Will a Special Needs Trust Protect Section 8 Benefits?
By Alissa B. Gorman, Esquire
McAndrews Law Offices, P.C.
Many individuals with disabilities receive resource based public benefits such as Supplemental Security Income (SSI) and Medical Assistance (MA), which provide a cash payment to pay for their most basic needs of food and shelter, and pay for costly medical expenses. Due to the inability to find affordable housing, SSI and MA recipients often receive a Section 8 housing subsidy to assist with rental payments. The monthly SSI payment of $733.00 is typically not enough to pay for food, rent, and other monthly expenses for competent individuals with disabilities.
An individual financially qualifies for SSI and MA if he has resources of less than $2,000.00 in his own name and meets an income test. In Pennsylvania, if an individual qualifies for SSI, he automatically qualifies for MA as well. An individual qualifies for Section 8 benefits based on an income test only, which is independent of the SSI and MA income limit. The U.S. Department of Housing and Urban Development (HUD) grants Section 8 vouchers to low-income families whose household income is less than a certain threshold. If an individual qualifies, then he pays a percentage of the rent (typically 30-40% of monthly income), and the Section 8 voucher pays for the remainder. Annual income directly effects the recipient’s contribution to the rental payment; any additional household income can cause a decrease in the amount of rent subsidy. The Section 8 regulations define what constitutes household income and what is excluded from income. Unless household income meets an exception, any income received by the household will factor into the total rent subsidy.
It is extremely critical for those individuals receiving SSI, MA, and a Section 8 housing voucher to maintain those benefits should they receive additional assets due to inheritance or a personal injury settlement. Any receipt of additional income could cause a recipient to pay more monthly rent, which could have a devastating effect on the individual’s financial assets and annual budgeting. To maintain SSI and MA, an individual must transfer any assets over the resource limit to a Special Needs Trust. A Special Needs Trust is the only vehicle that allows an individual with a disability to maintain critical public benefits while preserving some financial assets to provide for his supplemental needs. Regulations governing SSI and MA provide that assets properly transferred to a Special Needs Trust do not count against the $2,000.00 resource limit, thereby allowing individuals to maintain their critical SSI and MA benefits and keep resources to provide for their special needs.
Unlike the SSI and MA regulations, the Section 8 regulations contain no exception for a transfer to a Special Needs Trust. One would assume that the public policy behind Special Needs Trusts (allowing individuals with disabilities who are unable to join the workforce retain and qualify for critical public benefits while still preserving some limited means to assist with their supplemental care) would protect all public benefits, but such is not the case. Earlier this year, a Massachusetts court held that Section 8 housing regulations do not contain an exception for distributions from a Special Needs Trust, and such distributions are considered income to the beneficiary, which count against the monthly Section 8 income limits. DeCambre v. Brookline Housing Authority, D. Mass., No. 14-13425-WGY, March 25, 2015. The court went on to reason that while there is no separate exclusion for Special Needs Trusts, a distribution from a Special Needs Trust may be excluded if it falls under another income regulation. The court specifically identified income which is “temporary, nonrecurring, or sporadic” as excluded for Section 8 purposes. 24 CFR 5.609(e)(9). Therefore, if a distribution from a Special Needs Trust is temporary, nonrecurring or sporadic, it is not counted as income for Section 8 purposes.
In conclusion, if a beneficiary of a Special Needs Trust receives Section 8 benefits, the trustee should take care to ensure that distributions are not made on a regular basis, such as paying for monthly utilities. If distributions are considered recurring, then the distributions will count towards the beneficiary’s income limit for Section 8 benefits. For more information on Section 8 benefits and Special Needs Trusts, please contact McAndrews Law Offices.