Trusts As Resources

Trusts Which Are Resources

– Trust Principal is a Resource

If an individual (claimant, recipient, or deemor) has legal authority to revoke or terminate the trust and then use the funds to meet his food or shelter needs, or if the individual can direct the use of the trust principal for his/her support and maintenance under the terms of the trust, the trust principal is a resource for SSI purposes.

Additionally, if the individual can sell his or her beneficial interest in the trust, that interest is a resource. For example, if the trust provides for payment of $100 per month to the beneficiary for spending money, absent a prohibition to the contrary (e.g., a valid spendthrift clause, see 81 01120.2008.16.), the beneficiary may be able to sell the right to future payments for a lump-sum settlement.

– Authority to Revoke or Terminate Trust or Use Assets

     – Grantor

In some cases, the authority to revoke a trust is held by the grantor. Even if the power to revoke a trust is not specifically retained, a trust may be revocable in certain situations. (See 81 01120.2008.8. and 81 01120.200D.3. for information on grantor trusts.) Additionally, State law may contain presumptions as to the revocability of trusts. If the trust principal reverts to the grantor upon revocation and can be used for support and maintenance, then the principal is a resource to the grantor.

     – Beneficiary

A beneficiary generally does not have the power to terminate a trust. However, the trust may be a resource to the beneficiary in the rare instance where he/she has the authority to terminate the trust and gain access to the trust assets. In addition, the beneficiary may, in rare instances, have the authority under the trust to direct the use of the trust principal. (The authority to control the trust principal may be either specific trust provisions allowing the beneficiary to act on his/her own or by permitting the beneficiary to order actions by the trustee.) In such a case, the beneficiary’s equitable ownership in the trust principal and his/her ability to use it for support and maintenance means it is a resource.

The beneficiary’s right to mandatory periodic payments may be a resource equal to the present value of the anticipated string of payments unless a valid spendthrift clause (see 81 01120.200B.16.) or other language prohibits anticipation of payments.

While a trustee may have discretion to use the trust principal for the benefit of the beneficiary, the trustee should be considered a third party and not an agent of the beneficiary, i.e., the actions of the trustee are not the actions of the beneficiary, unless the trust specifically states otherwise.

     – Trustee

Occasionally, a trustee may have the legal authority to terminate a trust. However, the trust is not a resource to the trustee unless he/she becomes the owner of the trust principal upon termination. The trustee should be considered a third party. Although the trustee has access to the principal for the benefit of the beneficiary, this does not mean that the principal is the trustee’s resource. If the trustee has the legal authority to withdraw and use the trust principal for his/her own support and maintenance, the principal is the trustee’s resource for SSI purposes in the amount that can be used.

     – Totten trust

The creator of a Totten trust has the authority to revoke the financial account trust at any time. Therefore, the funds in the account are his/her resource.

Trusts Which Are Not Resources

If an individual does not have the legal authority to revoke or terminate the trust or to direct the use of the trust assets for his/her own support and maintenance, the trust principal is not the individual’s resource for SSI purposes.

The revocability of a trust and the ability to direct the use of the trust principal depend on the terms of the trust agreement and/or on State law. If a trust is irrevocable by its terms and under State law and cannot be used by an individual for support and maintenance (e.g., it contains a valid spendthrift clause, see 81 01120.200B.16.), it is not a resource.

Revocability of Grantor Trusts

Some States follow the general principle of trust law that if a grantor is also the sole beneficiary of a trust, the trust is revocable regardless of language in the trust to the contrary.

However, many of these States recognize that the grantor cannot unilaterally revoke the trust if there is a named “residual beneficiary” in the trust document who would, for example, receive the principal upon the grantor’s death or the occurrence of some other specific event.

Under the modem view, residual beneficiaries are assumed to be created, absent evidence of a contrary intent, when a grantor names heirs, next of kin, or similar groups to receive the remaining assets in the trust upon the grantor’s death. In such case, the trust is considered to be irrevocable.

NOTE: The policies regarding grantor trusts mayor may not apply in your particular state. Field offices should consult regional POMS or your regional office program staff if in doubt.