All transfers made after December 14, 1999 will have a penalty of one month SSI ineligibility for every $626 transferred (for up to 36 months). This new rule differs from previous asset transfer regulations in that since July 1, 1988, no restrictions were imposed on how assets were transferred. During this 11-year period, SSI beneficiaries were allowed to give away assets (in the form of money, property, etc.) without penalty. Now, in an effort to tighten SSI anti-fraud measures, this law forbids any transfer of assets that was not made at fair market value or spentdown to the $2000 limit, thus creating more difficulty for beneficiaries attempting to reserve funds and often penalizing them with benefit ineligibility.

So, under the above restriction, the funds in any trust created by the SSI beneficiary or applicant will be considered available and against the $2000 asset limit, with two exceptions. First, there are two acceptable trusts an SSI recipient may establish: (d)(4)(A) and (d)(4)(C). A (d)(4)(A) trust is created by the court or guardian of a disabled beneficiary, using the beneficiary's own funds. A (d)(4)(C) trust is a pooled trust that is managed by non-profit organizations. Both are irrevocable special needs trusts, acceptable under the new regulations because the beneficiaries cannot exert any influence over them. In other words, the beneficiaries cannot transfer money in and out of them, and cannot determine when and how they are used. Only the trustee (the beneficiary's guardian, etc.) can wield the trust funds and only towards special needs-related purposes, such as education, medical supplies, etc. In the case of both (d)(4)(A) and (d)(4)(C) trusts, upon the death of the SSI recipient, the funds still contained within the trust will be given to the state as reimbursement for any Medicaid benefits paid on the recipient's behalf, not to the trustee. However, all trusts differ substantially in how they are written, so applicants and recipients are encouraged to seek sound legal advice before attempting to establish one.

Secondly, the new law does not apply to transfers of income. Fortunately for SSI recipients, lump sum payments (resulting from insurance and personal injury lawsuits, inheritance, lottery winnings, etc.) are considered income during the month in which they are recovered. If these funds are transferred out of the trust during the month in which they are received, no penalty should apply.

Because these regulations are fairly new, many questions are still unanswered. SSI has not yet established and distributed detailed rules on how to implement these new regulations. It is suggested that SSI recipients and applicants seek very good, competent legal counsel from lawyers who stay abreast of changes in law and have experience establishing trusts. Some community resources that can help answer questions and provide representation in this area include: the Disability Law Center, Greater Boston Legal Services, Volunteer Lawyers Project, and the Legal Advocacy & Resource Center (Please see IRis for phone numbers).

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