What Can an SNT Pay for Without Affecting SSI or Medicaid?

  • January 31st, 2023

Young Black woman with vision disability sitting in city park reading Braille book.Funds held in a properly drafted special needs trust (SNT) will not affect a Supplemental Security Income (SSI) or Medicaid recipient’s benefits. However, funds disbursed in a manner that violates SSI or Medicaid rules can impact these benefits. It is important to understand what an SNT can and cannot pay for in order to avoid this.

What Is an SNT?

An SNT can play an important role in preserving the financial security and lifestyle of a person with special needs. It allows the individual to benefit from supplemental resources while still qualifying for public benefits, such as SSI and Medicaid.

There are several categories of SNTs, including first-party SNTs, third-party SNTs, or pooled trusts. Depending on your circumstances, one of these may be more suitable for you or your loved one. For example, the age of the beneficiary, the individual or entity that is funding the trust, and other factors can dictate which type of SNT is best for your situation.

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Read more about the decisions involved when setting up an SNT.

Special Needs Trust Rules: Permissible Uses of SNT Funds

In general, money or funds should not be used to pay for food, clothing, or shelter because this is what SSI is intended to be used for. An SNT is meant to supplement, and not replace, SSI.

The first general rule of thumb when considering whether the use of SNT funds is permissible is to ask if the funds will be used for the sole benefit of the disabled beneficiary. Disbursements must primarily and directly benefit the beneficiary and only indirectly benefit others. So, for example, if a beneficiary needs to travel somewhere and needs an aide to accompany him or her, an SNT may pay for both of their travel costs.

Some examples of allowed uses of SNT funds are the following expenditures made on behalf of the beneficiary:

  • Activities
  • Entertainment
  • Books, newspapers, and magazines
  • TV, internet, and phone
  • Education or training
  • Insurance, subject to certain limitations
  • Therapies
  • Medical equipment or services not covered by Medicaid
  • Services rendered to the beneficiary by professionals
  • Electronics, computers, and software
  • Transportation/travel costs
  • Vehicle and maintenance or operation costs
  • Household items
  • Personal items
  • Taxes
  • Care management

Whenever possible, an SNT should purchase an item or service in the name of the trust and not the beneficiary. This is because, in some scenarios, if a beneficiary receives an asset as the result of a permissible expenditure, it could be considered income to the beneficiary or an available resource. This may disqualify them from benefits in the month when the asset is received.

Where is it not possible for an SNT to directly purchase an item or service, the purchase should be billed to the SNT. For example, when a beneficiary purchases fuel for their car, they could do so with a gas credit card billed to the SNT.

What Special Needs Trusts Should Not Pay For

In general, an SNT should refrain from giving the beneficiary money from the SNT to make purchases on their own. Instead, an SNT trustee should pay for items directly to the vendor or provider.

If an SSI beneficiary receives cash (or a cash equivalent, like a refundable gift card) from an SNT, their benefit can be reduced by $1 for each dollar received, up until the point that they lose SSI completely. This is a hard-and-fast rule and should be disregarded only after a serious conversation with a special needs professional.

In addition, a beneficiary should not be given cash or a cash equivalent or pay for food or shelter. If an SNT pays for a beneficiary’s food or shelter directly to a landlord, restaurant, or store, the beneficiary could lose up to one-third of their SSI benefit. There are some workarounds to this problem, which a qualified professional can help you consider.

Paying bills for housing-related expenses like mortgage payments, real estate taxes, utilities, and condo fees are considered payments for housing that can also cause a similar reduction in benefits. A one-third decrease in benefits might be a small price to pay for guaranteed shelter and meals. But if the beneficiary works or receives other income, the additional one-third reduction could cause the beneficiary to lose SSI and accompanying Medicaid benefits entirely.

As with anything, there are exceptions to this guidance. In some situations, the benefit to a beneficiary of paying for these items outweighs the impact of potentially losing government benefits. Because each SNT and the situation of its beneficiary is unique, it is crucial to speak with a professional when considering making disbursements that could lead to a loss of benefits.

Contact a Professional in Your Area

Once you have taken cash, housing, and food off the table, an SNT can typically pay for most other things a beneficiary might need to supplement their lifestyle.

These rules can be complicated, so it is best to speak with an attorney or special needs planner in your area to discuss what may be done with SNT funds before making any payments to anyone. This is a cost that, under most circumstances, can be paid for by the SNT, and the advice you receive may save you a lot of headaches.


Last Modified: 01/31/2023
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