A federal district court recently ruled in Williams v. Colvin (N.D. Ill., No. 12C7852, March 31, 2014) that payments from an annuity to a pooled special needs trust are not considered income when determining Supplemental Security Income (SSI) benefits. However, in the same case, the court also ruled that payments from the pooled trust to the beneficiary’s guardian for food and shelter are countable income for SSI purposes.

SSI is a means-based Federal income supplement program designed to help aged, blind, and disabled people, who have little or no income. It provides cash to meet basic needs for food, clothing, and shelter, and is administered by the Social Security Administration (SSA).

In this case, Dietrich Williams, who was left permanently disabled from an accident, began receiving payments from two structured settlement annuities following personal injury litigation. In 1999, a court order was granted approving the transfer of the annuities and the payments they generate into the Illinois Disability Pooled Trust.  The court also approved a budget for Mr. Williams that provided that the trust distribute $525 per month to his guardian for groceries, household supplies and drinking water, and another $300 per quarter for clothes.

Then in 2008, Mr. Williams applied for SSI, but his application was denied because the SSA determined that the payments to his guardian from the trust were countable income. Mr. Williams’ appealed the denial and SSA ultimately found that he was ineligible for benefits because the payments from the annuities to the pooled trust were income. After losing the appeal Mr. Williams then brought the case before the U.S. District Court for the Northern District of Illinois.

The federal district court reversed the SSA’s decision treating the annuity payments into the pooled trust as income. However, the court also determined that a guardian or conservator is considered an agent for SSI purposes, and payments to the guardian, as agent for the ward, constitute payments to the ward, rather than as reimbursement to a third-party. This meant that the monthly payments from the IL Trust for groceries, and the quarterly payments for clothing, to the guardian on behalf of Mr. Williams should be counted as unearned income for the purposes of determining SSI benefits.

This case is significant for any individual who is the recipient of a structured settlement annuity and wishes to obtain SSI benefits, and highlights the benefit of a pooled income trust while warning against potential pitfalls of having payments made directly to the guardian.

For more information on Pooled Trusts, go to https://vjrussolaw.com/resources/faqs/pooled-trust-frequently-asked-questions/