Corrections Article Regarding First Party Special Needs Trusts – Much to my dismay, I have learned that my article, “ Upheaval In the World of First Party Special Needs Trust,” published in December, 2015, contained several items of misinformation.  This article makes necessary corrections concerning SSI and estate recovery and regarding certain payments that indeed can be made by First Party Special Needs Trusts.  It also expands the prior discussion regarding the general rule that Special Needs Trusts do not replace needs based government benefits such as SSI.

No SSI reimbursement. The previous article incorrectly states,  “… when the trust terminates … the remaining assets [must] first be used to reimburse SSA and DHCS for … what the beneficiary received in SSI and Medi-Cal (underlining added).”

The foregoing is incorrect as far as SSI is concerned.  Unlike with Medi-Cal benefits, SSI benefits legitimately received are not subject to estate recovery after the beneficiary’s death.  It is correct, however, that the Special Needs Trust must direct repayment to any state where Medicaid benefits were received, even if the beneficiary never leaves California and so never receives Medicaid outside California. The later point is important because the Social Security Administration is taking issue with First Party Special Needs Trusts that do not provide for repayment of any state where Medicaid was received, regardless of whether the recipient only received Medi-Cal in California.

Travel expenses allowed. The previous article incorrectly states, “[t]he Trustee may no longer pay travel expenses of family and friends to visit the beneficiary.”

Although there was a temporary proposed policy guideline to this effect, this policy was never adopted and so certain travel expenses to visit the beneficiary are permitted.  Specifically, the following travel expenses are presently allowed:

(1) Payment of third party travel expenses which are necessary in order for the trust beneficiary to obtain medical treatment; and

(2) Payment of third party travel expenses 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. The travel must be for the purpose of ensuring the safety and/or medical well-being of the individual.  (

Family members do not need to be medically trained/certified as caregivers.  The previous article incorrectly states, “[n]or may the trustee pay the beneficiary’s family members to serve as the beneficiary’s care providers if they are not medically certified, medically trained or approved to provide such care.  Any trust that provides to the contrary is automatically disqualified.”   As of 2015, the SSA revoked that requirement.

Replacing needs based government benefits.  Now let us reexamine the following statement, “The Trustee [of a First Party Special Needs Trust] may use the assets for the sole benefit of the beneficiary to supplement, but not to replace, any needs based government benefits, including SSI and Medi-Cal, being received by the beneficiary.”  While this is a correct statement of the general rule it would benefit from discussion of an exception.

All special needs trusts are created to preserve the beneficiary’s eligibility for needs based government benefits.  Nonetheless, Special Needs Trusts may allow trust assets to be used to replace needs based government benefits, such as SSI, if the trustee decides that doing so is in the best interests of the beneficiary.   That is, a special needs trust may authorize the trustee to purchase food and shelter, known as “In Kind Support and Maintenance” (“ISM”).  Thus a Trustee may provide ISM if the beneficiary’s very limited SSI benefits alone are insufficient.  Doing so, however, means reducing SSI benefits.

Fortunately, any reduction in ISM is capped using either one of two possible approaches as appropriate.  Under the Presumed Maximum Value (“PMV”) approach any reduction in SSI is the lesser of either the value of the ISM or one-third (1/3rd) of the $733 PMV (the value in 2015) plus an extra $20, which comes to $264.33.

I offer my sincere apologies to my readers for publishing misinformation.

“Serving Lake and Mendocino Counties for nineteen years, the Law Office of Dennis Fordham focuses on legacy and estate planning, trust and probate administration, and special needs planning. We are here for you. 870 South Main Street Lakeport, California 95453-4801. Phone: 707-263-3235.”