Requirements for reporting a SNT trust to Social Security

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
User avatar
Topic Author
typical.investor
Posts: 3810
Joined: Mon Jun 11, 2018 3:17 am

Requirements for reporting a SNT trust to Social Security

Post by typical.investor »

Is the beneficiary of a third party irrevocable special needs trust considered the owner?

My son is disabled and receiving SSI and social security is asking about a trust I set up. They want the original trust documents and statements.

I explained he is the beneficiary and they say they need to review it calling him the owner. If he is the owner, then perhaps technically I am subject to penalty for not reporting the correct value of his resources (in their opinion) but I did not because they are not really his resources.

The issue arose because I am the trustee of the trust and as his representative payee have the social security go to the trust.

I really dislike sending statements to the government with account numbers on it. Anyway, they are reviewing his eligibility per this issue.

*** I guest the upside is if they know of his trust, they won't be surprised by the trust income on his federal tax return income
User avatar
beyou
Posts: 5030
Joined: Sat Feb 27, 2010 3:57 pm
Location: If you can make it there

Re: Requirements for reporting a SNT trust to Social Security

Post by beyou »

Sounds like you funded the trust and already spending it on your son. I am considering creating a trust but funding at my passing, with trust as beneficiary on various assets.

I did read that the trustee must notify SSA of the trust and it’s assets/expenditures. Not sure if this is required before funding the trust or after funding.

That said, they need to know if you are giving your son countable income (cash, food, shelter). Not sure why they need statements as to how the income is generated. If not used for your son, not sure how it could impact him, unless they seek some technical error that could cause assets to be counted towards the $2000 limit.
User avatar
Topic Author
typical.investor
Posts: 3810
Joined: Mon Jun 11, 2018 3:17 am

Re: Requirements for reporting a SNT trust to Social Security

Post by typical.investor »

beyou wrote: Wed Nov 23, 2022 1:03 am Sounds like you funded the trust and already spending it on your son. I am considering creating a trust but funding at my passing, with trust as beneficiary on various assets.

I did read that the trustee must notify SSA of the trust and it’s assets/expenditures. Not sure if this is required before funding the trust or after funding.

That said, they need to know if you are giving your son countable income (cash, food, shelter). Not sure why they need statements as to how the income is generated. If not used for your son, not sure how it could impact him, unless they seek some technical error that could cause assets to be counted towards the $2000 limit.
Yeah, I guess it’s because he is the beneficial owner.

His benefit is already reduced for us paying for rent/food.

I’ve always wondered, what if I make his pay his fair share (we live together) and loan him the difference between his benefit and actual amount. Guess I’d have to ask my lawyer. It’s what my dad did for my college expenses. I signed a loan agreement and never paid it back. Hey, I’m honest and even brought it up when his estate got settled.

They also want an affidavit on how the trust was funded - probably to make sure it wasn’t his money.
User avatar
beyou
Posts: 5030
Joined: Sat Feb 27, 2010 3:57 pm
Location: If you can make it there

Re: Requirements for reporting a SNT trust to Social Security

Post by beyou »

typical.investor wrote: Wed Nov 23, 2022 1:26 am
beyou wrote: Wed Nov 23, 2022 1:03 am Sounds like you funded the trust and already spending it on your son. I am considering creating a trust but funding at my passing, with trust as beneficiary on various assets.

I did read that the trustee must notify SSA of the trust and it’s assets/expenditures. Not sure if this is required before funding the trust or after funding.

That said, they need to know if you are giving your son countable income (cash, food, shelter). Not sure why they need statements as to how the income is generated. If not used for your son, not sure how it could impact him, unless they seek some technical error that could cause assets to be counted towards the $2000 limit.
Yeah, I guess it’s because he is the beneficial owner.

His benefit is already reduced for us paying for rent/food.

I’ve always wondered, what if I make his pay his fair share (we live together) and loan him the difference between his benefit and actual amount. Guess I’d have to ask my lawyer. It’s what my dad did for my college expenses. I signed a loan agreement and never paid it back. Hey, I’m honest and even brought it up when his estate got settled.

They also want an affidavit on how the trust was funded - probably to make sure it wasn’t his money.
Yes, you can charge your son rent (room and board) and get the full payment by removing such countable income. The confusing part, I read one must charge market rates, and document it, but if one charged market rent and actual food, it would be more than full SSI payment. The SSA agent told us “you shouldn’t charge him
more than his income, charge him less”. They also said, if he lives with a parent, we don’t need to see a formal lease or any documentation of what is a fair market rent.

My use of SNT was more to 1) ensure a trustee will help my son when i am gone and 2) preserve Medicaid and the 2/3 of SSI benefit when he no longer can pay his parent rent, and needs more $ to pay the true cost of housing and food. But as long as we can get the full benefit now, I see no reason to fund the SNT now.
User avatar
celia
Posts: 15375
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Requirements for reporting a SNT trust to Social Security

Post by celia »

typical.investor wrote: Wed Nov 23, 2022 12:38 am Is the beneficiary of a third party irrevocable special needs trust considered the owner?
I’m confused reading this post. A first-party irrevocable SNT is funded by the disabled person’s own assets. A third-party SNT is funded by everyone else for the benefit of the disabled person and there can be multiple Third-party trusts for the same disabled person, each funded by a different person.

My confusion is that it seems like both you and your disabled son are funding the same trust.
My son is disabled and receiving SSI and social security is asking about a trust I set up. They want the original trust documents and statements.
This is standard practice, at least for a first-party trust when the beneficiary is receiving government benefits like SSI or Medicaid. They will want to see all his income and how it is being spent. I believe the states get Medicaid money from the federal government but each state administers it’s own program. SS needs to ensure a beneficiary is accepting Medicaid benefits from only one state and that his income is staying under about $2,000 a month to continue receiving Medicaid. His money should be paying for his rent and food, while a third-party trust cannot pay for anything covered by government benefits.
I explained he is the beneficiary and they say they need to review it calling him the owner. If he is the owner, then perhaps technically I am subject to penalty for not reporting the correct value of his resources (in their opinion) but I did not because they are not really his resources.
Who’s resources are they then?
The issue arose because I am the trustee of the trust and as his representative payee have the social security go to the trust.
I have not been a “representative payee” but my understanding is that they must report periodically on how the received money is being used. This also sounds like your son’s SSI is going into the trust.

typical.investor wrote: Wed Nov 23, 2022 1:26 am They also want an affidavit on how the trust was funded - probably to make sure it wasn’t his money.
This sounds like someone else’s money is going into the trust, too. If that is the case, you need to see your SNT lawyer soon! You need clarification of whose money can go into the trust and what the trust can spend that money on.
User avatar
Topic Author
typical.investor
Posts: 3810
Joined: Mon Jun 11, 2018 3:17 am

Re: Requirements for reporting a SNT trust to Social Security

Post by typical.investor »

celia wrote: Wed Nov 23, 2022 3:33 am
Hi Celia!

Thanks for the input.

Yeah, the lawyer says best not to have SSI go to the trust so I called SS and that is now changed.
User avatar
beyou
Posts: 5030
Joined: Sat Feb 27, 2010 3:57 pm
Location: If you can make it there

Re: Requirements for reporting a SNT trust to Social Security

Post by beyou »

typical.investor wrote: Wed Nov 23, 2022 6:42 pm
celia wrote: Wed Nov 23, 2022 3:33 am
Hi Celia!

Thanks for the input.

Yeah, the lawyer says best not to have SSI go to the trust so I called SS and that is now changed.
SSI payments should go to
1) son’s checking acct
2) ABLE acct (also in son’s name)
3) first party trust (see atty, can’t tell you much about why)

Still, I read that SSA wants to see info about 3rd party trusts since they do pay some of the expenses and they want to know which ones. If housing/food they can deduct 1/3 of SSI payment.
Post Reply