A special needs trust is a legal document designed to help people with disabilities. It permits them to have funds that en...Read more
Special needs trusts are designed to supplement, not replace, the kind of basic support provided by government programs like Medicaid and Supplemental Security Income (SSI). Special needs trusts pay for comforts and luxuries not covered by public assistance funds.
This means that if money from the trust is used for food or shelter costs on a regular basis or distributed directly to the beneficiary, payments will count as income and can affect eligibility for government benefits like Medicaid and SSI. One of the trustee's most important jobs is to use discretion in making distributions from the trust to avoid jeopardizing the beneficiary's eligibility for critical government benefits.
If the beneficiary receives SSI, here are some basic expenses that should not be paid through a special needs trust without consultation with a special needs attorney. These expenses are covered by public benefits instead:
However, many of these payments will only cause a one-third reduction in SSI benefits. The trustee may determine that the benefit of the trust making these payments far outweighs the loss of income. Cash given directly to the beneficiary for any purpose must be carefully considered to avoid potential problems. If a trustee is uncertain of the effect payments will have on government benefits qualifications, they should seek a local special needs planner for advice. If mistakes are made, it may be possible to remedy the situation if you act quickly.