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  • A Bi-Monthly Electronic Publication for Section Members
  • April 2009

Group and Committee News

Social Security Administration Issues
Revised POMS on Special Needs Trusts

by: Kristen M. Lewis
Smith, Gambrell & Russell, LLP

In January 2009, the SSA issued some long-awaited updates to its staff policy manual (known as the "Program Operations Manual System" or "POMS") pertaining to the treatment of Special Needs Trusts ("SNTs") for purposes of means-tested government benefits such as Supplemental Security Income and Medicaid. Significant revisions to three POMS sections appear in SI 01120.200, SI 01120.201 and SI 01120.203 (highlighted in yellow at these links).

Of particular note to practitioners who deal regularly with SNTs are the provisions set forth in POMS SI 01120.203.B.2, which seem to formalize as a new national policy a controversial position previously espoused by the Boston Regional Office in May 2008. This revised POMS section states that while assets held in a "pooled" SNT account under 42 U.S.C. §§ 1917(d)(4)(C) and 1396p(d)(4)(C) will not be counted as a resource of an account beneficiary who is age 65 or older, the transfer of assets to the (d)(4)(C) SNT "may result in a transfer penalty ( see SI 01150.121)." The newly revised POMS section retains from the prior version an acknowledgement that the federal statute authorizing (d)(4)(C) SNTs contains "no age restriction." Nevertheless, numerous state Medicaid agencies have already amended their State Medicaid Manuals to adopt the position that transfer penalties will apply if a (d)(4)(C) SNT account is funded with the assets of a beneficiary who is age 65 or older. This is a hotly debated issue. The Long Term Care, Medicaid and Special Needs Trusts Committee of the Elder Law, Disability Planning and Bioethics Group welcomes the input of Committee and Section members as it considers preparing a position statement on this new development.

On a positive note, the revised POMS expressly endorse the concept of a "seed" SNT established by the parent or grandparent of a legally competent disabled adult, and funded with nominal assets provided by the parent or grandparent. Approval of this seed SNT concept is now included in POMS SI 01120.203.B.1.f and 01120.203.B.1.g. Prior to the issuance of the revised POMS, staff at the National SSA office in Baltimore had unofficially recommended the use of a seed SNT by practitioners preparing a SNT for a legally competent, yet disabled, adult under 42 U.S.C. §§ 1917(d)(4)(A) and 1396p(d)(4)(A). Once the seed SNT is established, the legally competent adult may then transfer his own assets to the SNT, as may any person with legal authority over the adult's assets, e.g. an agent acting pursuant to a power of attorney. The revised POMS sections noted above also indicate that a seed SNT may be unfunded "if State law allows." In light of the vagaries of State law, practitioners should be wary of utilizing an "empty" or "dry" seed SNT, since compliance is easily established with a nominal funding amount, e.g. $10.

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