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Section 8 Housing andSpecial Need Trusts

A question that frequently occurs in Special Needs Planning is how do federal public housing programs view special need trusts. Specific federal laws under Medicaid and Supplementary Social Security Income (SSI) address special need trusts. But federal laws concerning Section 8 Housing do not directly recognize or even address special need trusts. Section 8 Housing comprises an array of federal housing programs that either provide or subsidize low cost housing to disabled and elderly individuals. Many disabled and elderly individuals rely on subsidized housing benefits under the Section 8 program. If the disabled individual has a first party special needs trust the question is how will the Section 8 program view distributions from the trust.

If the disabled individual has a special needs trust and the trustee makes a purchase for an item used by the disabled person how does Section 8 view the purchase? The trustee is not paying the disabled person directly. Instead, the trustee is purchasing items or services such as a phone, computer, internet services etc. which are used by the disabled person. Under Medicaid and SSI law the purchase will not count as income to the disabled individual.

A Massachusetts Public Housing Authority (Brookline Housing Authority) considered the purchase of such items by a special needs trust for a disabled individual who had a Section 8 voucher. It determined that the purchases by the trust were income to the individual. This resulted in the loss of the disabled person's eligibility for the housing subsidy. Suit was brought in Federal District Court challenging the Housing Authority’s decision. The Federal District Court upheld the Housing Authority’s decision so an appeal was made to the United States Court of Appeals for the First Circuit.

In June 2016 the First Circuit reversed the District Court decision and held that the disbursements from the special needs trust are not income. See DECAMBRE v. BROOKLINE HOUSING AUTHORITY, No. 15-1458 (1st Cir. June 14, 2016). The Appeals Court stated that, "if they accepted the Housing Authority's view that distributions from the trust are income, that there is a potential for 'untoward' results that neither Congress nor HUD intended."

This is an important decision since it clarifies how distributions from a special needs trust are to be treated for Section 8 housing eligibility. The Court made a distinction between distributions that came from trust principal versus accumulated investment gains made by the trust. Purchases made by principal are not countable income to the disabled person.

This case involved only a First Party Trust. The trust assets were resources originally owned by the disabled person. It should be noted that distributions from Third Party Special Need Trusts would never be considered income to the disabled person because the proceeds in the trust never belonged to the disabled person. The Decambre decision applies to First Party Special Need Trusts and Pooled Trusts. Trustees of first party SNT's should understand this case.

I will be addressing the Decambre decision in much greater detail in the next update of the Elder Law in the Virginia CLE Handbook in my section on Housing.

Edward Zetlin Law is experienced in such issues. Don't hesitate to call if you face such an issue or if you have additional questions. Edward Zetlin Law would be happy to discuss. Please contact us at 703-379-0442 or e-mail at ed@zetlinlaw.com

Community Presentations in July for Ed Zetlin
Langston-Brown - July 20th at 1:00 pm Estate Planning - What You Need to Know, Arlington Center 55+ at Langston-Brown Community Center, 2121 N Culpeper St, Arlington, VA 22207

Contact us at (703)379-0442; ed@zetlinlaw.com


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