BREAKING: Distributions from Self-Settled Trust not countable income for Section 8 Housing

DeCambre v. Brookline Housing Authority, Nos. 15-1458, 15-1515 (1st Cir. June 14, 2016) http://media.ca1.uscourts.gov/pdf.opinions/15-1458P-01A.pdf

Summary: In a closely watched case, the United States First Circuit Court of Appeals rules that Housing Authority cannot count distributions from a self-settled trust when computing income and rent for a person receiving Section 8 federal housing assistance.

June 20, 2016

Disability advocates and attorneys have been closely watching this case as it has wound its way through to the United States Court of Appeals for the First Circuit. The Appellant, Kimberly Decambre, has been a participant in the Section 8 federal housing assistance program since 2005, administered in her locality by the Brookline (Massachusetts) Housing Authority (the “BHA”). Under Section 8, an individual pays 30% of his or her monthly income as rent, with the balance subsidized by the government.

As part of her annual review, DeCambre reported distributions from a trust to the BHA. The trust was a self-settled special needs trust, established under 42 U.S.C. Section 1396p (d)(4)(A). This kind of trust is sometimes called a “Medicaid Payback Trust,” and was authorized by Congress in 1993. With such a trust, a person with funds in excess of $2,000 could put the excess funds in the trust and qualify for SSI and Medicaid, so long as (1) the trust was for the sole benefit of that person, and (2) the Medicaid program got paid back for its expenditures from the trust when the person died. In DeCambre’s case, the trust was funded by court order with proceeds from a personal injury lawsuit.

The BHA counted all distributions from the trust as income for purposes of computing DeCambre’s rent (after allowing for certain deductions such as medical expenses). DeCambre lost on appeal within the BHA and in the United States District Court for the District of Massachusetts. But she won decisively in the First Circuit Court of Appeals.

The court’s reasoning was extremely intricate and detailed, and cannot be reproduced here with precision. However, in essence the court held that it was only the income generated within the trust that would be treated as income to DeCambre when distributed from the trust. The principal of the trust would retain the character that it had going into the trust when it later came out of the trust. Going in, that principal amount (the lawsuit settlement) was a “lump sum” amount, which is not “income” for federal housing assistance purposes, and so in DeCambre’s case distributions of principal would not be “income” for federal housing assistance purposes.Thus, for example, if the trust principal was a lump-sum of $100,000, and it earned $1,200 of income in the trust, and then the trust distributed $3,600, only $1,200 would be income for federal housing assistance purposes.

That would raise the trust beneficiary’s income by $100 per month, not $300, and increase his or her rent by $30 per month. Thus, the court effectively said that the result should be the same in both cases (whether the lump-sum had gone to DeCambre directly, or was held for her in trust for some period of time): only the income from the lump-sum should be counted as income, not the lump-sum itself.This decision is very important, as many of the over 3,000 Housing Authorities across the nation count all distributions from trust as income for federal housing assistance purposes. And many of our special needs kids and families depend on both SSI/Medicaid and housing assistance.

Kudos to Massachusetts NAELA (National Academy of Elder Law Attorneys) member Attorney Emily Starr, and NAELA member Attorney Ron Landsman (Maryland), whose amicus brief was critical to the successful outcome of the case.

If you have questions or concerns regarding your own situation, please call our office on 508-861-3453 to schedule a consultation.

 

2 Responses to BREAKING: Distributions from Self-Settled Trust not countable income for Section 8 Housing

  1. Linda September 11, 2016 at 2:35 am #

    I am in the same situation, does this mean that other HUD agencies must apply this ruling since it is federal? My worker is counting all expenditures and has my income as twice the amount it is,raising my rent over 50% and my SSI check covers rent and utilities only. I am appealing due to the payments being all random, and I believe excludable.the only regular ones were Netflix and gas purchases a few times. Do I need an attorney to dispute may income determination?Can I confront my worker with this ruling and court case or does it not apply to Oregon?She counted ALL dispersements made last year and is using them for income this year even though I am not spending any of the trust now. This creates hardship and means I am being charged 30% on every dollar spent,with rent being 60% of my actual income and penalties apply to spending SNT money on food,shelter or utility needs. I was blindsided with this.Do I need legal representation or can I appeal it myself? Thanks for any advice.

    • Annette Hines October 5, 2016 at 9:55 am #

      Hello Linda,
      Attorney Hines has suggested that you seek legal advice from an Oregon Attorney.
      Kind Regards,
      Nicole

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