This memorandum is in response to your request for an opinion regarding whether the
provisions of a trust agreement that a representative payee established in Oklahoma
on behalf of a disabled adult child comply with the Social Security Administration's
(agency's) use of benefits policy. Specifically, you asked whether trust terms that
provide the disabled adult child, during his lifetime, assistance with his medical
needs and other needs, including, but not limited to, education, transportation, and
entertainment, that are not currently being met by the Oklahoma Medicaid Program,
establish a proper use of Social Security benefits by a representative payee. You
also asked whether this trust could be viewed as an assignment of benefits. In our
opinion, the trust provisions set forth a proper use of Social Security benefits.
As such, because the trust funds will be expended for the use and benefit of the disabled
adult child, the representative payee's deposit of the disabled adult child's Social
Security benefits into the trust would not be considered an unlawful assignment of
benefits.
As we understand the facts, in April 2004, John F. W~, an incapacitated adult, began
receiving Social Security Title II child's insurance benefits in the monthly amount
of $965.00 on the account of his mother, J.L. C~ (number holder). John is eligible
for Medicaid and currently resides in Callaway Nursing Home in Sulphur, Oklahoma,
a Medicaid facility. In August 2006, John's father and legal guardian, Franklin W~,
became John's representative payee and established the John F. W~ Trust Agreement
(Trust Agreement), which named John as the primary beneficiary.
The Trust Agreement is funded with John's assets, which include his Social Security
Title II child's insurance benefits. The primary purpose of the Trust Agreement is
to provide John, during his lifetime, assistance with his medical needs and other
needs, consisting of education, transportation, and entertainment, that "cannot be
satisfied" by the Oklahoma Medicaid Program. See Trust Agreement, Section 2.01. The Trust Agreement's purpose is also to provide "any
other assistance [John] will need to ensure that he experiences as natural and pleasant
a life as possible." Specifically, the Trust Agreement states that John's needs and
assistance may consist of the following items that are not being provided by any other
source:
1. More sophisticated medical, psychological, and/or dental treatment, private rehabilitative
or education training, and additional home care;
2. Maintenance and living expenses, such as therapy, laundry, diapers, hair care,
bedding, medical apparatus, and supplies and food supplements;
3. An automobile or van for John's benefits, including any modification, improvement,
insurance, and operating expense;
4. Companions;
5. Items that will enrich John's life, including furniture, radios, televisions, audio,
video, and computer equipment, adaptive toys, electronic devices, and the maintenance
and payment of services for same;
6. Recreational opportunities, trips, family visits, visits with friends or relatives,
and any other tangible or intangible items that would enrich or benefit John;
7. Maintenance of contact with John and other family members and friends, including
their lodging and transportation;
8. Payment of insurance policy premiums;
9. Ongoing maintenance and adaptations of John's primary residence;
10. Attorney fees and disbursements and court fees relating to any guardianship proceeding;
the trust; state or federal programs that may benefit John; and the representation
of John to protect and enforce his rights.
11. Any tax obligation of the Trust;
12. A special wheel chair and other items needed due to John's physical and mental
limitations; and
13. Prepayment into an irrevocable funeral trust, contract, or insurance policy for
funeral and burial expenses.
Trust Agreement Section 2.03.
The Social Security Act (Act) provides that a representative payee receives Social
Security benefits on behalf of a beneficiary and has a responsibility to use the payments
he or she receives only for the use and benefit of the beneficiary in a manner that
is in the beneficiary's best interests. 42 U.S.C. § 405(j); 20 C.F.R. §§ 404.2035,
2040 ("Use of benefit payments"). The representative payee is to use benefits received
on a beneficiary's behalf for current and reasonably foreseeable maintenance, such
as food, shelter, clothing, medical care, and personal comfort items. 20 C.F.R § 404.2040(a),
(b), (d). Additionally, if a beneficiary is receiving care in a private institution
because of a mental or physical incapacity, current maintenance includes customary
charges made by the institution, as well as expenditures for those items that will
aid in the beneficiary's recovery or release from the institution or expenses for
personal needs that will improve the beneficiary's conditions while in the institution.
20 C.F.R. § 2040(b). Once the representative payee has used the benefit payments in
a manner consistent with the agency's use of benefits policy, any remaining amount
must be conserved or invested on the beneficiary's behalf. 20 C.F.R. § 404.2045.
Since agency regulations provide minimal guidance on the transfer of benefits to a
trust and the proper use of benefit payments, the agency issued more definitive benefit
policy guidance in its Program Operations Manual System (POMS). Under agency regulations
and policy, a representative payee may transfer Title II benefits to fund an existing
trust, provided the terms of the trust are not contrary with the use of benefits policy.
20 C.F.R. §§ 404.2035, 404.2040; POMS GN 00602.075 ("Transfer of Benefits to a Trust"). The trust must be in the beneficiary's best
interest, established exclusively for the use and benefit of the beneficiary to meet
the beneficiary's current and reasonably foreseeable needs, and the Title II beneficiary
must be the sole trust beneficiary during his or her lifetime. 20 C.F.R. § 404.2040;
POMS GN 00602.075. The POMS explains that terms of a trust are in compliance with the agency's use
of benefits policy when the trust terms direct the trust assets to be used only to
meet the beneficiary's current maintenance needs that are not covered by public assistance.
See POMS GN 00602.075. A trust is not in compliance with the use of benefits policy when the trust prohibits
the trust funds from being used specifically to meet the beneficiary's current and
reasonably foreseeable needs for food, clothing, housing, and medical care. Id.
We first note that John's representative payee properly set up the Trust Agreement.
The Trust Agreement was established exclusively for John's use and benefit to meet
his current and reasonably foreseeable needs not covered by the Oklahoma Medicaid
Program. The Trust Agreement also named John as the sole trust beneficiary during
his lifetime.
We next look at whether the Trust Agreement is in compliance with the agency's use
of benefits policy. See 20 C.F.R. § 404.2040; POMS GN 00602.075. The POMS explains that Social Security benefits should not be used to purchase items
"normally provided" by a facility or covered under a state program. POMS GN 00602.010(B)(2). The POMS also explains that the purchases on behalf of a beneficiary should
reflect a personal evaluation of the beneficiary's situation and needs, and should
help the beneficiary keep contact with the outside world and preserve his or her sense
of individuality. POMS GN 00602.010. The POMS further provides non-exhaustive lists of personal items that a beneficiary
may need, such as clothing, personal articles, room furnishings, recreational items,
special medical expenses or equipment, transportation expenses, and miscellaneous
items. See POMS GN 00605.067(F) and GN 00602.010.
In this case, the Trust Agreement specifically provides for John's current and reasonably
foreseeable needs that "cannot be satisfied" by the Oklahoma Medicaid Program. Trust
Agreement, Section 2.01. The Trust Agreement also provides trust funds to be used
for any assistance not being provided that John would need in the Medicaid nursing
home to make certain that he experiences "as natural and pleasant a life as possible."
Id. Such needs or assistance could consist of special medical expenses or equipment,
personal articles, room furnishings, recreation, including travel and transportation,
and miscellaneous items. See id. at Section 2.03. The Trust Agreement only authorizes the expenditure of funds for
these items when the items are not being provided by any other source, which is consistent
with agency guidelines. See POMS GN 00602.010. As such, we believe that the trust terms authorizing the expenditure for these needs
or assistance not being provided by the Oklahoma Medicaid Program or any other source
represent a proper use of Social Security benefits.
The Trust Agreement also provides for the payment of insurance policies, funeral and
burial expenses, tax obligations of the trust, and attorney fees. The POMS clarifies
that the purchase of life insurance policies or pre-paid burial contracts is an acceptable
use of benefits. See POMS GN 00602.050. The POMS also states that a trust may provide for reasonable costs associated with
legal and other necessary services. See POMS GN
00602.075(3). We believe the trust terms directing payment for insurance policies, funeral
and burial expenses, tax obligations of the trust, and attorney fees represent a proper
use of Social Security benefits.
Finally, we note that the transfer of John's Title II child's insurance benefits to
the Trust was appropriate. The Trust does not direct the payment of John's Title II
benefits directly into the Trust. See POMS GN 00602.075 (prohibiting a trust provision that directs the payment directly into a trust). Therefore,
the transfer would not be considered an improper assignment of benefits under 42 U.S.C.
§ 407(a).
In summary, we believe the trust terms that provide for John's medical needs, along
with his education, transportation, and entertainment needs, that the Oklahoma Medicaid
Program or any other source are not currently meeting, represent a proper use of Social
Security benefits by a representative payee. We also believe that the trust terms
directing payment for insurance policies, funeral and burial expenses, tax obligations
of the trust, and attorney fees represent a proper use of Social Security benefits.
Overall, we believe the trust funds contained within the Trust Agreement are being
used for John's use and benefit, are in his best interests, and are not contrary with
the agency's use of benefits policy. As such, the transfer of John's Title II benefits
to the Trust was appropriate and would not be considered an improper assignment of
benefits.
Very Truly Yours
Michael M~
Regional Chief Counsel
By: _____________________
Carolyn E. W~ Assistant Regional Counsel