TN 8 (07-07)

A. Introduction

A representative payee is permitted to transfer Title II and/or Title XVI benefits to establish a trust, or fund an existing trust, provided the terms of the trust are not contrary with use of benefits policies (see GN 00602.001). However, for Title XVI eligibility, additional requirements may have to be met (refer to GN 00602.075C.4.).

Exception: A representative payee cannot use Title XVI past-due benefits which meet dedicated account requirements as described in SI 02101.010 to establish a trust or fund an existing trust. These benefits must be held in a savings account, a checking account, or a money market account established in a financial institution as described in GN 00603.025.

B. Definitions

Trust – A property interest whereby property held by an individual or entity (such as a bank) subject to a fiduciary duty to use the property for the benefit of another.

Trustee – The person who holds legal title to property for the use or benefit of another.

Trust Beneficiary – The person for whose benefit a trust exists.

Grantor – The person who provides the trust principal. The grantor must be the owner or have legal right to the property or be otherwise qualified to transfer it.

Trust Principal – The property placed in trust by the grantor which the trustee holds, subject to the rights of the beneficiary plus any trust earnings paid into the trust and left to accumulate.

Residual Beneficiary – The person who will receive the residual benefit of the trust contingent upon the occurrence of a specific event, e.g., the death of the beneficiary.

Refer to SI 01120.200B. for a list of definitions related to trusts.

C. Policy

1. Payee Responsibilities When Establishing a Trust or Funding an Existing Trust

A representative payee may transfer a beneficiary’s Title II and/or Title XVI benefits to establish a trust, or fund an existing trust, on behalf of the beneficiary provided that:

• Establishing the trust is in the beneficiary’s best interest;

• The trust is established exclusively for the use and benefit of the beneficiary, to meet the beneficiary’s current and reasonably foreseeable needs; and

• The Title II and/or Title XVI beneficiary is the sole trust beneficiary during his or her lifetime.

2. Benefits Transferred to a Trust are Viewed as Expended

Once the representative payee has properly transferred the benefits to a trust established in accordance with the conditions described in GN 00602.075C.1., the benefits are considered “expended” or “used” to meet the beneficiary’s current and reasonably foreseeable needs, just as if the payee used the funds to purchase goods and services to benefit the beneficiary.

3. Directing Benefits into a Trust is Prohibited

A trust provision that directs the payment of past-due, current or future Title II and/or Title XVI benefits directly into a trust and not to the individual or his or her representative payee is prohibited because it violates the assignment of benefits provision of section 207 of the Social Security Act. Section 1631(d)(1) of the Act incorporates section 207 to protect Title XVI benefits. Refer to GN 02410.001 for an explanation of the assignment of benefits provision.

4. Effect of Establishing a Trust on SSI Eligibility

Trusts established with, or including, funds belonging to an SSI beneficiary may be counted as a resource and may affect SSI eligibility, unless certain criteria are met. Generally, trusts established with the assets of an individual (or spouse) will be considered to be a resource for SSI eligibility purposes unless one of the exceptions in SI 01120.203 applies. Refer to SI 01120.201, SI 01120.202 and SI 01120.203 for guidance on trusts and how trusts established with an individual’s assets affect SSI eligibility. In addition, disbursements from a trust may also be counted as income for SSI purposes (see SI 01120.200E.)

D. Procedure

Do not attempt to give legal advice, draft trust language, or correct trust documents to meet SSA guidelines. Refer to SI 01120.200K.1. for additional guidance when discussing SSI trust policy with representative payees.

1. Payee Contacts FO about Establishing a Trust

A representative payee may contact the FO with questions about transferring Title II and/or Title XVI benefits to establish a trust for the beneficiary.

• Discuss with the payee his or her responsibilities as described in GN 00602.075C.1.

• Ask the payee to submit a copy of the trust document to the FO for review and approval to ensure the terms of the trust are in compliance with use of benefits policies (GN 00602.001) and SSI trust policies, if applicable (SI 01120.201, SI 01120.202 and SI 01120.203).

• Determine whether the terms of the trust represent a proper use of benefits (refer to GN 00602.075D.3.). If the terms of the trust represent an inappropriate use of benefits, inform the payee that the trust provision(s) do not comply with use of benefits policy and that any transfer of benefits to the trust is not permitted under Agency rules and could constitute a misuse of benefits. Also, determine if the trust may cause ineligibility for SSI benefits, if applicable. This discussion may prompt the payee to modify the terms of the trust and to provide the FO with a copy of the revised trust document.

• Document the Make Note screen (MS INTRANETERPS 015.002 and 015.003.D) on the eRPS with your decision(s), payee proposed action(s), etc. Also refer to SI 01120.200K. and SI 01120.202 for additional instructions related to documenting the trust when SSI is involved.

2. FO Learns About an Existing Trust

You may learn that a representative payee used Title II and/or Title XVI benefits to establish a trust, or fund an existing trust for the beneficiary, after the fact (e.g., during a site review, annual accounting, SSI redetermination, or through a third party).

• Discuss with the payee his or her responsibilities as described in GN 00602.075C.1.

• Ask the payee to submit a copy of the trust to the FO for review and approval to ensure the terms of the trust are in compliance with use of benefits policies (GN 00602.001) and SSI trust policies, if applicable (SI 01120.201, SI 01120.202 and SSI 01120.203). If the payee and the trustee are not the same person, ask the payee to explain how the trust funds are used and have the payee obtain a copy of the trust from the trustee.

• Determine whether the terms of the trust represent a proper use of benefits (refer to GN 00602.075D.3.). If the terms of the trust represent an inappropriate use of benefits, inform the payee that the trust provision(s) do not comply with use of benefits policy and that any transfer of benefits to the trust is not permitted under Agency rules and could constitute a misuse of benefits. This discussion may prompt the payee into taking legal action to modify the trust and to provide the FO with a copy of the revised trust document. It may also result in the payee alleging that trust fund expenditures are in compliance with use of benefits policy. Under these circumstances, allow the payee 60 days to provide proof that the trust has been revised and disbursements were proper. Absent proof, the FO should develop for misuse following the instructions in GN 00604.000. If applicable, also determine if the existence of the trust allows for continued SSI eligibility.

• Document the Make Note screen (MS INTRANETERPS 015.002 and MS INTRANETERPS 015.003.D) on the eRPS with your decision(s), payee proposed action(s), etc. Also refer to SI 01120.200K and SI 01120.202 for additional instructions related to documenting the trust when SSI is involved.

3. Determine Whether the Trust Meets Use of Benefits Policies

The following guidelines should be used to evaluate whether or not the trust meets use of benefits policies. If it is unclear whether the trust meets use of benefits policies, you should refer the case to your regional office for possible referral to the Regional Chief Counsel:

• Is the trust established in the beneficiary’s best interests?

  Determine whether the trust will provide for the beneficiary’s current and reasonably foreseeable needs. If it does, then a transfer of benefits to such a trust can be viewed as in the “best interests” of the beneficiary.

• Will the benefits comprising the trust fund ONLY be used for purposes that would be permitted by a representative payee on behalf of the beneficiary?

  Consider trust fund expenditures for food, clothing, housing, medical care, recreation, education, etc., as expenditures for the use and benefit of the beneficiary and in his or her best interests.

  Note: A trust may provide for reasonable compensation for the trustee to administer the trust, as well as reasonable costs associated with legal and other necessary services. The size and complexity of the trust makes it difficult to provide guidance on what constitutes “excessive” fees. Decide each case on its merits. If a fee for service payee is the trustee of the trust, refer to GN 00506.220 which describes the restrictions on collecting a fee for payee services.

• Is the Title II and/or Title XVI beneficiary the sole trust beneficiary during his or her lifetime?

  The trust beneficiary is the person for whose benefit the trust exists. During the lifetime of that individual no one but the individual must benefit from the trust. Residual beneficiaries are permitted to receive the benefits of the trust only upon the trust beneficiary’s death.

Example – Compliance with Use of Benefits

The trust directs that trust assets be used only to meet the beneficiary’s current maintenance needs that are not covered by public assistance.

Rationale: Since the trust does not prevent the use of trust assets to meet the beneficiary’s current maintenance needs, establishing a trust that would provide for the maintenance needs not met by public assistance can be viewed as an expenditure of benefits for the use and benefit of the beneficiary.

Example – Non Compliance with Use of Benefits

The trust prohibits that trust funds be used specifically to meet the beneficiary’s current needs for food, clothing, housing and medical care. Trust funds are to be used to enhance the quality of life for the trust beneficiary in the broadest sense, including but not limited to vacation travel and transportation expenses.

Rationale: The transfer of benefits to this type of trust would be inappropriate since the beneficiary’s current and reasonably foreseeable needs would be left unmet, thereby violating representative payment regulations that benefits be expended to meet such needs.

NOTE: Although the use of benefits for vacations and transportation expenses for the beneficiary would be an improper use of benefits, it is not misuse (see GN 00602.130 and GN 00604.001B.3.).

4. Transfer of Benefits to a Trust and the Annual Accounting Report Form

Instruct the payee that the amount of Title II and/or Title XVI benefits transferred during the 12-month report period to establish a trust, or fund an existing trust, should not be reported as conserved funds on the accounting report (e.g., SSA-623).

The payee should consider these benefits as “spent” at the time of transfer and include the money amount along with the other monies actually spent on food and housing, clothing, medical care, personal needs, etc. when completing the accounting report. This reporting practice is necessary to ensure the annual accounting system selection process and the identifying information printed on the accounting report (i.e., total accountable amount) is accurate for future accountings.