Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Wednesday, April 10, 2019

Note on Disabling the Funds of the Disabled: How the "Sole Benefit" Rule Frustrates the Administration and Purpose of Supplemental Deeds Trusts

SimpleElizabeth A. Weikel recently published a Note entitled, Disabling the Funds of the Disabled: How the "Sole Benefit" Rule Frustrates the Administration and Purpose of Supplemental Deeds Trusts, 32 Quinnipiac Prob. L.J. 60-86 (2018). Provided below is an introduction of the Note.

"Simplicity is the most deceitful mistress that ever betrayed man."

-Henry Adams

Floyd Brown was charged with murder in 1993. Found incompetent to stand trial, he was sentenced to a psychiatric institution. In 2007, after fourteen years of confinement, he was exonerated. The appellate judge held that the lone piece of evidence, an elaborate six-page confession, was entirely too sophisticated for Mr. Brown to have dictated. Mr. Brown is intellectually disabled; he has an IQ of less than sixty and the mental capacity of a seven-year-old child. 

Following his release, Mr. Brown was awarded approximately nine million dollars for his wrongful confinement. The net settlement was put into a supplemental needs trust ("SNT"), 8 a special kind of trust available for people with disabilities which allows the beneficiary to exclude the trust corpus from asset calculation when applying or recertifying for means-tested government programs. The trust was meant to enhance his quality of life. Yet, with millions of dollars accruing interest, Mr. Brown's simple request for a bouquet of flowers for his mother's grave was denied, and he was living below the poverty line. 

Why? Because the flowers and other items Mr. Brown requested were not strictly for his benefit.  According to the Social Security Administration's ("SSA") interpretation of the statutory language, which established SNTs, the trust must be established for the "sole benefit" of the beneficiary. Likewise, until very recently, the SSA required that all trust disbursements be made for the "sole benefit" of the beneficiary. On April 30, 2018, the SSA relaxed its interpretation of the "sole benefit" rule in limited circumstances: trust disbursements made to third-parties for certain goods or services may now be for the "primary benefit" of the beneficiary. However, outside of this limited exception, any other disbursement that violates this stringent rule ensures that the beneficiary will lose eligibility for essential government benefit programs, including Medicaid and Supplemental Security Income ("SSI"). Although Mr. Brown had millions of dollars, losing eligibility for public benefits meant the trust would likely be expended in a short time to provide medical care and necessities, and to repay state and federal programs for previous expenditures related to his cost of care.

https://lawprofessors.typepad.com/trusts_estates_prof/2019/04/note-on-disabling-the-funds-of-the-disabled-how-the-sole-benefit-rule-frustrates-the-administration-.html

Articles, Current Affairs, Disability Planning - Property Management, Estate Administration, Estate Planning - Generally, Trusts | Permalink

Comments

Post a comment