Special needs trusts are strictly regulated by the Social Security administration and the state of New Jersey. Changes implemented several years ago made it much more difficult for trustees to make distributions for the special needs beneficiary if they incidentally benefitted other people. Elder law and disability advocates have pushed for common sense reforms and clarifications. The Social Security Administration recently updated its Program Operations Manual System (POMS) and made a number of changes that make life easier for special needs beneficiaries and their families.
The most significant reform is in the interpretation of the sole benefit rule. This rule states that distributions from first party special needs trusts (otherwise known as d4a or OBRA trusts) can only be made for the sole benefit of the beneficiary. While this makes sense in theory, it can be difficult to achieve in practice. For instance, is a computer purchased for the beneficiary for his/her sole benefit if another family member might occasionally use it? The new rules say yes. The instructions to social security staff indicate that the rule is met as long as the primary benefit is for the beneficiary, collateral benefit to another party is acceptable. The new POMS also addresses some common issues in titling assets such as when a car is purchased for transporting a child or someone without a driver’s license.
Payment of family caregivers is another major issue that arises. The POMS revisions clarify that family members may be paid as any other caregiver can without the need for specialized training or certifications. The POMS also indicate that payment can be made for companion services. It also states that tax verification should not be made, that reasonable should not automatically be questioned and that incidental expenses such as ticket for the caregiver is acceptable if the beneficiary needs a companion to attend the activity with them.
A big sticking point has been third party travel rules. These rules were substantially tightened through the POMS previously. These restrictions have been relaxed. The new POMS states that payment of third party travel expenses such as hotel, meals and airfare are acceptable if the beneficiary cannot travel alone due to age or disability. The POMS indicate that no medical documentation is necessary and in certain cases, reimbursement may extend to more than one individual if they are providing services to the beneficiary. Lastly, the POMS now clarify that trustee or caregiver travel expenses may be paid from a special needs trust if necessary to ensure the wellbeing, health and safety of the beneficiary. These rules apply when the individual lives in a supported living environment but not in an institution. A provision regarding questioning reasonableness of trustee compensation has also been deleted.
These changes are real game changers for families especially those of limited means who found it difficult to comply with the prior travel and sole benefit limitations which were so narrowly drawn. The new POMS also clarify the procedure for reforming trusts, specifically providing a 90 day period for amending a trust that does not comply with the current rules due to changes in SS policy. They also implement ABLE accounts and their interaction with trusts, as well as the Special Needs Fairness Act which allows for competent individuals with disabilities to create their own trusts.