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

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

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

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  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).

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.

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.

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:

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:

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

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  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.

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:

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  the disabled individual’s parent(s);

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  the disabled individual’s grandparent(s);

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

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  a court.

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.

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). 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. 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.

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:

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

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  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

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  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.

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

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  the individual;

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  a parent(s);

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  a grandparent(s);

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  a legal guardian(s); or

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  a court.

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.

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:

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

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

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

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

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  The trust provides that, 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 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 beneficiary under State Medicaid plan(s).

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 age 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.

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.

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.

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:

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

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  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.

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

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  the disabled individual themselves;

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  the disabled individual’s parent(s);

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  the disabled individual’s grandparent(s);

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

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  a court.

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.

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). 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.

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.

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:

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

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  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.

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:

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

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  Inheritance taxes due for residual beneficiaries;

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  Payment of debts owed to third parties;

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  Funeral expenses; and

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  Payments to residual beneficiaries.

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.

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

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 Frank's 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 FBR of $735. (His State has no federally administered State supplement.)

Frank comes back into the office in 6/2017 and presents evidence that they have spent down the $500 in their 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. Frank meets the undue hardship test for 6/2017 (which is Frank's E02 month). The trust does not count as Frank's resource in that month. If Frank's situation does not change, Frank qualifies for an SSI payment in 7/2017.

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. Since undue hardship is a month-by-month determination, recontact the individual to redevelop undue hardship periodically.

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.

At each recontact:

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  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;

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

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  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

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  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.

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

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  In the ISSUE field: input TRUST;

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

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  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:

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  In the ISSUE field: input TRUST;

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  In the CATEGORY field: input T16MISC;

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

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  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 appropriate. If additional space is needed, use REMARKS.

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

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