Special Needs Trust Accounting

The States have authority to review trust accounting. Depending on the Circuit, this power stems from authority implicit in 42 U.S.C. § 1396p(d), see Hobbs v. Zenderman, 579 F.3d 1171 (10th Cir. 2009), or from State trust law. See Lewis v. Alexander, 685 F.3d 325 (3rd Cir. 2012).

In Georgia, written financial review guidelines and protocol for special needs trust were first established in 2009. The following criteria are designed, for the most part, to hold trustees accountable for fiscal responsibility and to enforce the sole benefit rule:

  1. All funds and assets placed in the trust for the benefit of the beneficiary must remain accessible to meet the needs of the beneficiary;
  2. Trust expenditures must be made for the primary benefit of the trust Beneficiary;
  3. Trust expenditures must comply with the terms of the document that established the trust;
  4. Trust assets must not be unreasonably dissipated; trust expenditures must be reasonable in light of the needs of the beneficiary and the size of the trust;
  5. The ongoing financial integrity of the trust must be maintained;
  6. The state’s interests as a remainder beneficiary and creditor must be protected;
  7. Any oversight duties that may be placed on the state by law or policy must be Satisfied;
  8. The trustee must administer the trust as a fiduciary with the highest level of good faith, duty and loyalty to the beneficiary of the trust, and must satisfy the following legal fiduciary duties:
    • Maintain loyalty to the beneficiary;
    • Carry out the terms of the trust agreement;
    • Act and invest prudently;
    • Avoid delegating trustee responsibility; and
    • Maintain books and records and keep the beneficiary reasonably informed of the administration of the trust.

The protocol presumes an annual accounting will be prepared and submitted to the Trust Unit. Trust expenditures will be reviewed using a four-part test which evaluates: (1) whether the expenditure was for the primary benefit of the beneficiary; (2) appropriateness; (3) consistency with trust guidelines and published policy; and (4) whether the expenditure is reasonable and whether fair market value was paid. Certain types of expenses are subject to specific review: (i) expenditures which are not clearly for the sole benefit of the beneficiary; (ii) caregiver wages; (iii) housing expenses; (iv) vehicle expenses; and (v) egregious expenditures. The policy described how the Trust Review Unit analyzes each of these specific types of expenditures, again, focusing on fiduciary responsibility and the sole benefit rule.

Failure to comply with the rules causes the trust to be deemed non-compliant. The Department’s recourse options for non-compliant trusts include: (a) correction of the action going forward; (b) demand for recovery to the trust; (c) cash reimbursement to the trust; (d) re-titling and retransfer of asset to the trust; (e) and disenrollment of the beneficiary from Medicaid. Ultimately, the Department’s primary means of enforcement is disenrollment because, at best, the Department is a contingent beneficiary while the primary beneficiary is living and has limited enforcement rights.

Notes:

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