DeCambre v. Brookline Housing Authority: Special Needs Trust Distributions Not Income for Section 8 Purposes

by Shannon Laymon-Pecoraro, Esq.

Kimberly DeCambre is a person with a disability who receives SSI, Medicaid, and a Section 8 voucher. After receiving a personal injury settlement of $330,000, a special needs trust was established for the benefit of Ms. DeCambre. While the trust, and its income, were exempt for SSI and Medicaid purposes, the Brookline Housing Authority had determined that distributions from the trust were income to Ms. DeCambre and that as a result of $60,000 in distributions[1] from the special needs trust, she would no longer be eligible for Section 8. Ms. DeCambre appealed the decision to the United States District Court for the District of Massachusetts, arguing that the payments from the trust were not income and that she was discriminated based on her disability. The court ruled that the Brookline Housing Authority properly terminated Ms. DeCambre’s Section 8 benefits. Ms. DeCambre appealed to the United States Court of Appeals for the First Circuit.

DeCambre argued that because the special needs trust was funded with settlement proceeds, the distributions were excluded from her annual income, as, pursuant to HUD regulations, which would have been the case had she received the proceeds directly. The court reasoned that HUD policy expressly states that proceeds in an irrevocable trust are excluded from annual income so long as they continue to be held in trust. However,            one of HUD’s regional offices had held that only income distributed from the earning on the trust’s principal should be considered annual income. Knowing that the larger problem was the classification of principal distributions, the court furthered their analysis of how to treat trust principal.

Brookline Housing Authority argued that because the settlement proceeds were not first paid to DeCambre, they are not considered to be a lump-sum exclusion to family assets, and therefore not excluded from annual income. The court rationalized that it didn’t matter who accepted the funds, and that HUD did not intend to treat outright payment of settlements differently from payment into a trust and that at least one regional office has specifically excluded “lump-sum additional to family assets, such as… settlement for personal or property losses.” The court therefore concluded there is no reason to exclude proceeds merely because they are paid directly to a tenant in lieu of a trust.

In response to Brookline Housing Authority’s final argument that even if the proceeds were paid directly to DeCambre that subsequent withdrawal of the funds would have counted towards her annual income, the court found that HUD regulations are to the contrary. Specifically, the regulations exempt withdrawals of cash or assets that are “reimbursement of cash or assets invested by the family” and as a result, assets retain their character as an asset. As a result, only the increased value of the asset would count towards annual income.

In overturning the lower court’s decision, the court determined that if they accept Brookline Housing Authority’s view that distributions from the trust are income, that there is a potential for “untoward results that neither Congress nor HUD intended.” The court therefore concluded that Brookline Housing Authority should not have counted distributions of principal against Ms. DeCambre’s annual income. The result, in the world of special needs, was a great win in which people with disabilities do not need to fear the immediate loss of Section 8 benefits when establishing a special needs trust or receiving distributions. However, it is also important that these trusts be administered properly so as to prevent large distribution of income generated from the assets that could adversely affect the beneficiary.

[1]It is important to note that these were not cash distributions, but distributions in-kind for things such as phone and internet, travel expenses, and veterinary care for her pets.

Kit Kat

Ask Kit Kat – Discerning Fish

Hook Law Center:  Kit Kat, can fish really recognize human faces?

Kit Kat: Well, recent research now supports that, at least, one type of fish—the archerfish—can. I find this so interesting! Those relatively small creatures which do not have the sophisticated brains or the fusiform gyrus of humans do appear to be able to distinguish human faces. The archerfish is a fish which shoots high-powered water jets from their mouths in order to stun prey. In a study conducted by scientists at the University of Oxford and the University of Queensland, they found that archerfish were able to discern a particular human face with accuracies ranging from 81-86%. Their work was published June 7, 2016 in the journal Scientific Reports.

First, the researchers experimented with a computer cursor, and then moved on to human faces, and then to particular human faces. Using reinforcement conditioning theory, they rewarded the fish with pellets when they performed the given task correctly. Even when they made the faces gray-scale, the archerfish were able to distinguish a particular human face from a random group of 44 faces with the accuracies stated above. This has led scientists to wonder whether the fusiform gyrus is really the critical mechanism responsible for human facial recognition or just the place in the brain where this function occurs. More research will need to be done to ascertain how the skill of facial recognition actually happens. However, it is interesting to note that other species like birds, which have a fusiform gyrus, can distinguish faces. At present, the only known fish to have this skill is the archerfish—so beware if you frequent the archerfish habitat and you annoy them. They just may squirt you with their powerful sprays! (Rachel Feltman, “Fish can recognize human faces,” from the The Washington Post as it appeared in The Virginian-Pilot, June 8, 2016, pg. 8)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.