Lillesand’s SSI Trust Compliance
Seven Step Chart for Special Needs Trust Disbursement Decisions
STEP 1. IN MAKING THE DISTRIBUTION, WILL THE TRUSTEE BE IN COMPLIANCE WITH STATE TRUST CODE
RULES? – Is the distribution consistent with trustee’s duties to avoid conflict of interests, avoid self-dealing, not act
arbitrarily, use best judgment, act in good faith, follow the trust terms, use reasonable skill and care, act in the
beneficiary’s best interests, and use trustee’s special skills, if any - - or any other state trust code requirements.
If YES, GO TO STEP 2
If NO, STOP (DENY)
STEP 2. IS THE PROPOSED DISTRIBUTION “FOR THE SOLE BENEFIT” OF THE DISABLED INDIVIDUAL? – See
the Sole Benefit Rule in POMS SI 01120.201.F as modified by traditional trust law (a self-settled or first party grantor trust
cannot legally avoid creditors’ claims) and criminal law (e.g., felony child neglect to fail to provide food, clothing shelter
and medical care for minor children; failure to pay IRS and state taxes, etc.): Does the disabled beneficiary reasonably
receive some benefit, even if not exclusive benefit, from the distribution. Examples: trustee paying the mother’s
admission tickets to Disney World to accompany of a disabled minor; discharging the child support or alimony obligation
of a disabled adult beneficiary, or paying obligations to avoid criminal penalties for nonpayment of income taxes, traffic
tickets, or neglect of children and spousal maintenance.
If YES, GO TO STEP 3.
If NO, STOP (DENY)
STEP 3. IS IT A SERVICE OR CONSUMABLE ITEM? (e.g., tank of gas for car, travel, medical service, caretaker,
baseball tickets, etc.)
If YES, GO TO STEP 6
If NO, GO TO STEP 4
STEP 4. FOR RESOURCES – WOULD THE PURCHASED RESOURCE BE WITHIN THE SPECIAL SSI RULES THAT
LIMIT THE AMOUNT, TYPE OR TITLING OF THE RESOURCE TO BE PURCHASED? IS THE PURCHASE ONE OF
THE FOLLOWING?
- the only principal residence for the beneficiary – POMS SI 01130.100; SI 01120.200.F;
- one vehicle in accord with POMS SI 01130.200
- household effects of the disabled individual – POMS SI 01130.430
- personal effects of the disabled individual – POMS SI 1130.430
- other limited or excluded resources listed in POMS SI 01130, including burial plots, prepaid burial contracts,
limited life insurance, etc.
If YES, GO TO STEP 6.
If NO, GO TO STEP 5.
STEP 5. IF THE DISABLED BENEFICIARY CANNOT HOLD TITLE TO RESOURCE (ASSET), CAN THE OVER-LIMIT
RESOURCE BE HELD BY THE TRUSTEE, IN THE TRUST, AS A TRUST ASSET? For example, buying a camper
(second vehicle), time share or vacation condo, held in trust’s name
- Should resource/asset be held in name of trust [auto liability laws exposing trust assets if there is an accident
with the second car], or create a second trust to hold the asset, e.g., a “Transportation Trust”, for example; and
- Does the Institutional Trustee have a rule against holding, in trust, real property, cars, etc
If YES, GO TO STEP 6.
If NO, STOP (Deny)
STEP 6. DOES THE METHOD OF PURCHASING THE GOODS OR SERVICES, VIOLATE THE SSI INCOME RULES?
– The trustee must consider POMS SI 01120.201.I. - the three rules for distributions from a trust and the impact on
benefits: 1) cash payments to a beneficiary are unearned income; 2) payments of items to third parties directly f/b/o
beneficiary that are NOT “food or shelter” have no effect on amount of SSI benefit check; and 3) direct third party
payments for “food or shelter” items reducing the SSI check, but the reduction is capped by the PMV rule (permissible
unless the SSI check is already less than the PMV amount);
Note: also be aware of the special POMS on use of Gift Cards and Gift Certificates [POMS SI 00830.522] and purchase of
Domestic and Foreign Travel Tickets [POMS SI 01120.150].
If YES, STOP (Look for a different method)
If NO, PROCEED WITH DISBURSEMENT FROM
TRUST
STEP 7. ARE THERE REASONS TO GO AHEAD ANYWAY, AND PURPOSELY GIVE UP SSI AND SSI-RELATED
MEDICAID BENEFITS FOR A PERIOD OF TIME? [e.g., family going to live in Europe for three months]
If YES, MAKE THE DISBURSEMENT.
If NO, STOP (DENY)
© David J. Lillesand 2008