On March 3, 2015 the Eighth Circuit Court of Appeals, sitting in Denver, Colorado, rendered an opinion in the case of Draper v. Colvin, where it explicitly admitted that it drew “a hard line” when it upheld the decision of the Social Security Administration that denied Stephany Draper eligibility for supplemental security income. Draper v. Colvin, 229 F.3d 556 (8TH Cir. 2015). Ms. Draper was an 18 year old woman who suffered traumatic brain injuries in an automobile accident and applied for supplemental security income benefits. In addition, she filed a personal injury case where she netted approximately $429,000 from the settlement. This amount of money would render Ms. Draper ineligible for both supplemental security income as well as Medicaid, both of which are means based programs.


Congress resolved these issues when it created loopholes to allow for special needs trusts that provide for beneficiaries, yet considers them as non-countable assets when applying for supplemental security income and Medicaid. The loophole found at 42 U.S.C. 1396(d)(4)(A) requires that the special needs trust must be set up by a third party and not the beneficiary herself. The parents of Ms. Draper created a special needs trust that they believed would render her eligible for both supplemental security income and Medicaid, as the money from the personal injury case would not be enough to provide aid to Ms. Draper for life. The Social Security Administration disagreed, as the parents created the trust in their capacity as agents for Ms. Draper, acting under the power of attorney. When Ms. Draper’s parents tried to correct the deficiencies, likely in an effort to appease the Social Security Administration and make the issue a non-issue, the Social Security Administration was still not satisfied. Most specifically, the parents sought a Court Order from the same trial Court that had jurisdiction over the personal injury case, approving the trust and retroactively dating it back to the date of the original trust. These amendments still did not comport with the statutory mandate, as the seed money for the trust was still Ms. Draper’s settlement proceeds.


Throughout the life of the Draper case, the Social Security Administration’s Program Operations Manual System (POMS) was continually referenced, as it helped to guide and justify the Social Security Administration in much of its decisions. The Draper case is a warning to all that the Social Security Administration will require strict adherence with all of the statutory mandate, as well as the POMS. For a trust to be considered a non-countable asset, the following must occur, and in this order

  1. The trust must be created by someone other than the disabled person. If a parent creates the trust they can seed the trust account with a nominal amount, signing off on all relevant documents as the “grantor”. If for some reason a parent, grandparent or other relative cannot create the trust, the disabled party can petition a Court to establish a trust. The Court Order should indicate that the Court is the grantor establishing the trust. This was a material fact in Draper, as the Eighth Circuit deemed that the Trial Court did not establish Ms. Draper’s trust.
  2. After the trust is established by a third party, any personal injury proceeds may fund the trust. The person that deposits money into the special needs trust account or transfers title and ownership to property may act in their capacity from a power of attorney for the beneficiary.
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