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16th Annual PFAC Annual Educational Conference

May 4-7, 2011Hyatt, Monterey

Ten Common Mistakes Trustees Make in the Administration

of Special Needs Trusts and How to Avoid Them

1. Not Knowing What Public Benefits the Beneficiary is Receiving

• SSA• SSI• SSDI• Medi-Cal– Institutional– Community based

• Medicare

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2. Not Having an Attorney Review the Trust Before Becoming Trustee

• 3rd Party SNT• 1st Party SNT• Distributions• Accounting• Getting Paid• Investing• Recovery

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Trustee Review

• Beneficiary • Trust Protectors/Trust Advisory Committee, Etc. • SNT 1st or 3rd• Discretion• Distribution • Bond• Accounting• Resignation• Compensation• Liability• Investment Powers• Termination Provisions• Special Provisions• Notes

3. Commingling

• Trust assets are exempt- personal assets are not exempt

• 1st Party - Public benefits• 3rd-Party -Adding Funds to the Trust• Reimbursements

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4. Not Understanding In-Kind Income or Support

• “in-kind income” exists when you give the beneficiary something other than money

• If the beneficiary receives food or shelter as a result of payments by the Trustee to other persons, then the beneficiary will have income in the form of “in-kind support and maintenance” (ISM). ISM causes a reduction in the beneficiary's SSI payments.

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ISM

• ISM results in dollar for dollar loss of benefits from SSI up to 1/3 of the Federal portion

• Presumed Maximum Value - PSM ($224.67)• Does the trustee have discretion to lose

benefits?• Medi-Cal dilemma

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ISM

• ISM includes: Shelter -rent, mortgage, real property taxes, heating fuel, gas, electricity, water, sewage, garbage and Food-groceries

• Groceries do not include: paper products, soap, toiletries, and pet food.

• Occasional meal out will probably be ok, but pattern becomes FOOD

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5. Lack of Coordination with Representative Payee

• If the beneficiary is receiving SSI and you are not the Rep Payee for SSI, there is a need to coordinate who is paying what to prevent unintended disqualifications and maximize benefit received by beneficiary

• Reporting requirements to SSA-see below• Need to know of changes in theMedi-Cal status from Authorized Rep

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6. Providing Benefits to Someone Other than the “sole beneficiary”

• “An” Attendant (not four)• Gifts – You have become the Grinch• Minors – parental duty of support

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7. Knowing when to Make a Mistake on Purpose

• Does the trust allow you to make distributions that will disqualify beneficiary from benefits

• Rent/Mortgage• Maximum in-kind support loss• Presumed Maximum Value - PSM ($224.67)

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8. Not Knowing the Travel/Vacation Rules

• Beneficiaries can go on vacation• When temporarily absent from a permanent

living arrangement – ISM applies to permanent living arrangement

• Can provide for food and lodging, but no spending cash over $20

• General Rule: Cannot be out of country over 30 days

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9. Failure to Report

• SSI requires certain reporting for all recipients.• What has to be reported: change of address,

persons moving in or out of household, death of household member, changes in income or resources for recipients or individuals involved in deeming, changes in martial status, leaving US for more than 30 days, changes in school, death or recipient, etc…

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Who has duty to report?

• SSI Recipient• Representative Payee• There is an argument that the trustee has an

obligation to report ISM and to tell the beneficiary that they must do so because the distribution has an effect on the benefit amount.

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How, What, and When

• A report is due within 10 calendar days after the month in which the change occurred.

• Reports may be made in writing, by phone, or in person.

• The report should include the reporter’s name, the name and social security number of the recipient, facts about the change and when the change happened.

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10. DON’T GIVE CASH

• Do not give cash to the beneficiary of 1st Party SNT!!

• Direct Payments• $20 rule – anything more must be reported to

SSI• Do not reimburse expenses to beneficiary• Gift Cards – to use or not to use• Credit Cards – EEEK!

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Some Permissible Distributions(if done correctly)

• Acupuncture, appliances, water service, bus pass, camera, clothing, health club, computer, classes, dental work, down payment or security deposit on apartment, furniture, gasoline, haircut, Christmas tree, maid services, magazine subscriptions, massage, pets and pet supplies, gardening, storage units, cell phone, therapy not covered by Medi-Cal, telephone, cable, etc…

• P.S. Do not give this list to beneficiaries

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Resources• CEB Special Needs Trusts• Lexis Nexis Fundamentals of Special Needs

Trusts• Aspen Publications: Special needs Trusts

Handbook• Nolo Press, Special Needs Trusts• SSI Webpage • http://www.ssa.gov/ssi/index.htm• SSI Resources• http://www.ssa.gov/ssi/ssi-resources.htm 10