Can Special Needs Trusts Reimburse Family Members for Travel Expenses?

Families of people with special needs often face unusually high travel expenses.  Medical emergencies or other unforeseen circumstances may require travel to care for their loved ones at a moment’s notice.  Or family members may simply need to travel in order to visit the person with special needs.

Typically, family members can be reimbursed for these expenses from the special needs trust of the person with disabilities (the trust beneficiary) if the trust was created as a third-party trust, meaning that it is funded with money from someone other than the trust beneficiary.

Stricter rules apply, however, where the trust is set up as a first-party trust, meaning that is funded by the beneficiary’s own money.  Distributions from first-party trusts are subject to the so-called “sole benefit” rule, which is meant to ensure that trust distributions are used solely for the benefit of the trust beneficiary.

Prior to 2012, no distinction existed for family members’ travel expenses between first- and third-party trusts – travel to visit the beneficiary was allowed.  But that August, the Social Security Administration (SSA) revised its Program Operations Manual System (POMS), the guidebook that agency employees follow when determining a person’s Supplemental Security Income eligibility, in a way that appeared to interpret the “sole benefit” rule for first-party trusts to bar reimbursement of family members’ travel expenses.

Following an outcry by disability advocates, the SSA rescinded the change and implemented a compromise in May 2013. Although the compromise retained the general prohibition on reimbursement of travel expenses from first-party trusts, it created two, relatively broad, exceptions.

The first exception apples to medical treatment. Specifically, the POMS states that trust distributions are allowed for the “payment of third party travel expenses which are necessary in order for the trust beneficiary to obtain medical treatment.”

Second, first-party trusts can reimburse travel expenses where the trust beneficiary who lives in an institution, nursing home, or other long-term care facility or  supported living arrangement, and  if the travel is “for the purposes of ensuring the safety and/or medical well-being of the individual.”

If the SSA rejects a first-party trust for violation of these rules, then the POMS includes a 90-day “safe harbor” provision, which essentially creates a 90-day period during which the trust can be modified.

Note: It is expected that the SSA will soon issue new directives broadening the allowable distributions for such expenses.  We will update our readers if and when this occurs.

Click here to read the applicable POMS provision, POMS Section 1120.201.

To find out more about whether a trust can reimburse family members’ for travel expenses, contact your special needs planner.

© 2015 MATTHEW L. MERCER | Attorney at Law

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