New Rule May Make It Harder for Trusts to Reimburse Family Members for Travel Expenses

One type of expense that a special needs trust has been able to cover is reimbursing family members for their costs when they travel to visit the trust beneficiary (the person with special needs). Due to a recent rule change, this may no longer be possible in the case of certain trusts.

The Social Security Administration, the agency that administers the Supplemental Security Income (SSI) program, recently updated several sections of its Program Operations Manual, the guidebook that agency employees follow when determining whether someone is eligible for SSI. Although most of the changes are cosmetic, one amendment appears to have prohibited one particular type of special needs trust from reimbursing family members for expenses they incur when visiting the trust beneficiary.

The new rule applies only to first-party special needs trusts, which are designed to hold an SSI beneficiary's own money. If the trust meets certain standards, the SSA will disregard the assets held in the trust when it evaluates a person with special needs' SSI application. One of the main requirements for trusts to qualify for this preferential treatment is that the funds in the trust must be used for the sole benefit of the beneficiary with special needs. In its new rule, the SSA has apparently taken the position that a trust that allows reimbursement of family members for travel violates the "sole benefit" rule because the funds are not being spent on or on behalf of the trust beneficiary.

What does this mean for you or your loved one? The first thing to keep in mind is that the rule applies only to first-party trusts; if you have a third-party special needs trust, which is designed to hold your assets for the benefit of a person with special needs, then you don't have to worry about the new rule. If your loved one is the beneficiary of a first-party trust, then you should contact your special needs planner to schedule a review of the trust. Your planner will be able to tell you if the trust may run afoul of the new rule and what to do about it.

Article Last Modified: 08/31/2012