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New Law Penalizes Gifts By SSI Applicants But Permits Trusts

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On December 14, 1999, President Clinton signed the Foster Care Independence Act of 1999. While most of the new federal legislation deals with foster care programs, it also changes the law and practice regarding so-called “Special Needs” trusts.

The Supplemental Security Income (SSI) program, administered by but separate from Social Security, helps guarantee a minimum income for disabled Americans. SSI provides a maximum of $512 per month (beginning in January, 2000) to disabled individuals who do not qualify for Social Security Disability Insurance. Because SSI is a welfare program, however, it requires that the recipient not have significant assets or income available from other sources.

Under prior law it was possible for most disabled persons to qualify for SSI fairly easily, however. For many years the SSI program did not impose a penalty on asset transfers by applicants; in other words, a disabled individual could satisfy the asset eligibility limitations by simply giving away most of his or her property.

In practice, this opportunity was usually exercised in one of two common ways—either the prospective SSI recipient gave assets to family members (who could be counted on to use the money for the original owner’s benefit), or the recipient established a trust for his or her own benefit and transferred the assets into that trust. These trusts—usually called “Special Needs” or “Supplemental Benefits” trusts—could be used to pay for the SSI recipient’s needs other than necessities. In other words, the trust could take care of everything but food, clothing and shelter, while SSI income could be used to pay for those items.

Because SSI recipients automatically qualify for Medicaid coverage, even a fairly wealthy disabled individual could secure medical care from the federal welfare system by use of a Special Needs trust or an outright gift of assets. The new law changes the rules permitting such a transfer. Beginning immediately, a gift of assets by an SSI applicant will disqualify the applicant from receiving benefits for a period of time based on the size of the gift. Transfers into most trusts will simply be ignored—if there is any circumstance in which the trust assets or income can be used for the benefit of the SSI applicant, it will be treated as an available resource (or income, as the case may be).

This does not end the usefulness of Special Needs Trusts, however. An exception in the new law expressly permits transfers of assets into such a trust—but only if the trust includes a provision reimbursing the government for any benefits received by the beneficiary upon the beneficiary’s death. Only trusts established after January 1, 2000, must include such “pay-back” provisions, so pre-existing trusts should not be affected by the new law.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.