Effective Dates: 08/26/2025 - Present Previous | Next

TN 104 (08-25)

SI 01120.203 Exceptions to Counting Trusts Established on or after January 1, 2000

A. Introduction to Medicaid trust exceptions

We refer to the exceptions discussed in this section as Medicaid trust exceptions because section 1917(d)(4)(A) and (C) of the Social Security Act (Act) (42 U.S.C. §1396p(d)(4)(A) and (C)) set forth exceptions to the general rule of counting trusts as income and resources for the purposes of Medicaid eligibility and can be found in the Medicaid title of the Act. While these exceptions are also Supplemental Security Income (SSI) exceptions from resource counting (under section 1613(e)(5) of the Act), we refer to them as Medicaid trust exceptions to distinguish them from other exceptions to counting trusts provided in the SSI program (such as undue hardship) and because the term has become a term of common usage.

The type of trust under review dictates the development and evaluation of the Medicaid trust exceptions.

There are two types of Medicaid trusts to consider:

  1. 1. 

    special needs trusts; and

  2. 2. 

    pooled trusts.

CAUTION: 

A trust that meets an exception to counting for SSI purposes under the statutory trust provisions of section 1613(e) of the Act must still be evaluated under the instructions in SI 01120.200 to determine if it is a countable resource. If the trust meets the definition of a resource (see SI 01110.100B.1.), it will be subject to regular resource-counting rules.

B. Policy for special needs trusts established under section 1917(d)(4)(A) of the Act before December 13, 2016

1. General rules for special needs trusts established prior to December 13, 2016

The resource-counting provisions of section 1613(e) do not apply to a trust that:

  • •

    contains the assets of an individual who is under age 65 and is disabled;

  • •

    is established for the benefit of such individual through the actions of a parent, grandparent, legal guardian, or court; and

  • •

    provides that the State(s) will receive all amounts remaining in the trust upon the death of the individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State(s) Medicaid plan(s).

Note: 

Although this exception is commonly referred to as the special needs trust exception, the exception applies to any trust that meets the above requirements, even if it is not titled a special needs trust.

CAUTION: 

A trust that meets an exception to counting for SSI purposes under the statutory trust provisions of section 1613(e) must still be evaluated under the instructions in SI 01120.200 to determine if it is a countable resource. If the trust meets the definition of a resource (see SI 01110.100B.1.), it will be subject to regular resource-counting rules.

2. Under age 65

To qualify for the special needs trust exception, the trust must be established for the benefit of a disabled individual under age 65. For special needs trusts, an individual attains age 65 on the anniversary date of their birth. The special needs trust exception does not apply to a trust established for the benefit of an individual age 65 or older. If the trust was established for the benefit of a disabled individual prior to the date the individual attained age 65, the exception continues to apply after the individual reaches age 65.

3. Additions to trust after age 65

Additions to or augmentations of a trust after age 65 (except as outlined below) do not qualify for this exception. Such additions may be income in the month added to the trust, depending on the source of the funds (see SI 01120.201J) and may count as resources in the following months under regular SSI trust rules.

Additions or augmentations do not include interest, dividends, or other earnings of the trust or any portion of the trust meeting the special needs trust exception. If the beneficiary’s right to receive payments from an annuity, support payments, or Survivor Benefit Plan (SBP) payments (see SI 01120.201J.1.e.) is irrevocably assigned to the trust, and such assignment is made when the trust beneficiary was less than 65 years of age, treat the payments paid to a special needs trust the same as payments made before the individual attained age 65. Do not disqualify the trust from the special needs trust exception.

4. Disabled

To qualify for the special needs trust exception, the individual whose assets were used to establish the trust must be disabled for SSI purposes under section 1614(a)(3) of the Act as of the date on which the trust’s resource status could affect the individual’s SSI eligibility.

In cases where you need to develop for disability, obtain a disability determination from the disability determination services (DDS). Develop disability as of the date on which the trust’s resource status could affect SSI eligibility. Given the first-of-the-month (FOM) rule for making resource determinations (SI 01110.600), develop for a potential onset date (POD) as of the first of the month in which the individual could be eligible for SSI, following this procedure:

a. Sending the case to the DDS

  • •

    Use the SSA-3367 to notify DDS of the SSI POD. See DI 25501.220 and DI 11005.045.

    • –

      Show an SSI POD equal to the first of the month of the SSI application date (protective filing date or application receipt date if no protective filing exists).

    • –

      Select POD reason as "Other". Explanation: “SSI Trust resource involved. POD represents first of the month in which the individual could be eligible for SSI. See SI 01120.203B.4.”

  • •

    If a current Title II medical allowance exists, follow instructions in DI 11011.001. The DDS has jurisdiction for all potential collateral estoppel claims.

  • •

    On the Trust page in the SSI Claims path (MS 08113.005) do not show any value in the "Excluded Amount(s)" column. Leave this blank.

  • •

    Hold the case in H80 payment status pending the DDS determination.

b. DDS Determination Received

  • •

    If disability onset is the first of the month in which the individual could be eligible for SSI, the trust meets the disability requirement for exception; or

  • •

    If disability onset is NOT the first of the month in which the individual could be eligible for SSI, the trust will not meet the disability requirement for exception until the month following the disability onset date given the FOM rules for making resource determinations in SI 01110.600.

  • •

    Use the DDS determination for proper completion of the "Excluded Amounts(s)" column on the Trust page in the SSI Claims path (MS 08113.005)

  • •

    Process the case to pay or denial.

c. Transfer of Resource Provisions and Trust Provisions

  • •

    For resource transfers to a trust, consider whether a period of ineligibility applies for transferring a resource for less than fair market value – see SI 01150.110. Consider also whether one of the exceptions for transfers to a trust applies in SI 01150.121.

  • •

    Generally, a period of ineligibility does not apply to transfers to a trust that is a countable resource (SI 01150.121A.1.). This is to avoid both counting the trust as a resource and imposing a transfer of resources penalty for the same transaction. Per SI 01120.201D.5., the trust instructions take precedence over the transfer instructions.

  • •

    For transfers to a trust occurring within the look-back period (SI 01150.110C), we may have to develop disability as of the date on which the resource transfer occurred in order to determine whether a period of ineligibility – or an exception to the penalty – applies to the transfer.

d. Examples

  • •

    Mark, a special needs trust beneficiary whose trust was established in 2015 when Mark was 64 years old, applies for SSI Aged benefits on June 15, 2019. Even though disability is not a requirement for SSI Aged benefits, we must develop disability as of June 1, 2019, when the trust's resource status could affect Mark's SSI eligibility.

  • •

    Sally has a special needs trust that was established in 2010 when Sally was 10 years old. At the time, Sally was not eligible for SSI Child benefits because of deeming parents' income and resources. However, Sally applies for SSI Adult benefits with a protective filing date of April 15, 2018. We must develop disability as of April 1, 2018. The 2010 trust establishment date is not relevant because the trust did not present as a resource issue until the month it could affect Sally's eligibility for SSI (April 2018).

5. Established for the benefit of the individual

Under the special needs trust exception, the trust must be established and used for the benefit of the disabled individual. SSA has interpreted this provision to require that the trust be for the sole benefit of the individual, as described in SI 01120.201F.1. Other than trust provisions for payments described in SI 01120.201F.3. and SI 01120.201F.4., any provisions will result in disqualification from the special needs trust exception if they:

  • •

    provide benefits to other individuals or entities during the disabled individual's lifetime, or

  • •

    allow for termination of the trust prior to the individual's death and payment of the corpus to another individual or entity (other than the State(s) or another creditor for payment for goods or services provided to the individual). For more information on early termination provisions and trusts, see SI 01120.199.

Payments to third parties for goods and services provided to the trust beneficiary are allowed under the policy described in SI 01120.201F.3.a.; however, such payments should be evaluated under SI 01120.200E, SI 01120.200F, and SI 01120.201I to determine whether the payments may be income to the individual.

Note: 

A third party can be a family member, non-family member, or an entity. Do not differentiate between third parties; anyone other than the trust beneficiary (or spouse, guardian, or representative payee) is a third party.

6. Who established the trust

The special needs trust exception does not apply to a trust established through the actions of the disabled individual themselves. (Remember that this instruction applies specifically to special needs trusts established under section 1917(d)(4)(A) before December 13, 2016.) To qualify for the special needs trust exception, the assets of the disabled individual must be placed into a trust established through the actions of:

  • •

    the disabled individual’s parent(s);

  • •

    the disabled individual’s grandparent(s);

  • •

    the disabled individual’s legal guardian(s); or

  • •

    a court.

Note: 

Under section 1613(e) of the Act, a trust is considered to have been “established by” an individual if any of the individual's (or the individual's spouse’s) assets are transferred into the trust other than by will. Alternatively, under the Medicaid trust exceptions in section 1917(d)(4)(A) and (C) of the Act, a trust can be “established by” an individual who does not provide the corpus of the trust, or transfer any of their assets into the trust, but who takes action to establish the trust. To avoid confusion, we use the phrase “established through the actions of” rather than “established by” when referring to the individual who physically takes action to establish a special needs or pooled trust.

a. Seed trusts

In the case of a legally competent, disabled adult, a parent or grandparent may establish a “seed” trust using a nominal amount of their own money or, if State law allows, an empty or dry trust. After the seed trust is established, the legally competent, disabled adult may transfer their own assets into the trust, or a different individual or entity with legal authority may transfer the disabled individual's assets into the trust.

b. Power of attorney

A power of attorney (POA) can establish legal authority to act with respect to the assets of an individual. A trust established under a POA for the disabled individual will result in a trust that we consider to be established through the actions of the disabled individual themselves because the POA establishes an agency relationship.

Note: 

A representative payee, in their capacity as representative payee, does not necessarily have the legal authority to establish a trust or transfer funds into a trust for the disabled individual. For information about a representative payee transferring benefits into a trust, see GN 00602.075.

c. Legal authority

The person or entity establishing the trust with the assets of the legally competent, disabled individual or transferring the assets of the individual to the trust must have legal authority to act with respect to the assets of the individual. Attempting to establish a trust with the assets of another individual without proper legal authority to act with respect to the assets of that individual will generally result in an invalid trust under State law.

Note: 

Do not routinely question the validity of a trust under State law. However, if you have reason to question the validity of a trust under State law (e.g., because it is apparent the individual or entity that established the trust did not have legal authority to act with respect to the assets), please turn to your Regional Trust Lead (RTL), who may consult with the Office of Program Law (OPLaw) on the issue.

7. Court-established trusts

In the case of a trust established through the actions of a court, the creation of the trust must be required by a court order for the exception in section 1917(d)(4)(A) of the Act to apply. The special needs trust exception can be met when a court approves a petition and establishes a trust by court order, as long as the creation of the trust has not been completed before the order is issued by the court. Court approval of an already created special needs trust is not sufficient for the trust to qualify for the exception. The court must specifically either establish the trust or order the establishment of the trust. An individual is permitted to petition a court for the present establishment of a trust or may use an agent to do so. The court order establishes the trust, not the individual’s petition. Petitioning a court to establish a trust is not establishment by an individual.

Note: 

An individual may petition the court with a draft document of a trust as long as it is unsigned and not legally binding.

a. Example of a court ordering the establishment of a trust

John is an SSI recipient and a legally competent adult who inherited $250,000 in January 2015. John's sibling, Justine, petitioned the court to create and order the funding of the "John Special Needs Trust". Justine also provided the court with an unsigned draft of the trust document. A month later, the court approved the petition and issued an order requiring the creation and funding of the trust. This trust meets the requirement in SI 01120.203B.7 in this section. The fact that the trust beneficiary is a competent adult and could have established the trust is not a factor in the resource determination.

b. Example of a court-established trust

Henry wins a lawsuit in the amount of $50,000. As part of the settlement, the judge orders the creation of a trust in order for Henry to receive the $50,000. As a direct result of this court order, a trust was created with Henry’s settlement money. The trust document lists the $50,000 as the initial principal amount in Schedule A of the trust. This trust meets the requirement for exclusion in SI 01120.203B.7. in this section.

c. Example of only a court-approved trust (not court-established)

Jane is ineligible for SSI benefits because Jane has a self-established special needs trust that does not meet the requirements for exception in SI 01120.203 in this section. Jane petitioned the court to establish an amended trust and to make the order retroactive, so that Jane's original trust would become exempt from resource counting from the time of its creation. The court approved the petition and issued a nunc pro tunc order stating that the court established the trust as of the date on which Jane had previously established the trust. The court did not establish a new trust; it merely approved a modification of a previously existing trust. The amended trust does not meet the requirement for exclusion in SI 01120.203B.7. in this section.

Note: 

Please forward all nunc pro tunc orders to your regional office (RO) for additional review and final determination.

d. Example of only a court-approved trust (not court-established)

Dan is the beneficiary of a special needs trust. Dan's sibling petitioned the court to establish "Dan’s Special Needs Trust" and submitted to the court the fully executed Master Trust Agreement for “Dan’s Special Needs Trust,” which had already been signed, along with evidence that the trust had already been funded. Although the court order states that it approves and establishes the trust, the court simply approved the existence of the already established special needs trust. This trust does not meet the requirement in SI 01120.203B.7. in this section. For an example of an unsigned and unfunded trust, see SI 01120.203B.7.a.

8. State Medicaid reimbursement requirement

To qualify for the special needs trust exception, the trust must contain specific language that provides that, upon the death of the individual, the State(s) will receive all amounts remaining in the trust, up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan(s). The State(s) must be listed as the first payee(s) and have priority over payment of other debts and administrative expenses, except as listed in SI 01120.203E in this section.

The trust must provide reimbursement for any State(s) that may have provided medical assistance under the State Medicaid plan(s) and not be limited to any particular State(s). For example, it is not compliant for a Medicaid-payback provision to refer simply to “Maryland” or “Maine and Vermont”. However, it is compliant for a Medicaid-payback provision to refer to “the State”, assuming that the trust has not defined that term to mean only a particular State(s). If the trust does not have sufficient funds upon the beneficiary’s death to reimburse in full each State that provided medical assistance, the trust may reimburse the States on a pro-rata or proportional basis.

Medicaid payback also cannot be limited to any particular period of time; for example, payback cannot be limited to the period after establishment of the trust, and payback cannot be limited to medical assistance paid during the beneficiary’s lifetime. (Note: A limitation to medical assistance provided during the beneficiary’s lifetime may be compliant.)

Note: 

Merely labeling the trust as a Medicaid payback trust, an OBRA 1993 payback trust, a trust established in accordance with 42 U.S.C. § 1396p, or a Medicaid Qualifying Trust (MQT) is not sufficient to meet the requirements for this exception. The trust must contain specific payback language whose effect is consistent with the requirements described above. An oral trust cannot meet this requirement.

C. Policy for special needs trusts established under section 1917(d)(4)(A) of the Act on or after December 13, 2016

1. General rules for special needs trusts established on or after December 13, 2016

On December 13, 2016, the President signed into law the 21st Century Cures Act (Public Law 114-255). Section 5007 of this Act allows individuals to establish their own special needs trusts and qualify for the exception to resource counting under section 1917(d)(4)(A) of the Social Security Act.

As such, the resource-counting provisions of section 1613(e) do not apply to a trust established on or after December 13, 2016, that:

  • •

    contains the assets of an individual who is under age 65 and is disabled;

  • •

    is established for the benefit of such individual through the actions of the individual, a parent, a grandparent, a legal guardian, or a court; and

  • •

    provides that the State(s) will receive all amounts remaining in the trust upon the death of the individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State Medicaid plan.

Note: 

Although this exception is commonly referred to as the special needs trust exception, the exception applies to any trust meeting the above requirements, even if it is not titled as a special needs trust.

CAUTION: 

A trust that meets an exception to counting for SSI purposes under the statutory trust provisions of section 1613(e) must still be evaluated under the instructions in SI 01120.200 to determine if it is a countable resource. If the trust meets the definition of a resource (see SI 01110.100B.1.), it will be subject to regular resource-counting rules.

2. Who established the trust

The special needs trust exception applies to a trust established through the actions of:

  • •

    the individual;

  • •

    a parent(s);

  • •

    a grandparent(s);

  • •

    a legal guardian(s); or

  • •

    a court.

Note: 

Under section 1613(e) of the Act, a trust is considered to have been “established by” an individual if any of the individual's (or the individual's spouse’s) assets are transferred into the trust other than by will. Alternatively, under the Medicaid trust exceptions in section 1917(d)(4)(A) and (C) of the Act, a trust can be “established by” an individual who does not provide the corpus of the trust, or transfer any of their assets into the trust, but who takes action to establish the trust. To avoid confusion, we use the phrase “established through the actions of” rather than “established by” when referring to the individual who physically takes action to establish a special needs or pooled trust.

a. Seed trusts

In the case of a legally competent, disabled adult, a parent or grandparent may establish a “seed” trust using a nominal amount of their own money or, if State law allows, an empty or dry trust. After the seed trust is established, the legally competent, disabled adult may transfer their own assets into the trust, or a different individual or entity with legal authority may transfer the disabled individual's assets into the trust.

b. Power of attorney

A power of attorney (POA) can establish legal authority to act with respect to the assets of an individual. A trust established under a POA for the disabled individual will result in a trust that we consider to be established through the actions of the disabled individual themselves because the POA establishes an agency relationship.

Note: 

A representative payee, in their capacity as representative payee, does not necessarily have the legal authority to establish a trust or transfer funds into a trust for the disabled individual. For information about a representative payee transferring benefits into a trust, see GN 00602.075.

c. Legal authority

The person or entity establishing the trust with the assets of the legally competent, disabled individual or transferring the assets of the individual to the trust must have legal authority to act with respect to the assets of the individual. Attempting to establish a trust with the assets of another individual without proper legal authority to act with respect to the assets of that individual will generally result in an invalid trust under State law.

Note: 

Do not routinely question the validity of a trust under State law. However, if you have reason to question the validity of a trust under State law (e.g., because it is apparent the individual or entity that established the trust did not have legal authority to act with respect to the assets), please turn to your Regional Trust Lead (RTL), who may consult with OPLaw on the issue.

3. Additional requirements for a trust established on or after December 13, 2016

Except as noted in SI 01120.203C.1. through SI 01120.203C.3. in this section, the requirements for an exempt special needs trust remain the same as those for a trust established prior to December 13, 2016. For additional requirements and guidance, see SI 01120.203B.2. through SI 01120.203B.5., SI 01120.203B.7., and SI 01120.203B.8. in this section.

D. Policy for pooled trusts established under section 1917(d)(4)(C) of the Act

1. General rules for pooled trusts

A pooled trust contains the assets of many different individuals, each held in separate trust accounts and established through the actions of individuals for separate beneficiaries. By analogy, the pooled trust is like a bank that holds the assets of individual account holders. A pooled trust is established and managed by a non-profit association. The pooled trust instruments usually consist of an overarching “master trust” and a joinder agreement that contains provisions specific to the individual beneficiary.

Whenever you are evaluating a pooled trust, it is important to distinguish between the master trust, which is established through the actions of the nonprofit association, and the individual trust accounts within the master trust, which are established through the actions of the individual or another person or entity for the individual, through a joinder agreement.

The resource-counting provisions of section 1613(e) of the Act do not apply to a trust containing the assets of a disabled individual that meets the following conditions:

  • •

    The pooled trust is established and managed by a nonprofit association;

  • •

    Separate accounts are maintained for each beneficiary, but assets are pooled for investing and management purposes;

  • •

    Accounts are established solely for the benefit of the disabled individuals;

  • •

    The account in the trust is established through the actions of the individual, a parent, a grandparent, a legal guardian, or a court; and

  • •

    To the extent that any amounts remaining in the beneficiary's account upon the death of the beneficiary are not retained by the trust, the trust pays to the State(s) from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under State Medicaid plan(s).

Note 1: 

There is no age restriction for this exception. However, a transfer of resources into a trust for an individual age 65 or over may result in a transfer penalty (see SI 01150.121).

Note 2: 

A trust that meets an exception to counting for SSI purposes under the statutory trust provisions of 1613(e) must still be evaluated under the instructions in SI 01120.200 to determine if it is a countable resource.

2. Disabled

To qualify for the pooled trust exception, the individual whose assets were used to establish the trust account must be disabled for SSI purposes under section 1614(a)(3) of the Act as of the date on which the trust account’s resource status could affect the individual’s SSI eligibility. This also includes individuals aged 65 and older.

In cases where you need to develop for disability, obtain a disability determination from the DDS following procedure in SI 01120.203B.4. in this section.

3. Nonprofit association

The pooled trust must be established and maintained by the actions of a nonprofit association. For purposes of the pooled trust exception, a nonprofit association is an organization established and certified under a State nonprofit statute. For development of nonprofit associations, see SI 01120.203J in this section. For more information on pooled trust management provisions, see SI 01120.225.

4. Separate account

A separate account within the trust must be maintained for each beneficiary of the pooled trust. However, for purposes of investment and management of funds, the trust may pool the funds in the individual accounts. The trust must be able to provide an individual accounting for each individual.

5. Established for the sole benefit of the individual

Under the pooled trust exception, the individual trust account must be established for the sole benefit of the disabled individual. (For the definition of sole benefit, see SI 01120.201F.1.) Other than the payments described in SI 01120.201F.3. and SI 01120.201F.4., this exception does not apply if the trust account:

  • •

    provides a benefit to any other individual or entity during the disabled individual's lifetime; or

  • •

    allows for termination of the trust account prior to the individual's death and payment of the corpus to another individual or entity. For more information on early termination provisions and trusts, see SI 01120.199.

6. Who established the trust account

In order to qualify for the pooled trust exception, the trust account must have been established through the actions of:

  • •

    the disabled individual themselves;

  • •

    the disabled individual’s parent(s);

  • •

    the disabled individual’s grandparent(s);

  • •

    the disabled individual’s legal guardian(s); or

  • •

    a court.

Note 1: Under section 1613(e) of the Act, a trust is considered to have been “established by” an individual if any of the individual's (or the individual's spouse’s) assets are transferred into the trust other than by will. Alternatively, under the Medicaid trust exceptions in section 1917(d)(4)(A) and (C) of the Act, a trust can be “established by” an individual who does not provide the corpus of the trust, or transfer any of their assets into the trust, but who takes action to establish the trust. To avoid confusion, we use the phrase “established through the actions of” rather than “established by” when referring to the individual who physically takes action to establish a special needs or pooled trust.

Note 2: In general, we do not require master trusts to allow only sub-accounts that are established by parties listed in section 1917(d)(4)(C)(iii) of the Act. As pooled trusts can have SSI and non-SSI beneficiaries, we would not count a trust account solely because the master trust agreement permitted a non-SSI trust account to be established by someone other than the parties listed in section 1917(d)(4)(C)(iii).

a. Seed trusts

In the case of a legally competent, disabled adult, a parent or grandparent may establish a “seed” trust using a nominal amount of their own money or, if State law allows, an empty or dry trust. After the seed trust is established, the legally competent, disabled adult may transfer their own assets into the trust, or a different individual or entity with legal authority may transfer the disabled individual's assets into the trust.

b. Power of attorney

A power of attorney (POA) can establish legal authority to act with respect to the assets of an individual. A trust established under a POA for the disabled individual will result in a trust that we consider to be established through the actions of the disabled individual themselves because the POA establishes an agency relationship.

Note: 

A representative payee, in their capacity as representative payee, does not necessarily have the legal authority to establish a trust or transfer funds into a trust for the disabled individual. For information about a representative payee transferring benefits into a trust, see GN 00602.075.

c. Legal authority

The person or entity establishing the trust with the assets of the legally competent, disabled individual or transferring the assets of the individual to the trust must have legal authority to act with respect to the assets of the individual. Attempting to establish a trust with the assets of another individual without proper legal authority to act with respect to the assets of that individual will generally result in an invalid trust under State law.

Note: 

Do not routinely question the validity of a trust under State law. However, if you have reason to question the validity of a trust under State law (e.g., because it is apparent the individual or entity that established the trust did not have legal authority to act with respect to the assets), please turn to your Regional Trust Lead (RTL), who may consult with OPLaw on the issue.

7. Court-established trusts

In the case of a trust account established through the actions of a court, the creation of the trust account must be required by a court order for the exception in section 1917(d)(4)(C) of the Act to apply. That is, the pooled trust exception can be met when courts approve petitions and establish trust accounts by court order, so long as the execution of the trust account joinder agreement or creation of the trust account have not been completed before the order is issued by the court. Court approval of an already executed pooled trust account joinder agreement is not sufficient for the trust account to qualify for the exception. The court must specifically either establish the trust account or order the establishment of the trust account.

a. Example of a court ordering establishment of a trust account

John is an SSI recipient and a legally competent adult who inherited $250,000. John's sibling, Justine, petitioned the court to create and order the funding of an account in the Chesapeake Pooled Trust using the full amount of his inheritance. Justine also provided the court with an unsigned draft of the trust document. A month later, the court approved the petition and issued an order requiring the creation and funding of the trust account. This trust account meets the requirement in SI 01120.203D.7 in this section. The fact that the trust beneficiary is a competent adult and could have established the trust account is not a factor in the resource determination.

b. Example of a court-established trust account

Mary, a legally incompetent SSI recipient, wins a lawsuit in the amount of $50,000. As part of the settlement, the judge orders the creation of a pooled trust account in order for Mary to receive the $50,000. As a direct result of this court order, a pooled trust account was created with Mary’s settlement money. The pooled trust records and documentation of the initial deposit list the $50,000 as the initial principal amount. This trust account meets the requirement in SI 01120.203D.7 in this section.

c. Example of only a court-approved trust account (not court-established)

Jane has a self-established pooled trust account. Jane is ineligible for SSI benefits because the pooled trust does not meet one of the requirements for exception in SI 01120.203D. Specifically, the pooled trust has to be established and managed by a nonprofit association. A for-profit association is managing Jane’s pooled trust. The pooled trust changed management to a nonprofit association to satisfy the requirement. Jane petitioned the court to establish an amended trust account joinder agreement and to make the order retroactive, so that Jane's original trust account would become exempt from resource counting from the time of its creation. The court approved the petition and issued a nunc pro tunc order stating that the court established the trust account as of the date on which Jane had previously established the trust account themselves. The amended trust account joinder agreement does not meet the requirement in SI 01120.203D.7. in this section. The court did not establish a new trust account; it merely approved a modification of a previously existing trust account joinder agreement.

Note: 

Please forward all nunc pro tunc orders to your regional office (RO) for additional review and final determination.

8. State Medicaid reimbursement provision

To qualify for the pooled trust exception, to the extent that amounts remaining in the individual’s account upon the death of the individual are not retained by the trust, the trust must contain specific language providing that the trust will pay to the State(s) from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan(s). To the extent that the trust does not retain the funds in the account, the State(s) must be listed as the first payee(s) and have priority over payment of other debts and administrative expenses, except as listed in SI 01120.203E in this section.

The trust must provide reimbursement to any State(s) that has provided medical assistance under the State Medicaid plan(s) and not be limited to any particular State(s). For example, it is not compliant for a Medicaid-payback provision to refer simply to “Maryland” or “Maine and Vermont”. However, it is compliant for a Medicaid-payback provision to refer to “the State”, assuming that the trust has not defined that term to mean only a particular State(s). If the trust does not have sufficient funds upon the beneficiary’s death to reimburse in full each State that provided medical assistance, the trust may reimburse the States on a pro-rata or proportional basis. Medicaid payback also cannot be limited to any particular period of time; for example, payback cannot be limited to the period after establishment of the trust, and payback cannot be limited to medical assistance paid during the beneficiary’s lifetime. (Note: A limitation to medical assistance provided during the beneficiary’s lifetime may be compliant.).

 

Note: 

Merely labeling the trust as a Medicaid payback trust, an OBRA 1993 payback trust, a trust established in accordance with 42 U.S.C. § 1396p, or a Medicaid Qualifying Trust (MQT) is not sufficient to meet the requirements for this exception. The trust must contain specific payback language whose effect is consistent with the requirements described above. An oral trust cannot meet this requirement.

E. Allowable and prohibited expenses for special needs and pooled trusts established under section 1917(d)(4)(A) and (C) of the Act

The following instructions about trust expenses and payments apply to Medicaid special needs trusts and to Medicaid pooled trusts.

1. Allowable administrative expenses

Upon the death of the trust beneficiary, the trust may pay the following types of administrative expenses from the trust prior to reimbursement to the State(s) for medical assistance:

  • •

    Taxes due from the trust to the State(s) or Federal government because of the death of the beneficiary;

  • •

    Reasonable fees for administration of the trust estate, such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with termination and wrapping up of the trust.

2. Prohibited expenses and payments

Upon the death of the trust beneficiary, the following are examples of some of the types of expenses and payments not permitted prior to reimbursement to the State(s) for medical assistance:

  • •

    Taxes due from the estate of the beneficiary other than those arising from inclusion of the trust in the estate;

  • •

    Inheritance taxes due for residual beneficiaries;

  • •

    Payment of debts owed to third parties;

  • •

    Funeral expenses; and

  • •

    Payments to residual beneficiaries.

Note: 

For the purpose of prohibiting payments prior to reimbursement to the State(s) for medical assistance, a pooled trust is not considered a residual or remainder beneficiary. Remember that a pooled trust has the right to retain funds upon the death of the beneficiary.

3. Applicability

This restriction on payments from the trust applies upon the death of the beneficiary. Payments of fees and administrative expenses during the life of the beneficiary are allowable as permitted by the trust document and are not affected by the State Medicaid reimbursement requirement.

F. Income trusts established under section 1917(d)(4)(B) of the Act

Income trusts, sometimes called Miller trusts (named after a court case), established under section 1917(d)(4)(B) of the Act are not considered exceptions to trust rules for SSI purposes. However, some States may exclude these trusts from counting as a resource for Medicaid purposes. This type of trust is composed only of pension, Social Security, and other income to the individual (and accumulated income in the trust).

G. Policy for waiver for undue hardship

Section 1613(e) of the Social Security Act (Act) sets forth rules for counting as resources trusts established with the assets of an individual on or after 01/01/2000 (see generally SI 01120.201), along with exceptions to those rules if a trust meets one of the Medicaid trust exceptions in section 1917(d)(4)(A) or (C) of the Act for special needs trusts or pooled trusts, respectively. However, when a trust does not meet a Medicaid trust exception, SSA has the authority to waive applying the rules when such application would cause an undue hardship to the individual in certain circumstances.

For purposes of the trust provisions of section 1613(e) of the Act, there are four circumstances wherein undue hardship may be found:

  1. 1. 

    the trust contains funds in a Medicare Set-Aside Arrangement (MSA) for purposes of compliance with the Medicare Secondary Payer (MSP) Act;

  2. 2. 

    an SSA error results in a trust deficiency that cannot be remedied;

  3. 3. 

    a policy-compliant special needs trust or a subaccount of a policy-compliant pooled trust is transferred to a noncompliant pooled trust or special needs trust and the trust beneficiary is not responsible for the transfer; and

  4. 4. 

    the individual would be deprived of food or shelter without SSI payments and has limited available funds.

Each of these four circumstances is discussed in more detail below. If all of the required criteria are met for a circumstance, then undue hardship applies for purposes of the trust provisions of section 1613(e) (SI 01120.201).

Note: 

Qualifying for an undue-hardship waiver only applies to counting a trust under the statutory provisions of section 1613(e) of the Act (see SI 01120.201 through SI 01120.203). A trust that meets the requirements for undue hardship to apply must still be evaluated under SI 01120.200 to determine if it is a countable resource.

1. Undue Hardship - Medicare Set-Aside Arrangement (MSA)

a. Definitions

  1. i.  

    Undue Hardship

    Undue hardship exists if a trust containing funds in a Medicare Set-Aside Arrangement (MSA) would be a countable resource under section 1613(e) and the MSA funds may only be used for certain medical expenses consistent with the Medicare Secondary Payer (MSP) Act.

    Note: 

    The undue hardship waiver only applies to the MSA funds and not to any other assets in the trust.

  2. ii.  

    Medicare Secondary Payer (MSP) Act

    Under the MSP Act, Medicare may not pay for a beneficiary’s medical expenses when payment has been made (or can reasonably be expected to be made) under a workers’ compensation law or plan, an automobile or liability insurance policy or plan, or under no fault insurance (see 42 U.S.C. § 1395y(b)(2)(A)(ii)).

    • •

      Essentially, the MSP Act requires that Medicare be the secondary payer when another entity has the primary responsibility of paying for medical care, such as in cases involving workers’ compensation and liability insurance.

  3. iii.  

    Medicare Set-Aside Arrangement (MSA)

    An MSA is a financial agreement that allocates a portion of an award, judgment, or settlement to pay for all future medical expenses related to the relevant injury or illness, for purposes of complying with the MSP Act. The use of the MSA funds must be legally restricted to such medical expenses that are covered and otherwise reimbursable by Medicare. The funds must also be depleted before Medicare will pay for future Medicare-covered expenses related to the individual’s relevant injury or illness that exceed the set-aside amount. There may be cases in which funds in an MSA are placed in a trust.

    General additional information regarding MSAs can be located via a CMS website (see https://www.cms.gov/medicare/coordination-benefits-recovery/workers-comp-set-aside-arrangements).

b. Application of the undue hardship waiver

  1. i.  

    Applicability

    We will apply undue hardship under this provision with respect to the portion of a trust containing an MSA when all of the following criteria are met:

    • •

      An MSA is established for the benefit of the SSI applicant or recipient or their spouse.

    • •

      Funds in the MSA are placed in a trust or the MSA is administered by a third party such that it is considered a legal instrument or device similar to a trust (see SI 01120.201G).

    • •

      The trust (or legal instrument or device similar to a trust) containing the MSA funds would be a countable resource under section 1613(e) and results in the individual’s ineligibility for SSI due to excess resources.

    • •

      The MSA contains the necessary legal restrictions on the use of the MSA funds for certain medical expenses (i.e., medical expenses related to the relevant injury or illness that would be covered by Medicare).

    • •

      The individual signs a statement for the file and submits all relevant documentation related to the MSA, including documentation that shows how the MSA was created and that the MSA contains the necessary legal restrictions on the use of the MSA funds.

      Note: 

      The individual’s statement (SSA-795) should reflect:

      •  

        1) the MSA is restricted to medical expenses related to the relevant injury or illness that would be covered by Medicare; and

      •  

        2) they understand they must report any changes regarding the MSA’s restrictions or report if the MSA ceases to exist.

        For example, the SSA-795 may state: “As shown in the submitted workers’ compensation settlement agreement dated January 5, 2025, this MSA is restricted to medical expenses related to the relevant injury—a broken right arm—that would be covered by Medicare. I understand that I must report any changes regarding the MSA’s restrictions or report if the MSA ceases to exist.”

  2. ii.  

    Suspension of resource counting

    The portion of a trust containing an MSA is not counted as a resource under section 1613(e) (see SI 01120.201) in any month for which counting it would cause undue hardship under this application.

  3. iii.  

    Resource counting resumes

    Resource counting resumes for any month(s) for which it would not result in undue hardship, such as if the MSA was dissolved or depleted or the legal restrictions on the use of MSA funds to certain medical expenses were removed.

    Undue hardship is a month-by-month determination; however, this application only requires reviews periodically. The MSA may be reviewed during periodic reviews of the record, such as redeterminations, and the individual is responsible to notify SSA if there is any change regarding the MSA consistent with their reporting responsibilities.

    Note: 

    Please refer all cases that may fall under this undue hardship circumstance to your regional office (RO). If necessary, the RO staff will seek guidance from the central office or OPLaw.

c. Example

An SSI recipient received a workers’ compensation settlement of $15,000 due to a work-related injury. The $15,000 was allocated for future medical services related to that injury for purposes of the MSP Act and these funds must be depleted before Medicare will pay for treatment related to the injury. The $15,000 was then placed in an MSA trust that is restricted to medical expenses related to the injury. The CS requests a copy of the settlement agreement and the MSA trust documents, any additional documentation that will show the legal restrictions on the use of the funds, an accounting of the funds, and how the funds are administered.

The CS determines the MSA trust would be a countable resource under section 1613(e). However, because the MSA trust funds are restricted to certain medical expenses (i.e., medical expenses related to the relevant injury that would be covered by Medicare), the CS determines that undue hardship applies in this scenario. The CS obtains the individual’s statement and notes the system to reflect the MSA trust does not count as a resource under section 1613(e). The CS also determines that the MSA trust is not a resource under SI 01120.200.

2. Undue Hardship - Agency Error Resulted in Uncorrectable Trust Deficiency

a. Undue Hardship Definition

Undue hardship exists, in limited circumstances, if an SSA error results in a trust deficiency that cannot be remedied.

b. Application of the undue hardship waiver

  1. i.  

    Applicability

    We will apply undue hardship under this provision when all of the following criteria are met:

    • •

      There is an error by SSA;

    • •

      The trust has a deficiency that would result in the trust’s being a countable resource under section 1613(e);

    • •

      There is a clear causal connection between SSA's error and that trust deficiency;

    • •

      The trust deficiency does not result in a potential benefit that substantially reduces the hardship to the individual;

    • •

      The trust deficiency cannot be corrected; and

    • •

      Substantive relief cannot otherwise be provided.

  2. ii.  

    Suspension of resource counting

    The irrevocable trust is not counted as a resource under section 1613(e) (see SI 01120.201) in any month for which counting the trust would cause undue hardship under this application.

  3. iii.  

    Resource counting resumes

    Resource counting under section 1613(e) resumes only if the circumstances change such that the criteria under this section are no longer satisfied. The individual is responsible for notifying SSA if there is any change regarding the trust consistent with their reporting responsibilities. Although undue hardship is a month-by-month determination, this application does not require monthly or periodic reviews due to the criteria.

Note: 

Please refer all cases that may fall under this undue hardship circumstance to your regional office (RO). If necessary, the RO staff will seek guidance from the central office or OPLaw.

c. Example

A thirty-year-old SSI recipient received a $7,000 inheritance and established an irrevocable special needs trust through their legal guardian, who is also their spouse and representative payee (RP). The trust was intended to meet a Medicaid trust exception and was reported to the field office. The CS determines that the trust is a countable resource because it contains a noncompliant early termination provision. However, the CS does not issue a notice (as required under SI 01120.204) that explains the problematic provision in the trust and the policy regarding it.

The RP requests reconsideration and inquires as to why the trust does not meet the Medicaid trust exception. The field office affirms the initial determination and simply states the trust is countable without further explaining or providing the notice required by policy. The RP appeals the decision to an ALJ and attempts to fix the trust; however, the amended trust doesn’t resolve the early termination issue. The ALJ decides the trust is still noncompliant due to its deficient early termination provision, notes the applicable policy, and finds it is a countable resource. The RP realizes the trust’s deficiency upon reading the ALJ’s decision; however, the recipient passes away two weeks later, and the trust can no longer be amended. 

In this example, the SSA error was the field office's failure to provide the proper notice required by policy. The RP tried to determine the trust’s deficiency and amended the trust; however, the RP didn’t have an explanation as to what provision of the trust was problematic or what policy was at issue, so the amendment didn’t correct it, which is the causal connection between the error and the trust’s deficiency. There is no indication that the trust deficiency resulted in a potential benefit that substantially reduced the hardship to the individual. Finally, due to the recipient’s death, the trust can no longer be amended and there is no way to provide substantive relief other than through this undue hardship provision.

3. Undue Hardship - Assets Transferred Upon Early Termination from a Compliant Pooled Trust or Special Needs Trust to a Noncompliant Pooled Trust or Special Needs Trust

a. Undue Hardship Definition

Undue hardship exists, in certain circumstances, when, upon early termination, assets in a pooled trust subaccount or a special needs trust that was previously determined to be policy-compliant are transferred to a noncompliant pooled trust or special needs trust and the beneficiary is not responsible for the transfer.

b. Application of the undue hardship waiver

  1. i.  

    Applicability

    We will apply undue hardship under this provision when all of the following criteria are met:

    • •

      A pooled trust subaccount or a special needs trust was previously determined to meet a Medicaid trust exception and not to be a countable resource (under SI 01120.203 and SI 01120.200).

    • •

      The assets in the pooled trust subaccount or special needs trust are transferred to a secondary pooled trust or special needs trust that is intended to meet a Medicaid trust exception (see SI 01120.203), but the secondary trust was not previously evaluated and is subsequently determined to be noncompliant with our policy.

    • •

      The SSI applicant or recipient is not responsible for the transfer to the secondary, noncompliant trust or the circumstances related to the early termination and the transfer.

  2. ii.  

    Suspension of resource counting

    The secondary irrevocable trust is not counted as a resource under section 1613(e) (see SI 01120.201) due to undue hardship for 120 days in order to allow the trust to be amended or the assets to be transferred to a policy-compliant trust.

    • •

      The 120-day period begins on the day SSA informs the applicant, recipient, or representative payee via written notification that the secondary trust contains provisions that must be amended in order to qualify for a Medicaid trust exception.

      • –

        If the written notification is mailed, instead of hand-delivered, then the applicant, recipient, or representative payee is considered to be informed five days after the mailing date.

      • –

        We permit a good cause extension if it is requested with evidence that the disqualifying issue cannot be resolved within the 120-day period (for example, if a court must amend the secondary trust and there is a waiting period to get on the court docket).

    • •

      The technician follows the recontact controls provided in SI 01120.203H.4.

  3. iii.  

    Resource counting resumes

    Undue hardship is a month-by-month determination; however, this application only requires a review when the 120-day period (plus any good cause extension) expires. If the secondary trust is not amended to conform with our policy requirements or the assets are not transferred to a policy-compliant trust within 120 days (plus any good cause extension), then undue hardship under this provision will no longer be met and resource counting of a trust will generally resume, subject to our policy, at the beginning of the following month.

Note: 

Please refer all cases that may fall under this undue hardship circumstance to your regional office (RO). If necessary, the RO staff will seek guidance from the central office or OPLaw.

c. Example

An SSI recipient has a subaccount in a pooled trust that was previously determined to meet the Medicaid trust exception for pooled trusts and not be a countable resource under our policy (SI 01120.203 and SI 01120.200). However, the pooled trust dissolved, and the trustee transferred the subaccount to a secondary pooled trust intended to meet a Medicaid trust exception. Although the secondary pooled trust’s master trust agreement expressed that its terms were intended to form a pooled trust that complied with section 1917(d)(4)(C), the agency determines the secondary pooled trust is not compliant with our policy due to a deficient early termination provision; so, it does not meet a Medicaid trust exception. The technician sends the required written notice to the SSI recipient, who notifies the trustee regarding the matter, and the technician tickles the issue for review in 120 days. The trust is amended to address the issue and conform with our policy within 100 days. The technician does not count the subaccount as a resource due to undue hardship and satisfying the requirements of SI 01120.200 for the first three months and does not count it as a resource due to the Medicaid trust exception and satisfying the requirements of SI 01120.200 for the months thereafter. 

4. Undue Hardship - Deprivation of Food or Shelter and Limited Funds

a. Definitions

  1. i.  

    Undue Hardship

    For purposes of the trust provisions of section 1613(e) of the Act, undue hardship exists in a month if:

    • •

      failure to receive SSI payments would deprive the individual of food or shelter; and

    • •

      the individual's available funds do not equal or exceed the Federal benefit rate (FBR) plus any federally administered State supplement.

    Note: 

    Inability to obtain medical care does not constitute undue hardship for SSI purposes, although it may under a State Medicaid plan.

  2. ii.  

    Loss of shelter

    For purposes of undue-hardship waiver in the context of section 1613(e) of the Act, an individual would be deprived of shelter if:

    • •

      they would be subject to eviction from their current residence, if SSI payments were not received; and

    • •

      there is no other affordable housing available, or there is no other housing available with necessary modifications for the disabled individual.

  3. iii.  

    Available funds

    In determining the individual's available funds, we include:

    • •

      Income

      • –

        All countable income, including the value of in-kind support and maintenance (ISM), received in the month(s) for which undue hardship is an issue; and

      • –

        All income excluded under the Act received in the month(s) for which undue hardship is an issue.

      • –

        Do not include SSI payments received or items that are not income, per SI 00815.000.

      For a list of unearned and earned income exclusions, respectively, see SI 00830.099 and SI 00820.500.

      Note: 

      The receipt of ISM, in and of itself, does not preclude a finding of undue hardship.

    • •

      Resources

      Resources include the following:

      • –

        All countable liquid resources as of the first moment of the month(s) for which undue hardship is at issue (for a definition of liquid resources, see SI 01110.300); and

      • –

        All liquid resources excluded under the Act as of the first moment of the month(s) for which undue hardship is at issue (for a list of resource exclusions under the Act, see SI 01130.050).

      • –

        Do not include non-liquid resources or assets determined not to be a resource, per SI 01120.000.

      SSI benefits retained into the month following the month of receipt are counted as a resource for purposes of determining available funds.

      Refer to subsections H and K for procedures on developing and following up on a finding of undue hardship due to deprivation of food or shelter and limited funds.

b. Application of the undue hardship waiver

  1. i.  

    Applicability

    We will apply undue hardship under this provision only when all of the following criteria are met:

    • •

      an irrevocable trust would be a countable resource under section 1613(e) and result in the individual's ineligibility for SSI due to excess resources;

    • •

      the trust specifically prohibits disbursements, or prohibits the trustee from exercising their discretion to disburse funds, from the trust for the individual's support and maintenance;

    • •

      the individual alleges (or information in the file indicates) that not receiving SSI would deprive the individual of food or shelter, with their statement subsequently obtained for the file; and

    • •

      the individual’s total available funds are less than the FBR plus any federally administered State supplement.

    Note: 

    If the trust is revocable by the individual, the undue-hardship requirements for this circumstance cannot be met because the individual can access the trust funds for their support and maintenance.

  2. ii.  

    Completing the individual’s statement (SSA-795)

    The individual's statement (SSA-795) should reflect:

    •  

      1) failure to receive SSI payments would deprive them of food or shelter;

    •  

      2) their total available funds are less than the FBR plus any federally administered State supplement;

    •  

      3) they will promptly report any changes in their income or resources; and

    •  

      4) they understand they may be overpaid if, for any month, available funds exceed the FBR plus any State supplement or if other situations change.

  3. iii.  

    Suspension of resource counting

    An irrevocable trust is not counted as a resource under section 1613(e) (see SI 01120.201) in any month for which counting the trust would cause undue hardship.

  4. iv.  

    Resource counting resumes

    Resource counting of a trust resumes for any month(s) for which it would not result in undue hardship.

c. Example

Frank filed for SSI in 3/2017 as an aged individual. In 2/2017, Frank received an insurance settlement from an accident that was placed in an irrevocable trust. After determining that Frank met the other requirements for undue hardship (including a prohibition on the trustee from disbursing any funds for his support and maintenance), the claims specialist determined Frank's available funds. Frank receives $450 in title II benefits per month. Frank's only liquid resource is a bank account that has $500 in it. The total of $950 in available funds ($450 in title II benefits and $500 in the bank account) means that undue hardship does not apply in 3/2017, because that amount exceeds the 2017 FBR of $735. (His State has no federally administered State supplement.)

Frank comes back into the office in 6/2017 and presents evidence that he has spent down the $500 in his bank account on living expenses in the past three months. As of 6/2017, Frank has no liquid resources, and Frank's income total of $450 is below the FBR ($735 for 2017). Frank meets the undue hardship test for 6/2017 (which is Frank's E02 month). The trust does not count as Frank's resource under section 1613(e) in that month. It also is not a resource under SI 01120.200. If Frank's situation does not change, he qualifies for an SSI payment in 7/2017.

H. Procedure for follow-up to a finding of undue hardship due to deprivation of food or shelter and limited funds

1. When to use this procedure

Use this procedure when it is necessary to determine whether an individual who established a trust continues to be eligible for SSI based on undue hardship due to alleged deprivation of food or shelter and limited available funds. Since this type of undue hardship is a month-by-month determination, recontact the individual to redevelop undue hardship periodically.

2. Recontact period

The recontact period may vary depending on the individual's situation. If the individual alleges, and information in the file indicates, that the individual's income and resources are not expected to change significantly, and the individual is continuously eligible for SSI because of undue hardship, recontact the individual at least every six months. If the individual's income and resources are expected to fluctuate, or the file indicates a history of such fluctuation, the recontact period should be shorter, even monthly in some cases.

3. Documentation

At each recontact:

  • •

    Obtain on a Report of Contact page the individual's statement, either signed or recorded, that failure to receive SSI would have deprived the individual of food or shelter for any month not covered by a prior allegation;

  • •

    Determine whether total income and liquid resources exceeded the FBR plus any State supplement for each prior month;

  • •

    If undue hardship continued for the prior period and is expected to continue in the future period, continue payment and tickle the case for the next recontact, per SI 01120.203H.4. in this section; and

  • •

    If undue hardship did not continue through each month, clear the excluded amount and exclusion reason entries on the Trust page for each month that undue hardship did not apply. Process the excess resources overpayment for those months. If undue hardship stops due to a continuing change in the individual's situation, such as income or resources, do not tickle the file to follow up. The individual must recontact SSA and make a new allegation of undue hardship.

4. Recontact controls

For SSI Claims System cases, use the Development Worksheet under instructions in MS 08122.004 and enter the following worksheet inputs:

  • •

    In the ISSUE field: input TRUST;

  • •

    In the TICKLE field: input the date by which the individual should be recontacted to redevelop undue hardship; and

  • •

    In the REMARKS field or on the Development Notes page (MS 08122.005): add additional notes with information about the trust undue hardship issue that the Claims Specialist believes is appropriate.

For non-SSI Claims System cases, use the Modernized Development Worksheet (MDW). If an MDW is applicable, set up an MDW screen using instructions in MS 03901.001 and the following MDW inputs:

  • •

    In the ISSUE field: input TRUST;

  • •

    In the CATEGORY field: input T16MISC;

  • •

    In the TICKLE field: input the date by which the individual should be recontacted to redevelop undue hardship; and

  • •

    In the MISC field: input information (up to 140 characters) about the trust undue hardship issue including issues to be aware of and anything else the Claims Specialist believes is appropriate. If additional space is needed, use REMARKS.

I. Procedure for developing exceptions to resource counting

1. Special needs trusts under section 1917(d)(4)(A) of the Act before December 13, 2016

The following is a summary of special needs trust development presented in step-action format. Refer to the policy cross-references for complete requirements:

STEP

ACTION

1

Does the trust contain the assets of an individual who was under age 65 when the trust was established? (See SI 01120.203B.2. in this section.)

  • •

    If yes, go to Step 2.

  • •

    If no, go to Step 9.

2

Does the trust contain the assets of a disabled individual? (See SI 01120.203B.4. in this section.)

  • •

    If yes, go to Step 3.

  • •

    If no, go to Step 9.

3

Is the disabled individual the sole beneficiary of the trust? (See SI 01120.203B.5. in this section.)

  • •

    If yes, go to Step 4.

  • •

    If no, go to Step 9.

4

Did a parent, grandparent, legal guardian, or court establish the trust? (See SI 01120.203B.6. in this section.)

  • •

    If yes, go to Step 5.

  • •

    If no, go to Step 9.

5

Does the trust provide specific language to reimburse any State(s) for medical assistance paid upon the individual's death as required in SI 01120.203B.8. in this section?

  • •

    If yes, go to Step 6.

  • •

    If no, go to Step 9.

6

Check if the trust contains any early termination provisions as described within SI 01120.199. If the trust does not contain any early termination provisions, go to Step 7.

If the trust contains any early termination provisions, does it meet the early termination criteria in SI 01120.199E that would make early termination acceptable?

  • •

    If yes, go to Step 7.

  • •

    If no, go to Step 9.

7

The trust meets the special needs trust exception to the extent that the assets of the individual were put in trust prior to the individual’s attaining age 65. Any assets placed in the trust after the individual attained age 65 are not subject to this exception, except as provided in SI 01120.203B.3. in this section.

Go to Step 8 for treatment of assets placed in trust prior to age 65.

Go to Step 9 for treatment of assets placed in trust after attaining age 65.

8

Evaluate the trust under SI 01120.200D to determine if it is a countable resource.

9

The trust (or portion thereof) does not meet the requirements for the special needs trust exception.

Consider if the pooled trust exception in SI 01120.203D in this section applies. If neither exception applies, determine whether the undue hardship waiver applies under SI 01120.203K in this section.

2. Special needs trusts under Section 1917(d)(4)(A) of the Act on or after December 13, 2016

STEP

ACTION

1

Does the trust contain the assets of an individual who was under age 65 when the trust was established? (See SI 01120.203B.2. in this section.)

  • •

    If yes, go to Step 2.

  • •

    If no, go to Step 9.

2

Does the trust contain the assets of a disabled individual? (See SI 01120.203B.4. in this section.)

  • •

    If yes, go to Step 3.

  • •

    If no, go to Step 9.

3

Is the disabled individual the sole beneficiary of the trust? (See SI 01120.203B.5. in this section.)

  • •

    If yes, go to Step 4.

  • •

    If no, go to Step 9.

4

Did the individual, a parent, a grandparent, a legal guardian, or a court establish the trust? (See SI 01120.203C.2. in this section.)

  • •

    If yes, go to Step 5.

  • •

    If no, go to Step 9.

5

Does the trust provide specific language to reimburse any State(s) for medical assistance paid upon the individual's death as required in SI 01120.203B.8. in this section?

  • •

    If yes, go to Step 6.

  • •

    If no, go to Step 9.

6

Check if the trust contains any early termination provisions as described in SI 01120.199. If the trust does not contain any early termination provisions, go to Step 7.

If the trust contains any early termination provisions, does it meet the early termination criteria in SI 01120.199E that would make early termination acceptable?

  • •

    If yes, go to Step 7.

  • •

    If no, go to Step 9.

7

The trust meets the special needs trust exception to the extent that the assets of the individual were put in trust prior to the individual’s attaining age 65. Any assets placed in the trust after the individual attained age 65 are not subject to this exception, except as provided in SI 01120.203B.3. in this section.

Go to Step 8 for treatment of assets placed in trust prior to age 65.

Go to Step 9 for treatment of assets placed in trust after attaining age 65.

8

Evaluate the trust under SI 01120.200D to determine if it is a countable resource.

9

The trust (or portion thereof) does not meet the requirements for the special needs trust exception.

Consider if the pooled trust exception in SI 01120.203D in this section applies. If neither exception applies, determine whether the undue hardship waiver applies under SI 01120.203K in this section.

3. Pooled trusts established under Section 1917(d)(4)(C) of the Act

The following is a summary of pooled trust development presented in step-action format. Refer to the policy cross-references for complete requirements.

STEP

ACTION

1

Does the trust account contain the assets of a disabled individual? (See SI 01120.203D.2. in this section.)

  • •

    If yes, go to Step 2.

  • •

    If no, go to Step 8.

2

Is the pooled trust established and managed by a nonprofit association? (See SI 01120.203D.1., SI 01120.203D.3., and development instructions in SI 01120.203J in this section.)

  • •

    If yes, go to Step 3.

  • •

    If no, go to Step 8.

3

Does the trust pool the funds yet maintain an individual account for each beneficiary, and can it provide an individual accounting? (See SI 01120.203D.4. in this section.)

  • •

    If yes, go to Step 4.

  • •

    If no, go to Step 8.

4

Is the disabled individual the sole beneficiary of the trust account? (See SI 01120.203D.5. in this section.)

  • •

    If yes, go to Step 5.

  • •

    If no, go to Step 8.

5

Did the individual, (a) parent(s), (a) grandparent(s), (a) legal guardian(s), or a court establish the trust account? (See SI 01120.203D.1. and SI 01120.203D.6. in this section.)

  • •

    If yes, go to Step 6.

  • •

    If no, go to Step 8.

6

Does the trust provide specific language to reimburse any State(s) for medical assistance paid upon the individual's death from funds not retained by the trust as required in SI 01120.203D.8. in this section?

  • •

    If yes, go to Step 7.

  • •

    If no, go to Step 8.

7

The trust meets the Medicaid pooled trust exception; however, the trust still must be evaluated under SI 01120.200D to determine if it is a countable resource.

8

The trust does not meet the requirements for the Medicaid pooled trust exception. Determine if the undue hardship waiver applies under SI 01120.203K in this section.

J. Procedure to verify nonprofit associations when evaluating pooled trusts

When a trust is alleged to be established through the actions of a nonprofit or a tax-exempt organization, consult the pooled trust precedent in SSITMS. If none exists, follow policy and procedure for verifying the tax-exempt status of organizations found at SI 01130.689E. “Gifts to children with life-threatening conditions.”

K. Procedure for development of undue hardship waiver due to deprivation of food or shelter and limited funds

The following is a summary of development instructions for undue hardship due to deprivation of food or shelter and limited funds presented in step-action format. Refer to cross-references for complete instructions. For other hardship situations, see:

  • •

    SI 01120.203G.1 for Medicare Set-Aside Arrangements (MSA) funds in trusts;

  • •

    SI 01120.203G.2 when an SSA error results in a trust deficiency that cannot be remedied; and

  • •

    SI 01120.203G.3 for transfers upon early termination to a noncompliant SNT or pooled trust.

STEP

ACTION

1

Is the trust irrevocable?

  • •

    If yes, go to Step 2.

  • •

    If no, go to Step 8.

2

Would counting the trust result in excess resources?

  • •

    If yes, go to Step 3.

  • •

    If no, go to Step 8.

3

Does the trust contain language that specifically prohibits the trustee from making disbursements for the individual’s support and maintenance or that prohibits the trustee from exercising discretion to disburse funds for the individual’s support and maintenance?

  • •

    If yes, go to Step 4.

  • •

    If no, go to Step 8.

4

Does the individual allege, or information in the file indicate, that not receiving SSI would deprive the individual of food or shelter according to SI 01120.203G.4 in this section?

  • •

    If yes, go to Step 5.

  • •

    If no, go to Step 8.

5

Obtain the individual's signed statement (on the Person Statement page in the SSI Claims System or, in non-SSI Claims System cases, on an SSA-795 stored in the Evidence Portal) as to whether:

  • •

    Failure to receive SSI payments would deprive the individual of food or shelter;

  • •

    The individual's total available funds are less than the FBR plus any federally administered State supplement;

  • •

    The individual agrees to report promptly any changes in income and resources; and

  • •

    The individual understands that they may be overpaid if, for any month, available funds exceed the FBR plus any State supplement or if other situations change.

  • •

    Go to Step 6.

6

Add up all of the individual's income, both countable and excludable (see SI 01120.203G.4.a.iii in this section). Do not include any SSI payments received or items that are not income, per SI 00815.000. If the individual is receiving ISM, include as income the ISM being charged (the PMV, VTR, or actual amount, if less).

Add up all of the individual's liquid resources, both countable and excludable (see SI 01120.203G.4.a.iii in this section).

Does the total of the income and the liquid resources equal or exceed the FBR plus any federally administered State supplement?

  • •

    If yes, go to Step 8.

  • •

    If no, go to Step7.

7

Suspend counting of the trust as a resource for any month in which all requirements above are met (see SI 01120.203G.4.b in this section).

  • •

    In the SSI Claims System, document the findings of undue hardship and applicable months on the Report of Contact page.

  • •

    On paper forms, document the information in the REMARKS section. For further documentation, see SI 01120.202D and SI 01120.202E; and for follow-up instructions, see SI 01120.203H in this section. STOP.

8

Undue hardship does not apply. However, in some instances where income and resources are currently too high, unless the trust is revocable, undue hardship may apply in future months.

To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/0501120203
SI 01120.203 - Exceptions to Counting Trusts Established on or after January 1, 2000 - 08/26/2025
Batch run: 08/26/2025
Rev:08/26/2025