“Sole Benefit” Payments Expanded

After much concern and some troubling provisions, the Social Security Administration (SSA) has revised its manual and policies to allow first-party supplemental needs trusts to pay for some expenses previously not considered for the “sole benefit” of the trust beneficiary.

According to the manual, the general rule is that a trust is established for the sole benefit of an individual “if the trust benefits no one but that individual, whether at the time the trust is established or at any time for the remainder of the individual’s life.” However, the revised manual provisions establish two exceptions: (1) third-party payments and (2) administrative expenses.

The new rule states that payments do not violate the sole benefit rule if they are to third parties for goods or services received by the beneficiary, payments of third-party travel expenses “which are necessary in order for the trust beneficiary to obtain medical treatment,” or payments that allow a third party to “visit a trust beneficiary who resides in an institution, nursing home, or other long-term care facility (e.g., group homes and assisted living facilities) or other supported living arrangement in which a non-family member or entity is being paid to provide or oversee the individual’s living arrangement.” However, “[t]he travel must be for the purpose of ensuring the safety and/or medical well-being of the individual.”

In addition, the revised manual clarifies the rule that payment of some administrative expenses upon early termination of the trust or otherwise, including trustee fees, will not violate the sole benefit rule.

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