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...Read more
Travel is sometimes necessary when a family has a child with special needs. Family members may need to visit the person with special needs, or a medical emergency may require travel to care for the loved one, or the family may simply want to take the child with special needs on vacation.
For years, the Social Security Administration (SSA) has placed strict limitations on when special needs trusts can distribute payments to family members for travel expenses. But with recent changes, it is now significantly easier for family members to obtain reimbursement from special needs trusts for certain travel expenses.
Federal law distinguishes between trusts funded by the beneficiary’s own money – “first-party” special needs trusts -- and trusts funded by others – “third-party” special needs trusts. Typically, third-party trusts can reimburse family members for travel expenses. First-party trusts, on the other hand, have traditionally been subjected to the “sole benefit rule,” which is meant to ensure that trust distributions are used solely for the benefit of the trust beneficiary. This had resulted in strict limitations concerning, among other things, reimbursement for travel expenses. Starting in May 2013, the SSA’s official policy banned family members from obtaining reimbursement for travel expenses from first-party trusts, with two exceptions.
Under the first exception, the trust could reimburse family members when travel expenses were necessary for the “trust beneficiary to obtain medical treatment.” The second exception applied where the trust beneficiary lived in an “institution, nursing home, or other long-term care facility or supported living arrangement,” and travel by family members to visit the beneficiary was necessary “for the purposes of ensuring the safety and/or medical well-being of the individual.”
The SSA recently liberalized these rules in new changes to its Program Operations Manual System (POMS), the guidebook that agency employees follow when determining a person’s eligibility for Supplemental Security Income.
Throughout the new POMS, which took effect April 30, 2018, the SSA abandons the “sole benefit rule” for first-party trusts in favor of a broader “primary benefit” standard. The new guidelines specify that when determining whether expenses, including those for travel, can be reimbursed from special needs trusts, the POMS “should not read so strictly as prevent any collateral benefit to anyone else.”
In particular, the SSA now says that family members may be reimbursed for travel expenses if their presence is necessary for the “safety or medical well-being of the individual.” As an example, the SSA says family members may be reimbursed for travel expenses where they are needed to supervise and thus ensure the safety of a child with disabilities on a vacation, although the expenses for other individuals accompanying them on the trip would not be reimbursed. In other words, parents’ travel expenses could be reimbursed, but not those for the siblings of the child with special needs.
The SSA also expanded the exception for people with special needs in supportive living arrangements. Instead of only permitting trusts to cover family member travel expenses to ensure the “safety and well-being” of the beneficiary, the POMS now allow for such reimbursement when necessary simply to “oversee the trust beneficiary’s living arrangements.”
Where the family member is a fiduciary, meaning they are in charge of overseeing the financial health of the special needs trust, travel expenses are now reimbursable when necessary for the trustee to exercise “his or her fiduciary duties.”
This is a complex and still evolving area of special needs trust law. To find out whether a trust can reimburse family members for specific travel expenses, contact your special needs planner.
To read the applicable POMS provisions, click here.