How can the money in a special needs trust be used?

On Behalf of | Aug 21, 2023 | Estate Planning |

Special needs trusts are designed to provide for the well-being of someone who has a disability, without putting their eligibility for important government benefits – including Supplemental Security Incomes (SSI) and Medicaid – in any danger.

The money in a special needs trust is managed and disbursed to enhance the beneficiary’s quality of life, but it has to be used very carefully. Understanding the rules surrounding the use of these trusts can make it easier to plan ahead.

Special needs trusts primarily cover supplemental expenses

SSI and other government benefits are designed to cover the absolute basics, such as housing, food and utilities. The funds from a special needs trust are meant to fund “supplemental” wants and needs.

Allowable expenses include things like:

  • Educational pursuits, including tuition, books, supplies and specialized programs that cater to the beneficiary’s needs
  • Uncovered medical expenses, including experimental therapies or anything beyond what the government-provided medical benefits are willing to cover
  • Transportation costs, including the purchase or modification of a vehicle in the beneficiary’s name, bus passes, Uber rides and cab fare
  • Recreational activities, including things like gaming systems, computers, books, art supplies and other hobby materials
  • Furniture that is designed to accommodate mobility issues, like lift chairs and specially designed beds
  • Support services, including an in-home health aide or companion services that aren’t covered by government insurance
  • Personal care, including haircuts, massages and spa services
  • Vacations, including day trips, bus trips or other getaways

It’s important to note that the trustee must manage the funds without transferring them directly to the beneficiary. For example, if the beneficiary wants a bus pass, the trustee needs to purchase the pass and then give it to the beneficiary. If they hand the beneficiary the money, that could count as income and affect their entitlement to benefits.

Seeking legal guidance can help you better understand the benefits and limitations of a special needs trust, and make certain that nothing you do with your estate plans will jeopardize your loved one’s future.