Text or Call Today 571-403-2619

Blog

Supplemental Security Insurance (SSI) and Trusts

Posted by Aubrey Carew Sizer | Mar 21, 2018

The contents of most trusts you create for yourself will be considered available to you in determining your eligibility for Supplemental Security Insurance (SSI). On the other hand, assets of most trusts that someone else creates and names you as a beneficiary of will not be considered to belong to you for purposes of determining your SSI eligibility. If you created and funded an irrevocable trust for your own benefit prior to January 1, 2000, it will be grandfathered, and in most cases, its assets will not be considered to belong to you.

Trusts designed to aid a person with special needs are commonly known as "special needs trusts."  There are three main types of special needs trusts: the first-party trust, the third-party trust, and the pooled trust. All three name the person with special needs as the beneficiary, but they differ in several significant ways.

A first-party special needs trust is designed to hold an SSI beneficiary's own assets, but it must be created by the beneficiary's parent or grandparent, or by a court, even though the beneficiary's assets are going to fund the trust. While the beneficiary is living, the funds in the trust are used for his benefit, and when he dies, any assets remaining in the trust are used to reimburse the government for the cost of his medical care. These trusts are especially useful for beneficiaries who are receiving SSI and come into large amounts of money because the trust allows the beneficiary to retain his benefits while still being able to use his own funds when necessary.

The third-party special needs trust is most often used by parents and other family members to assist a person with special needs. These trusts can hold any kind of asset imaginable belonging to the family member or other individual, including a house, stocks and bonds, and other types of investments. The third-party trust functions like a first-party special needs trust in that the assets held in the trust do not affect an SSI beneficiary's access to benefits and the funds can be used to pay for the beneficiary's supplemental needs beyond those covered by government benefits. But a third-party special needs trust does not contain the "payback" provision found in first-party trusts. This means that when the beneficiary with special needs dies, any funds remaining in her trust can pass to other family members, or to charity, without having to be used to reimburse the government.

A pooled special needs trust is an alternative to the first-party special needs trust.  Essentially, a charity sets up these trusts that allow beneficiaries to pool their resources for investment purposes, while still maintaining separate accounts for each beneficiary's needs. When the beneficiary dies, the funds remaining in her account reimburse the government for her care, but a portion also goes towards the non-profit organization responsible for managing the trust.

Given the complexity of this field, any special needs trust should be drafted by an experienced attorney knowledgeable about SSI matters.

About the Author

Aubrey Carew Sizer

Aubrey Carew Sizer is the Principal Attorney of The Law Office of Aubrey Carew Sizer PLLC, a Northern Virginia law firm providing representation for Wills, Trusts, and Estate Planning, Long-Term Care Planning, Guardianship and Conservatorship, Special Needs Planning for the Disabled, and Probate, Estate and Trust Administration.

Services

The Law Office of Aubrey Carew Sizer PLLC provides customized and affordable estate planning (including wills, living trusts, powers of attorney, and advance medical directives); elder law services (including long-term care planning, special needs planning for the disabled, and guardianships and conservatorships); probate, estate and trust administration (including advising executors and administrators of estates about post-mortem planning and the local probate process in Virginia), as well as general aging and disability advice in Northern Virginia, including but not limited to Arlington, Alexandria, Ashburn, Bristow, Burke, Centreville, Chantilly, Gainesville, Fairfax, Falls Church, Haymarket, Herndon, Leesburg, Manassas, Manassas Park, Reston, Springfield, Sterling, and throughout Loudoun, Prince William, and Fairfax counties.

Menu