25 May Part Six: What is new in the Social Security Administration’s Approach to Special Needs Planning and Trusts?
Retroactive Amendment of Trust – Nunc Pro Tunc – Not Likely to be Accepted by SSA.
In reviewing an existing special needs trust, the Social Security Administration may determine that the trust fails to comply with one or more SSA rules and regulations. This may occur, for example, where the trust permitted the payment of funeral and burial expenses prior to reimbursing the Medicaid program.
To correct these deficiencies, the parties have gone into court and obtained a court order amending the trust “nunc pro tunc,” that is, effective as of the date the trust was created. In reviewing a number of these court orders, the Social Security Administration has determined that although the court had authority to amend the trust as of the date of the court order, the court did not have the authority under applicable state law to enter an order modifying the trust effective as of the date the trust was originally created.
In reviewing existing case law, the Social Security Administration has determined that a court may only modify a trust “nunc pro tunc” to correct mistakes, clerical errors, or omissions arising from the actions of the court, not those of the attorney or parties. Under these rulings, the Social Security Administration has made it even more difficult to retroactively correct an inadvertent mistake in an existing trust.
In a Tennessee, case a self-settled special needs trust was established pursuant to court order to hold the proceeds from the sale of the disabled individual’s residence. However, the parties never submitted the trust to the Social Security Administration for review. Upon review several years later, the trust was found to be defective because it permitted the trustees to pay for funeral and burial expenses before reimbursing the states for medical assistance paid on behalf of the trust beneficiary. The Social Security Administration found that although the court’s order effectively amended the trust as of the date of the court order, the court did not have authority to amend the trust effective as of the date the trust was originally created. Regional Chief Counsel Precedent PS 01825.047 Tennessee
In a Florida case, a father created a support trust for the benefit of his daughter under his Will. Seven years after the father’s death, the trustee obtained a court order reforming the trust effective as of the death of the father. The Social Security Administration examined the Florida Trust Code and determined that although the court had authority to modify the trust as of the date of the court’s order, the court did not have authority to modify the trust effective as of the date the trust was originally created. Regional Chief Counsel Precedent PS 01825.011 Florida
If you want to learn more about Special Needs Planning and Trusts, call our Miami office for a FREE telephone consultation now!