Can I pay for travel expenses out of a Special Needs Trust? Can I pay for Companion Care?
Special Needs Trusts - a deeper dive into the updated POMS
A frequent question I get as a special needs planner is “Can I pay for travel expenses out of a Special Needs Trust? What about companion care?” These questions come up because of the “sole benefit rule.” First party Special Needs Trust money must be used for the sole benefit of the disabled person. The money spent needs to benefit that individual, and not others. SSA has been especially skeptical of payments to family or friends of the beneficiary.
During recertification or financial review, some Social Security officials had been taking the position that many payments to third parties violated the sole benefit rule. As an example, some SSA officials took the position that the SNT could not be used to pay for companion care to assist the disabled beneficiary to travel or to attend a concert or outing. Caregivers or others would have to pay their own way to prevent violation of the sole benefit rule. While this position did not make logical sense (because without the caregiver, the beneficiary could not go in the first place) SSA offices still flagged these distributions. This caused attorneys and trustees to be wary of authorizing these expenditures from first party special needs trusts.
Thankfully, we now have some clear guidance in the new POMS about third party payments and the sole benefit rule.
While the sole benefit rule has not changed, the POMS make it clear that the rule should be interpreted reasonably. Third party payments under the old POMS were described as “[p]ayments to a third party that result in the receipt of goods or services by the trust beneficiary[.]” The new POMS clarify that the sole benefit rule means that distributions for goods or services must be for the primary benefit of the trust beneficiary. Workers should not read this so strictly as to prevent any collateral benefit to anyone else.
The new POMS examples specifically reference companion services and third-party travel expenses as expenses that will not violate the sole benefit rule.
Payment for companion services can be a valid expense. The new POMS provide:
“[f]or example, perhaps an Alzheimer’s patient cannot be left alone and requires a sitter, or the beneficiary needs someone to drive her to the store and assist her with grocery shopping. Family members may normally do some of these things without compensation, but that does not prohibit the trust from paying for these services. Additionally, some incidental expenses for the companion can be payable. For example, if the trust pays a companion to take the beneficiary to a museum, the trust can pay for the admission of the companion to the museum, as this cost is part of providing the service. For payment of travel expenses for a companion[.]” SI 01120.201 F.3.a emphasis added
Payment of third party travel expenses to accompany the trust beneficiary and provide services or assistance that is necessary due to the trust beneficiary’s medical condition, disability, or age are also authorized. The new POMS say:
“Apply the following instructions in evaluating whether travel expenses are allowable and do not violate the sole-benefit rule:
•Travel expenses are transportation, lodging, and food.
•Providing services or assistance necessary due to the trust beneficiary’s age means that the beneficiary is a minor and cannot travel unaccompanied.
•Absent evidence to the contrary, accept a statement from the trustee that the service or assistance provided is necessary to permit the trust beneficiary to travel. Do not request a physician statement concerning medical necessity. You should not request evidence of medical training or certification for the person accompanying the trust beneficiary.
•Use a reasonableness test in evaluating the number of people the trust is paying to accompany the beneficiary. For example, it is reasonable for a trust to pay for other individuals, such as parents or caretakers, to accompany a disabled minor child on vacation to provide supervision and assistance. Travel without this support would not be possible. However, it would violate the sole benefit rule if the trust paid for other individuals who are not providing services or assistance necessary for the beneficiary to travel.
NOTE: In this example, the fact that the parents or caretakers cannot afford to pay for their other children’s trip, or cannot leave them at home, is not a consideration relevant to the sole-benefit requirement.” SI 01120.201 F.3.b
This is all great news for the special needs planning world.
A note of caution: not all third-party payments are automatically approved. Certain fact patterns will not pass SSA review and may very well violate the sole benefit rule. It is recommended that you check with your attorney about third party payments before they are made to make sure that the trust distribution will comply with the rules.