acting for and legally authorized to execute a contract (e.g., a legal representative, a legal guardian, a parent for a minor child, etc.);

• by an individual transferring assets which he constructively received (e.g., he/she refused an inheritance).

• by an individual transferring assets in the month of receipt (e.g. the transfer of income that would have been considered a resource in the following month, if retained).

This provision does not apply to transfers made by a deemor unless the deemor is a co‐owner of the resource or is the ineligible spouse. For example, the provision does not apply to a resource transfer made by a parent who is a deemor (unless the eligible child and parent are co‐owners of the resource).

Transfer of Resources – Disclaiming an Inheritance• In some cases, it may be better for your client to avoid receiving certain income or

resource than to have to deal with the formality, expense and complexities of a special needs trust. If, for example, a disabled child’s grandparents did not establish a third party trust for their grandchild in their will, but left her with a cash inheritance, depending on the law in your State, she may be able to disclaim the inheritance without impact on her eligibility for SSI benefits.

• An ABLE account may also be an option, but may not work either. Always better to have another arrow in your quiver.

10/8/2019

21

Transfer of Resources – Disclaiming an Inheritance• The POMS section on inheritances as income, SI 00830.550, states that SSA will

follow State law in determining when an inheritance is received.

• In POMS PS 01805.035 New York, the Regional Chief Counsel found that “[i]t is our opinion that the inheritance and renunciation would not count as a resource or resource transfer for the purposes of SSI. The claimant appears to have properly renounced her inheritance; under New York law, this had the same effect as if the claimant had predeceased her father, and so the inheritance never legally passed to the claimant.”

• There are other opinions following this finding. Check your State in the PS section.

Transfer of Resources – Disclaiming an InheritanceSI 00830.550 Inheritances

B. Procedure

2. Establishing Date of Receipt

To establish when the inheritance is received, check for regional instructions, which may explain the effect of individual State laws.

Transfer of Resources – Disclaiming an InheritancePS 01805.035 New York

A. PS 17‐027 Would inheritance count as a resource in New York for the purposes of Supplemental Security Income if the claimant renounced her inheritance rights?

QUESTION PRESENTED

You asked whether claimant K~’s (claimant’s) inheritance from her father’s estate would count as a resource for the purposes of Supplemental Security Income (SSI) if the claimant renounced her inheritance rights, or whether the renunciation would count as a transfer of resources.

OPINION

It is our opinion that the inheritance and renunciation would not count as a resource or resource transfer for the purposes of SSI. The claimant appears to have properly renounced her inheritance; under New York law, this had the same effect as if the claimant had predeceased her father, and so the inheritance never legally passed to the claimant.

10/8/2019

22

Transfers - Spend Down and Alternatives to TrustsPrepayment of ISM and Personal Services Contracts

In some cases an individual may receive some type of income that, if retained, would cause ineligibility for SSI due to excess resources over the $2,000 limit. On one hand the amount may be too high to deposit into an ABLE account (in excess of the $15,000 annual contribution limit), but not high enough to go through the expense of establishing a special needs trust or just not cost effective to maintain and administer a trust. In this case, there are alternatives to a trust that, in conjunction with an ABLE account, or apart from it, can be used to maintain SSI eligibility.

Transfers - Spend Down and Alternatives to Trusts• Hidden within the Transfer of Resources POMS at SI 01150.005 is a provision for

valuing noncash compensation received for a resource transfer.

• Under this provision, an individual can prepay for in‐kind support and maintenance at its full current market value for the length of time prepaid. For example, an individual who received $60,000 could prepay their rent or mortgage ($1,000 per month) for 5 years (60 months). If the actual cost increased over time, the individual would still get credit for full compensation.

• Alternatively, an individual could enter into a personal services contract that could be prepaid. For example, an individual could enter into an attendant services contract with a provider organization at a cost of $100 a day for two years ($73,000).

Transfers - Spend Down and Alternatives to TrustsSI 01150.005 Determining Fair Market Value C. Policy for determining the compensation amount 3. Value of noncash compensation a. General rule for noncash compensation

We value noncash compensation at its CMV at the time of transfer or contract for sale, whichever is earlier. The value of compensation is the gross value paid or to be paid. Expenses attributed to the sale do not reduce the value of the compensation.

b. In‐kind support and maintenance (ISM)

We value compensation received in the form of ISM at its full CMV (monthly or annually depending upon the agreement) multiplied by the length of time for which it is to be provided under the agreement. We do not cap the value of the compensation at the value of the one‐third reduction (VTR) or presumed maximum value (PMV).

c. Value of services provided to the transferor

We determine the value of services provided to the transferor based on the CMV of the services (monthly or annually) and their frequency and duration under the agreement.

10/8/2019

23

Transfers of Resources – ExceptionsIn the POMS SI 01150 section, there are five sections that provide for specific exceptions to the transfer of resources penalty. Each exception is different and has specific requirements that must be met. You should become familiar with all of them.

SI 01150.121 Exceptions ‐ Transfers to a Trust

SI 01150.122 Exceptions — Transfer of a Home

SI 01150.123 Exceptions — Non‐Home Transfers to Certain Family Members

SI 01150.124 Exceptions — Transferred Resource Returned

SI 01150.125 Exceptions — Transfers for Purposes Other Than to Obtain SSI

Transfers of Resources – ExceptionsSI 01150.121 Exceptions ‐ Transfers to a Trust

The period of ineligibility for transferring a resource at less than fair market value does not apply to an individual who transfers resources to a trust in the following situations:

• The Trust is a Countable Resource

• Transfers to a Trust for Disabled or Blind Child

• Transfers to a Trust for a Disabled or Blind Individual Under Age 65

Transfers of Resources – ExceptionsSI 01150.122 Exceptions — Transfer of a Home The period of ineligibility for transferring a resource at less than fair market value will not apply if the individual or individual's spouse transfers title to a home to his/her: • spouse (including a separated spouse); or• child under age 21 regardless of student or marital status; or• child of any age or any marital status who is blind or disabled• sibling:

• who has ownership interest (including life estate and equitable ownership) in the home; and

• who was residing in the transferor's home for at least 1 year immediately before the date the transferor becomes institutionalized.

• son or daughter who: • was residing in the transferor's home for at least 2 years immediately before the date

the individual becomes institutionalized; and • who provided care to the individual which permitted the individual to reside at home

instead of in an institution.

10/8/2019

24

Transfers of Resources – ExceptionsSI 01150.123 Exceptions — Non‐Home Transfers to Certain Family Members

The period of ineligibility for transferring a non‐home resource at less than fair market value does not apply if the resource was transferred to:

• the transferor's spouse (including a separated spouse); or

• another person for the sole benefit of the transferor's spouse; or

• the transferor's child of any age who is blind or disabled.

Transfers of Resources – ExceptionsSI 01150.125 Exceptions — Transfers for Purposes Other Than to Obtain SSI

If an individual gives away resources or sells resources for less than fair market value (FMV), there is a rebuttable presumption that the resources were transferred for the purpose of establishing or maintaining eligibility for SSI.

• The presumption is rebutted only if the individual provides convincing evidence that the resources were transferred exclusively for a purpose other than to become or remain eligible for SSI.

• If the individual had some other purpose for transferring the resource, but an expectation of establishing or maintaining SSI eligibility was also a factor, the period of ineligibility would apply.

Reopening DeterminationsOne of the existing policies highlighted in the SSI Trust POMS rewrite of April 2018 was the policy on reopening. This longstanding policy is not well known. Reopening allows an individual to question the correctness of a previous determination by SSA. The request to reopen must be in writing and received within the following time frame:

• Within 2 years of the initial determination if there is good cause found.

• Within 1 year of the initial determination if there is not good cause.

For policy on good cause, please see SI 04070.010F.5.

10/8/2019

25

Reopening DeterminationsSI 01120.201 Trusts Established with the Assets of an Individual on or after 01/01/00

K. Posteligibility changes in trust resource status

3. Reopening trust determinations

The field office (FO) may receive a request by any party to the determination, including SSA, questioning the correctness of the trust determination. The request to reopen a determination must be in writing and within the applicable time limit. See SI 04070.015.

Reopening DeterminationsSI 04070.015 Reopening SSI Determinations

A. Policy – When the Question of Reopening Will Arise

Receipt of a request by any party to the determination or representative of a party questioning the correctness of the determination or the most recent appeal step must be:

• in writing; and

• within the applicable time limit.

Although SSA is not legally required to reopen a determination or decision when the claimant requests it (even if he/she makes the request within 1 year of the notice of initial determination), it is SSA's policy to consider the request in all cases and to decide if reopening is appropriate. Consider all requests to reopen. In such situations, evaluate all the evidence in the file together with any evidence the individual may submit. The consideration of a request to reopen merely initiates a threshold review of the claims file, but does not constitute a reopening (see SI 04070.005A.8. for the definition of “threshold review”). If reopening and revision are found to be appropriate, then proceed to reopen.

Conditional BenefitsConditional benefits is a little know and little used policy that permits individuals who have excess nonliquid resources that would normally prevent receiving SSI payments to receive payments while trying to sell the excess resource(s). Conditional benefits can apply to applicants trying to establish eligibility, recipients trying to maintain eligibility and also to deemors whose resources impact another person’s eligibility.

• Conditional benefits are refundable meaning the have to be repaid upon disposition of the excess resource. Waiver provisions do not apply to conditional benefits overpayments.

• They are also time limited. They can be paid for up to 3 months (with one 3‐month extension for good cause) for personal property. They can be paid for 9‐months for real property.

• After a 9‐month conditional benefits period, the excess real property will continue to be excluded from resources and regular (nonrefundable) SSI benefits can be paid as long as reasonable efforts to sell continue and they individual remains otherwise eligible.

10/8/2019

26

Conditional BenefitsSI 01150.200 Conditional Benefits

A. Background for conditional benefits

2. The conditional benefits provisions The Commissioner of Social Security has statutory authority to prescribe the period(s) within which, and the manner in which, to dispose of various kinds of property. Regulations describe the conditions under which we can make SSI payments while an individual attempts to dispose of property. Such payments are overpayments to be repaid from the proceeds of the sale. Conditional benefits provisions may apply to:

• applicants (new claims),

• recipients (postentitlement cases), and

• deemors (in both new and postentitlement situations).

However, when the excess resources are in the form of real property which cannot be sold for certain specified reasons (undue hardship or unsuccessful reasonable efforts to sell), the owner can receive regular (not conditional) benefits.

Conditional BenefitsB. Policy on receiving conditional benefits

1. Conditional benefits rule

An individual (or couple) who meets all nonresource eligibility requirements, but fails to meet the resources requirement due solely to excess nonliquid resources, can receive SSI benefits for a limited period of time.

Such payments based on a “conditional” exclusion of the excess nonliquid resources, are available if the individual or couple (or deemor) meets both of the following conditions:

a. Countable liquid resources do not exceed the statutory limits. The resources not included in the disposition cannot exceed $2,000 for an individual or $3,000 for a couple; and

NOTE: For purposes of conditional benefit payments there is no limit on the value of the total countable nonliquid resources.

b. The individual or couple agrees in writing to:

• sell excess nonliquid resources at their current market value (CMV) within a specified period as seen in SI 01150.201A.1.; and

• use the proceeds of sale to refund overpayments of conditional benefits. For more details on overpayments see SI 01150.202.

Conditional BenefitsSI 01130.140 Real Property Following Reasonable but Unsuccessful Efforts to Sell It Throughout a 9‐Month Period of Conditional Benefits

A. Policy Principles 1. Exclusion

Real property that an individual has made reasonable but unsuccessful efforts to sell throughout a 9‐month period of conditional benefits will continue to be excluded for as long as:

• the individual continues to make reasonable efforts to sell it; and

• including the property as a countable resource would result in a determination of excess resources.

2. Distinction Between This And The Conditional Benefits Exclusion

If the property is later sold, benefits paid during the 9‐month conditional benefits period are subject to recovery as overpayments. Benefits paid as a result of this exclusion are not subject to recovery as overpayments of conditional benefits.

5 brown magical mystery tour - brown - 10.17...10/8/2019 1 2019 national conference on special needs...

Documents