NAELA joined the Special Needs Alliance (SNA) in filing an amicus curiae brief in the U.S. Court of Appeals for the Eighth Circuit in support of appellant Stephany Draper. The amicus brief, written by Ron Landsman, CAP, focused on the Social Security Administration’s (SSA) misinterpretation of South Dakota law as it relates to power of attorney and trusts; it also made a brief additional argument that funding and creation are not the same.
The court decision, filed on March 3, 2015, affirmed the lower court decision affirming the agency’s decision, relying heavily on the Skidmore doctrine, from Skidmore v. Swift & Co., 323 U.S. 134 (1944), which counsels courts to defer to agency interpretation of the statutes they administer depending on a variety of factors. The court adopted the agency’s view that absent state authority for so-called “empty” or “dry trusts,” a trust funded by the disabled beneficiary is “established” by the beneficiary since the trust did not exist until it was funded. And since federal law does not exclude self-settled trusts under 42 U.S.C. § 1396p(d)(4)(A), a trust that came into existence with funding by the disabled beneficiary did not meet the requirements for exclusion.
The NAELA-SNA brief led with what we thought to be the strong point, that SSA had been wrong throughout on state law, that South Dakota law would permit unfunded trusts, so that it fell within the exception that SSA itself recognized. Indeed, at oral argument, Judge Raymond Gruender, who ultimately wrote the Court’s decision, pressed counsel for SSA why, if they found that the trust satisfied state law, that wouldn’t satisfy the agency. (SSA’s other theory – that once acting as agents for their daughter, the trust they established was ipso facto her act as well – was also flatly contrary to well-established state law about reading powers of attorney narrowly.)
The decision rejected that theory not by disagreeing with it, but by finding that even if South Dakota law did recognize dry trusts, the Drapers had not intended to create a dry trust because it recited – quoting the Court here – “that ‘[t]his trust is funded with the proceeds of the settlement of a liability claim’ (emphasis added),” so that the Drapers did not intend to create a dry trust.
The problem with that approach is that it proves too much – since the dry trusts in states that have authorized them for supplemental security income purposes are all intended to be funded with the child’s resources. That should not make a difference.
It is difficult to overcome the deference that SSA gets in federal court, especially when dealing with an issue that is not, itself, like trust law, one that federal judges have likely spent a lot of time studying.