What can a Special Needs Trust Pay for?

Special Needs Trusts can be used to pay for anything. If the beneficiary is not on means-tested benefits, the only limitation on distributions are those in the trust agreement (e.g., some trusts limit the trustee’s discretion). If the beneficiary is on means-tested benefits, then there are several things to consider as money comes out of the trust. First, if cash is distributed to the beneficiary, then the cash (or a cash equivalent) is income; it reduces the beneficiary’s SSI payment dollar-for-dollar. Second, if distributions are used to pay for food or shelter, then the distribution is treated as In-Kind Support and Maintenance (ISM); it will reduce a beneficiary’s SSI payment.[1].

When computing household operating expenses for inside ISM or the CMV of household costs for outside ISM, the following 10 items are the only ones[2] used in the applicable computations:

  1. Food
  2. Mortgage (including property insurance required by the mortgage holder)
  3. Real property taxes (less any tax rebate/credit)
  4. Rent
  5. Heating fuel
  6. Gas
  7. Electricity
  8. Water
  9. Sewer
  10. Garbage removal

A third consideration is that anything purchased that is not exempt will be income during the month of receipt and will be a countable resource beginning the following month.[3] Exempt resources generally include the following:

  1. A home, including adjacent land, if the beneficiary lives in it or intends to return to it
  2. Household goods (furniture, furnishings, household equipment, household supplies)
  3. personal effects (toiletries, items of personal care and education, clothing, and jewelry
  4. One motor vehicle
  5. Life insurance with cash surrender value, if its face value is less than $1,500, and all term life insurance
  6. A burial plot, or other burial space, worth any amount
  7. A revocable burial fund, worth up to $1,500

If the trust is purchasing exempt resources, or if it is purchasing services, then the purchase does not impact the beneficiary’s public benefits eligibility. At first glance, determining what can be safely purchased may appear difficult. However, these purchases are limited only by the trustee’s creativity. Among those things the Trustee could purchase without impacting SSI or Medicaid eligibility are the following:

Services

  1. Any therapy not paid for by Medicaid
  2. Rehabilitation not paid for by Medicaid
  3. Eye and dental care
  4. Attendant care (sitters, personal assistants)
  5. Tutors and other educational services (e.g., seminars)
  6. Tuition to schools, camps, classes
  7. Professional services (attorney, accountant, and financial planner)
  8. Phone services, answering services, security and alert services
  9. Maid services and other household chores
  10. Landscaping services
  11. Home repair, modifications and maintenance (e.g., roof, HVAC, windows, lifts)
  12. Transportation and travel services (e.g., taxi cabs, airlines)
  13. Vehicle modifications, repairs and maintenance
  14. Vacations and day trips
  15. Grooming (hair care, nails)
  16. Massage
  17. Pet grooming/veterinarian bills

Entertainment

  1. Cable TV (Netflix, Hulu)
  2. Internet services
  3. Fees associated with sports and recreational activities
  4. Music (CDs, downloads, instruments) and music lessons
  5. Concerts tickets
  6. Movies (tickets, dvds)
  7. Sports events (tickets, cable access – “Georgia tickets”)
  8. Books and magazines

Goods

  1. Insurance payments (health, life insurance on a necessary caregiver)
  2. Replacement vehicles
  3. Gasoline
  4. Clothing
  5. Furniture (sofa, tables, lamps, bedding, bookshelves)
  6. Electronics (television, CD player, computers, playstation, etc.)
  7. Software
  8. Eyeglasses, contact lens, hearing aids
  9. Dietary supplements
  10. Hobby equipment and supplies
  11. Tools
  12. Toys and games
  13. Pets, pet food and pet supplies
  14. Outdoor equipment (camping, grilling)
  15. Appliances (washer, dryer, stove, refrigerator)
  16. Household products and personal care items
  17. Pre-paid funeral

Other resources

What Can a Special Needs Trust Pay For?, The Voice, Vol. 2, Issue 6 (Special Needs Alliance 2008)

D. McGuffey & P. Dudek, Disbursements from Special Needs Trusts (2016)

Notes:

1. See POMS SI 01120.200.E. See L. Anderson, In-Kind Support and Maintenance – A Trap for the Unwary (SNA, The Voice March 2020).

2. See SI 00835.465 ISM and Households – Household Costs

3. The following example appears at POMS SI 01120.200.E.1.a: For example, if a trust buys a car for the beneficiary and the beneficiary’s spouse already has a car which is excluded for SSI, the second car is income in the month of receipt since it would not be an excluded resource in the following month.

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