Failure to Respond to the Request for Verification

This month we are dealing with a tenant in a Section 8, affordable housing property who has a state legal guardian and who will not respond to requests for income verification notices or award letters. But that is not the only issue here.  There is also the need to assess whether the “Special Needs Trust” is to be considered an asset or should be treated as an income. 

The resident has a $40,000 amount in a Special Needs Trust fund, which can be accessed as needed. I have not been able to find out where this money came from and I cannot get the guardian to answer emails or phone calls. Her Recertification is due March 1, 2014. I am at a loss of how to handle this. Any suggestions would be a great help.

If the trust is set up for the resident (as opposed to by the resident for another person) and is irrevocable the income generated by the trust is not income. All you really need to verify that is whether or not the trust is indeed irrevocable. If any funds are disbursed from the trust on behalf of the resident then it is counted as income to the resident. The administrator of the trust should be able to verify all of this information…if the guardian finally responds.

Let’s deal with the lack of response for verification:

The HUD reg’s explicitly say that failure to provide documentation is ground for termination of subsidy. See Figure 5-4: Privacy Act Notice, the signed lease, and In the HUD handbook, 4350.3, Rev. 1 Change 4, Chapter 8, 8-13 Material Non-compliance with the Lease

A. Key Requirements

Owners may terminate tenancy when a tenant is in material noncompliance with the lease, including:

1. Failure of the tenant to submit in time all required information on household income and composition.

Now we should deal with the “Special Needs Trust”.  In the HUD Occupancy handbook, 4350.3, Rev. 1 Change 4, 5-7,1,G,c., here is what it says:

Special needs trusts- A special needs trust is a trust that may be created under some state laws, often by family members for disabled persons who are not able to make financial decisions for themselves. Generally, the assets within the trust are not accessible to the beneficiary.

(1) If the beneficiary does not have access to income from the trust, then it is not counted as part of income.

(2) If income from the trust is paid to the beneficiary regularly, those payments are counted as income.

Although the “Guardian” hasn’t responded the Head of Household is still responsible for submitting the information to the property manager so the recertification can take place.  If the “Guardian” fails to submit the required documentation the tenant may be subject to termination of subsidy. If the tenant is deriving income from this Special Needs Trust it will be treated as income, requiring a 30-day notice and the resulting increase in income more than likely will raise their rent.

Find out more about the treatment of Special Needs Trust in our Income, Asset and Expense class.