Funding a first party Special Needs Trust with alimony, an inheritance, or a personal injury settlement can preserve those assets for benefit of a person who is receiving or applying for means-tested government benefits such as SSI, DDD or Medicaid/MLTSS. There is quite a process to establish the trust and then fund it with these assets. But that’s just the beginning — not the end.
The person who receives these benefits has an affirmative obligation to notify the Agency when there is a change in assets or income. This duty still applies even though the assets that are held in a qualified Special Needs Trust are not counted as the person’s assets or income. This duty still applies even though the transfer of the person’s assets into the trust may be an exempt transfer. And this duty still applies even though a Court may have reviewed the trust and entered an order allowing the assets to be transferred to the trust.
If the person receiving the benefits has a Representative payee appointed for him/her by the Social Security Administration, the duty to report rests with the Rep. payee. If the Trust document meets all of the relevant criteria, benefits should continue or be approved, as the case may be. However if it turns out that the transaction or trust are defective, there may be wrongfully paid benefits and the representative payee and disabled person could be facing a demand for repayment years later.
What should be done? A copy of the fully executed trust and its EIN# paperwork should be promptly submitted to the agency for its review, along with the relevant court order and written verifications of the transfer and funding of the Trust, such as deposit slips and bank/brokerage statements for the trust. The Trustee should then maintain the account records on an ongoing basis as well as the receipts and copies of cancelled checks so that these verifications can be produced to the agency upon demand. If no response is received from the agency within a reasonable time of when the trust was submitted, the agency should be contacted.
The burden of proving and maintaining eligibility for public benefits rests with the recipient and the representative payee. Attending to these crucial steps can prevent problems down the road.
Call for advice on preparation, funding and administration of Special needs trusts … 732-382-6070.