Using a Credit Card When You Have a Special Needs Trust

A special needs trust (SNT) allows you to meet your needs while receiving government benefits, such as Medicaid and Supplemental Security Income (SSI). When you have a special needs trust, you can use it to pay for goods and services government benefits do not cover, such as therapy, education, housing, and travel.

Since receiving income directly from your trust would jeopardize your eligibility for benefits, your trustee can't give you cash from your SNT. When you use a credit card for permitted transactions, and your trustee pays off the balance with funds from your trust, these payments to a credit card company are not considered income. An SSI or Medicaid recipient who is capable of managing their own affairs can use a credit card to make small purchases, and the trustee of the special needs trust need not micromanage every transaction.

In the past, beneficiaries of SNTs sent their bills to their trustees for payment. Today, an individual with an SNT who qualifies for a personal credit card may find that using a credit card is more convenient.

Credit cards have several benefits. Using a credit card to manage payments from your special needs trust allows you to maintain independence, gain access to some of the advantages of a credit card, and easily keep records while preserving your eligibility for Medicaid and SSI.

Although credit cards can help people manage their special needs trusts, there are also several important restrictions and considerations to keep in mind. Consult with a special needs planner to ensure all transactions are acceptable under the trust's rules and comply with government regulations.

The Benefits of Using Credit Cards When You Have a Special Needs Trust

If you have a special needs trust, using a credit card has many benefits, including:

• Independence: Allowing you to maintain your independence. You can use your card to make qualifying purchases yourself. Your trustee does not have to make the transactions for you.
• Access to the Typical Advantages of a Credit Card: Depending on your eligibility to obtain a credit card, it can be in your name. Using it responsibly can help you establish or build your credit history, which may be important for your future financial needs.
• Record-Keeping: Credit cards provide easy record-keeping and a convenient way to monitor transactions from your special needs trust, which can also help special needs trustees fulfill their duty to maintain records. When you use your card, your trustee can observe your purchases and ensure that all expenses are allowable under the trust’s rules. Your statements can help your trustee keep track of funds leaving the trust.
• Benefits Eligibility: While adhering to Medicare and SSI’s income and asset limits, you can access funds from your SNT. Credit cards can help prevent your trustee from accidentally providing you with cash payments that could affect your eligibility for government benefits.

Considerations When Using a Credit Card for Your Special Needs Trust

While you can use a credit card to access funds from your special needs trust for certain transactions, restrictions apply. If your trustee sees a charge on your card that could affect your benefits eligibility, they can flag it for review.

• You can't use your credit card to pay for food and shelter, which SSI would cover.
• When administering your funds, your trustee must ensure that any expenditures are for your sole benefit if you have a first-party special needs trust.
• While using a credit card is appropriate, you should not use a debit card. Debit cards are considered cash income.

Best Practices

When using a credit card for a special needs trust fund, remember several best practices.

• Choose a card with low fees and interest rates
• Set a clear budget and monitor transactions regularly
• Keep thorough records and receipts of expenses

Consult with a qualified special needs planning attorney in your area. A special needs planning attorney can help you navigate the rules that apply to your trust and understand how to use a credit card to preserve your Medicaid and SSI eligibility.