Can Special Needs Trusts Pay for Housing and Not Affect SSI?

Trustees of special needs trusts generally have wide discretion in determining whether to distribute funds to trust beneficiaries.

One of a trustee’s main concerns lies with the beneficiary’s continued eligibility for public benefits. For example, a special needs trust beneficiary may be receiving Supplemental Security Income. Trustees must take precautions in using special needs trust funds to pay for costs associated with the SSI recipient’s housing.

What Is Supplementary Security Income (SSI)?

Supplemental Security Income (SSI) is a public benefits program People who qualify are provided with supplemental income that helps cover the cost of such necessities as clothing and shelter. It can also be a way for individuals to obtain access to Medicaid.

To be eligible for SSI, you must have very limited income and assets. This makes SSI a “means-based” program. Also note that if you are seeking SSI due to a disability, you must meet the government’s definition of “disabled.”

Special needs trusts are not meant to pay for someone’s basic needs, such as shelter. This is because SSI benefits are intended to help cover these types of costs.

The Maximum SSI Benefit

In 2023, federal guidelines set the maximum monthly SSI benefit at $914 for individuals. The maximum is $1,371 for eligible individuals with an eligible spouse; and $458 for an “essential person.” Certain states add a supplement on top of the federal maximum.

The most critical factor in determining whether SSI recipients are eligible for the maximum benefit is their housing arrangement.

How Living Arrangements Can Affect SSI Benefits

People living alone who pay their full rental expenses, including utilities, are eligible for the maximum monthly SSI benefit. (This is assuming they would otherwise be eligible for the maximum.)

SSI recipients who live with someone else but pay their proportionate share of the rent remain eligible for the maximum benefit.

However, where a third party pays the rent — for instance, a parent or a special needs trust — the SSI benefit drops. The Social Security Administration (SSA) will cut the maximum federal SSI benefit by one-third, plus $20. For example, let’s say an individual receives $750 from SSI. If a special needs trust covers their monthly rental expenses, their benefit will be reduced to $520.

Under SSA rules, spouses of SSI beneficiaries and parents of minor children who are SSI recipients are not considered third parties. Therefore, shelter payments made by them will have no bearing on the SSI recipient’s monthly benefit. (However, SSA income rules do apply to parents of minor children and spouses, which can ultimately disqualify a person from SSI.)

SSI recipients may also see their monthly benefits reduced if a special needs trust pays for other types of housing arrangements. This may include monthly mortgage payments, co-op fees, homeowner fees, or monthly utilities payments, such as electricity, gas, or water.

Other Considerations for Special Needs Trust Beneficiaries

Generally, people who are temporarily institutionalized, such as in a hospital, nursing home, or assisted living facility, are disqualified for SSI. There are some exceptions.

A permanent address, however, is not a requirement for continued SSI eligibility. SSI benefits will typically continue where the person is homeless or living in a shelter.

For SSI recipients who travel within the United States, third parties may pay for hotel and food expenses during travel. This will not cause a reduction in the SSI recipient’s benefit.

Payments from special needs trusts can also affect a beneficiary’s eligibility for Section 8 housing assistance and other government benefits. The rules can be very complex, so be sure to contact a special needs planner for more information. Find a qualified special needs planner near you today.