There is one question that our client’s always ask when designing a Special Needs Trust (SNT) for a loved one, “What can the Trust pay for?”
It is a great question and a very important question. If funds from a trust are not used properly, then the loved one that the trust was set up to provide for could be at risk of losing their government benefits for a period. Supplemental Security Income (SSI) is a major government benefit affected by payouts from a special needs trust, so this blog will focus solely the rules involving SSI.
There is one basic rule that applies to everyone with a special needs trust that receives SSI: A special needs trust for an SSI beneficiary should, for the most part, never give the beneficiary cash, a cash equivalent (gift cards), or pay for the beneficiary’s food or shelter.
Understanding the rules regarding cash payouts from the trust to the beneficiary are pretty cut and dry. If an SSI recipient receives cash or a cash equivalent from the trust (or really from anyone), the recipient’s SSI benefit will be reduced on a dollar for dollar basis up to the point that they lose SSI completely for that period. Therefore, if an SNT pays out $200 to a beneficiary in cash, that beneficiary will lose $200 from their SSI payment from that payment period. This is a hard and fast rule and should not be disregarding lightly.
The food and shelter rules are a bit more complicated, so let’s try to simplify them just a little for clarity. If the trust pays for a beneficiary’s food or shelter directly, then the beneficiary could lose up to one-third of their SSI payment. This includes payments of bills for house-related expenses such as the mortgage/rent, real estate taxes, utilities or condo fees. All those payments can incur a loss of one-third of the payment for that period. Although a one-third reduction might not seem like much to some (for PA SSI recipients, that could be a $240 reduction), if the recipient also works or receives additional income from another source, then they could lose SSI and its accompanying Medicaid benefits completely.
Outside of the cash payout, and the food and shelter rules, a special needs trust can typically pay for almost anything the beneficiary needs to supplement their lifestyle, including but limited to: medical care, dentistry, therapy, medical equipment, a car, furniture, televisions, computers, trips, family visits and other tangible item that would enrich or benefit the beneficiary’s life. Your best idea is to sit down with an attorney that understands these rules and discuss your options.
HighPoint Law Offices PC
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