When an SSI Recipient is Beneficiary of a Trust

Supplemental Security Income (“SSI”) is a federal cash assistance program for the aged, blind, and disabled, which is administered by the Social Security Administration. Unlike regular Social Security benefits, which are linked to work history, SSI is linked to financial need. In 2007, a single individual must have assets not exceeding $2,000, and countable monthly income must be less than $623.00, in order to qualify for SSI. In Texas, all SSI recipients are given automatic Medicaid coverage. However, the Medicaid coverage is contingent upon continued receipt of SSI cash assistance. When the cash assistance stops, so does Medicaid.

It is not uncommon for an SSI recipient to be the beneficiary of a trust. Trusts for SSI recipients are set up as supplemental needs trusts, meaning that they supplement (but do not supplant) public benefits. This is important, since SSI and Medicaid provide for only a subsistence level of existence. Often such a trust is third-party-settled, which means that it is set up by a family member (using that family member’s assets) to provide for the needs of the disabled SSI recipient. This may be in the form of a testamentary trust, which is one that is written into the settlor’s will and becomes effective upon the settlor’s death. Or it could be in the form of an inter vivos trust, which is one that is established and takes effect during the lifetime of the settlor. Depending upon the language of the trust agreement, a third-party-settled trust may not be a barrier to SSI eligibility. However, the SSI program will look at the trust distributions to see how and for what purpose they are being made. Distributions to (or for the benefit of) the SSI beneficiary may or may not count as income to that beneficiary, depending upon how the distributions are used and to whom they are made. The point here is that the trustee (the one who manages the trust assets on behalf of the SSI beneficiary) usually does not want to make distributions that will disqualify the beneficiary for SSI and hence for Medicaid.

Federal law also allows for certain self-settled trusts to be established. This type of trust may be established by the SSI recipient himself/herself, using his/her own assets. Often this type of trust is established with funds received from a personal injury settlement, but it could be established with other types of assets as well, such as those received through inheritance. In order not to interfere with SSI/Medicaid eligibility, this type of trust must meet very specific requirements set forth in federal law. Again, the SSI program will look at trust distributions to determine whether or not they are countable income to the SSI beneficiary.

The significance of the foregoing is that it is possible to set up a trust which is designed to supplement the needs of an SSI/Medicaid recipient, without jeopardizing that individual’s public benefits at all. By using one of the above-described trusts, one can help to enhance the lifestyle of a disabled individual by providing for items and services that are beyond the basic support needs of food and shelter.

An experienced elder law attorney can assist you in determining whether a trust might be appropriate, as well as the best type of trust to use. The attorney can also work with the trustee, during the administration of the trust, to help determine appropriate distributions and their effect upon SSI/Medicaid.

Wright Abshire, Attorneys, is available to assist you with SSI and Medicaid trusts, wills, probate, advance directives, living wills, durable powers of attorney, and all aspects of Medicaid planning.