Food stamp eligibility saved; trust payments not “income”

In a recent decision by the New Hampshire Supreme Court, the Court ruled that trust payments to third party vendors were not countable as “income” to the trust beneficiary for purposes of determining her eligibility for food stamps. Petition of Kelly Hagenbuch.

The federal food stamp program (called SNAP in New Jersey) is available to individuals who meet certain income and asset limits. Kelly Hagenbuch was a recipient of food stamps in New Hampshire. She was also the beneficiary of an irrevocable trust that had been established for her sole benefit. Kelly had no right, title or power over the distributions, and could not compel a distribution under any circumstances. The Trustee made payments from the trust to various third parties for such things as administration expenses and taxes. These payments were considered to be payments to third party vendors, which are normally excluded from “income” under the program’s rules. In reviewing the trust, the agency determined that the trust’s distributions should be treated as “income” to Kelly, and terminated her benefits, as the income would disqualify her from receipt of benefits. Kelly sought court review.  The New Hampshire Supreme Court held that these vendor payments did not count as her income because the trust funds were not “owed to” her — in other words, that she had no right to compel the payments. Petition of Kelly Hagenbuch.

Call us to review your existing trusts and advise you on eligibility for benefits programs … 732-382-6070

Payback provisions are required for a qualified special needs trust

Self-settled special needs trusts must have a payback provision to be considered an exempt trust  under the federal and state Medicaid program. A Medicaid applicant under 65 can transfer his or her excess resources (assets) into a “special needs trust” and avoid the usual transfer penalties, but only if the trust meets all of the requirements of the federal and state law. Also, if the trust meets all of the requirements it will not be treated as a countable resource that might otherwise disqualify the person. New Jersey’s regulations are quite detailed on this subject. One of these requirements is that the State of New Jersey must be named as the first beneficiary upon the death of the trust beneficiary/Medicaid recipient, up to the amount the State has expended for the individual. The case of D.W. v.Division of Medical Assistance and Health Services,

2015 WL 7738711 (App. Div. 2015), illustrates the problem.

D.W. received a settlement from a personal injury action, and a first party trust was established for D.W.’s benefit by the Court to receive the assets. However, the Trust lacked the required payback provision. D.W. lost his benefits/ was turned down for benefits because the amount in the trust was deemed to be a countable resource and put D.W. over the resource limit for the Medicaid program. On appeal, the Appellate Division affirmed, in an unpublished and nonprecedential opinion.

This was an unfortunate situation.  D.W. may be able to initiate an action in court to reform (amend) the Trust moving forwards, but that will not guarantee that the amendment will be made retroactive.

For legal advice and representation on Special Needs Trusts and Medicaid application, call us at … 732-382-6070

SSA issues emergency memo re: Notice to recipients of Special Needs Trust problems

A person who receives SSI (Supplemental Security Income) or is applying for SSI needs to report their resources (assets), income and transfers or gifts that they have made. If the individual is under 65, they sometimes shield their excess resources by transferring them into a first-party Special Needs Trust for their own sole benefit, which enables them to have some money on the side for supplemental needs and still receive benefits if they are otherwise eligible. The Trust has to meet specific federal criteria which are contained in the SSI statute and regulations, and which are further detailed in state regulations such as N.J.A.C. 10:71-4.11(g). Sometimes when the Trust arrangement is reviewed by the Social Security Administration caseworker, the worker determines that the Trust is nonconforming or has been improperly managed, and they issue a Notice of ineligibility.

If an adverse action is taken by the SSA, the applicant or recipient has a right to appeal, called Request for Reconsideration. The problem is that the Notice often fails to state just what the problem is, leaving the hapless individual seeking an appeal without knowing just what the issue is. The SSA has just issued an Emergency Message that is intended to solve this problem. Here it is:

According to the new instructions, the SSA notice must inform the individual as to (1) which section of the trust agreement contains the problem or issue, (2) the citation to the specific section of the SSA POMS (Procedural and Operations Manual) which tells what the policy requirements are for that issue, and (3) a reference or link to where the reader can access the POMS online.

Depending on the specific issue and the precise wording of the Trust, some amendments might be made administratively by the Trustee, but others must be made through a state court proceeding referred to as “trust reformation.” This may take several months. In any event, the individual should preserve their rights by filing for reconsideration as well.

Call us to write, evaluate pursue legal action concerning Special Needs Trusts…. 732-382-6070