A Big Breakthrough for Trustees of a Special Needs Trust with the Addition of Administrator-Managed Prepaid Cards

HNWSpecial Needs Trusts for Minor Children and Adults

Overview of Administrator-Managed Prepaid Cards

  • Historically, SNT trustees were limited to how methods of payment could be made for SNT disbursements without violating SSA rules. The new SSA rules allow SNT trustees to enable beneficiaries to be in control of their own lives through the use of what is called administrator-managed prepaid cards.
  • The best-known example of these cards is the True Link card, issued by True Link Financial.

How the New True Link Cards Work

Administrator-managed prepaid cards work as follows. The account has an owner/ trustee administrator and an authorized user. The administrator can transfer money to the card and configure the card to block or allow certain categories of expenditures or vendors. For example, an administrator (SNT trustee) could fund the card with $1,000 a month and configure the card to prohibit cash withdrawals, payment for food or shelter items, purchases at bars, merchandise purchases from the Home Shopping Network, and so on. The authorized user (SNT beneficiary) is issued a non-transferable card in his or her name. The beneficiary can then use the card to purchase authorized items, without further assistance from the SNT trustee.

Previously, SSA did not have an official agency policy regarding administrator-managed prepaid cards.

Gift Cards Do Not Qualify

A gift card or gift certificate is not considered income or a resource to an SSI claimant if two criteria are met: (1) the card or certificate cannot be sold (i.e., it is non-transferable) and (2) the card or certificate cannot be used to purchase food or shelter items. The penalty for the criteria is that the gift card or gift certificate is treated as unearned income and Medicaid and SSI benefits can be lost.

In the past, if an SNT trustee purchased a $500 Visa card and a $500 Best Buy card for the beneficiary and the beneficiary had a right to transfer both cards to someone else, the beneficiary would have $980 in unearned income for the month and lose his or her SSI benefits.

Administrator-managed pre-paid cards were established by companies to facilitate compliance with the gift card and gift certificate rules.

The revised rules add administrator-managed pre-paid cards as a new way to make SNT distributions and mentions the True Link card by name.  The revised rules articulate policies that differ from (and are more easily met than) those applicable gift cards and gift certificates.  Under the revised rules, if an administrator-managed pre-paid card is non-transferable and the SNT trustee is the card’s administrator (and thus has the authority to block access to cash withdrawals, purchases from specific vendors, and purchases in particular categories), the card is not considered income or a resource to the beneficiary.

The revised rules make the administrator-managed pre-paid card much more valuable. If the SNT beneficiary’s card statement shows no cash withdrawals, purchases of food or shelter items, or purchases of items countable as a resource under SSI program policies, the beneficiary is not considered to be receiving income and his or her SSI benefits will not be affected.

As long as an SNT beneficiary can be relied on to avoid making food or shelter (ISM) purchases using an administrator-managed pre-paid card, the beneficiary’s SSI benefits should not be affected even if he or she uses a card without spending restrictions. But if an SNT beneficiary does purchase food or shelter during the month with an administrator-managed pre-paid card, the maximum reduction in the beneficiary’s SSI is only $277.

In order for the beneficiary to receive this favorable treatment, his or her card must be established with the SNT trustee as the owner of the account, which gives the trustee control over the card’s configuration and use. The beneficiary should be a cardholder, but not an owner.

To discuss your NJ special needs trust matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq., of Hanlon Niemann & Wright, a Freehold Township, Monmouth County NJ Special Needs Trust Attorney

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