A federal district court ruled that a public housing authority properly counted distributions from a special needs trust as income in concluding that the beneficiary of the trust was ineligible for a Section 8 housing voucher. DeCambre v. Brookline Housing Authority (D. Mass., No. 14-13425-WGY, March 25, 2015)

Kimberly DeCambre, a disabled, 59 year old resident of Massachusetts, receives public benefits based upon financial need including Supplemental Security Income benefits, Medicaid and, since 2005, cash assistance for housing from the Section 8 Housing Choice Voucher Program. DeCambre is also the sole beneficiary of a court-created irrevocable Special Needs Trust funded with $330,000 from a personal injury lawsuit. In 2013, the Brookdale Housing Authority determined that DeCambre was no longer eligible for a Section 8 housing voucher because the Special Needs Trust distributed more than $60,000 during the year to pay for administrative trustee fees; cell phone, cable, and internet bills; veterinary care for cats; dental and medical costs; and travel expenses. A hearing officer upheld the housing authority’s decision, ruling that:

[A]lthough DeCambre’s personal injury settlement is not considered income under [federal] regulation, when these assets were placed in an irrevocable trust, the distributions from the trust must then be “considered income …

DeCambre filed a lawsuit in state court against the housing authority, and the case was removed to federal court. In the lawsuit, DeCambre claimed (1) the housing authority violated her civil rights because it arbitrarily terminated her eligibility for Section 8 housing, (2) the housing authority denied benefits “by reason of her disability” in violation of laws against disability discrimination, and (3) that she was entitled to a preliminary injunction to enjoin the housing authority from counting disbursements from her Special Needs Trust when calculating her eligibility for Section 8. The parties consented to a hearing on the plaintiff’s claims, and the court heard testimony.

The court issued a decision after the hearing. Initially, the court gave readers a big hint at the direction of its ruling by characterizing the inquiry as follows:

[T]his Court is faced with determining whether [a Special Needs] Trust, designed to prevent beneficiaries from losing their Medicaid and Social Security eligibility, should also protect beneficiaries from losing their income-based federal housing vouchers despite statutory language to the contrary.

Given that formulation, it is not surprising that the court ultimately ruled against DeCambre. Although the court said it sympathized with Special Needs Trust beneficiaries who struggled to maintain eligibility for Section 8 housing assistance, the court said it was “unable to find any regulatory support for DeCambre’s argument that [distributions from her Special Needs Trust] must be excluded from annual income … .” As a result, the court ruled that (1) the housing authority did not arbitrarily terminate DeCambre’s eligibility for Section 8 housing, (2) the housing authority did not deny benefits in violation of laws against disability discrimination, and (3) that DeCambre was not entitled to a preliminary injunction.

The court’s opinion is annexed here – DeCambre v. Brookline Housing Authority(D. Mass., No. 14-13425-WGY, March 25, 2015)

For additional information concerning special needs trusts and disability planning, visit:
https://vanarellilaw.com/special-needs-disability-planning/

UPDATED ON JUNE 16, 2016 – Reversing a lower court, the U.S. Court of Appeals for the First Circuit rules that a state housing authority cannot count distributions from a special needs trust funded by a settlement as income because the payments would not be considered income had the settlement been taken as a lump sum. DeCambre v. Brookline Housing Authority (1^st Cir., Nos. 15-1458, 15-1515, June 14, 2016).