What Expenses Can Be Paid from a Special Needs Trust?

Special needs trusts are an important part of estate planning. They are sometimes called supplemental needs trusts. They provide families with a safe, secure, and protected way to ensure the long-term care and financial well-being of their children or other loved ones with special needs. Unfortunately, issues can arise and conflicts can emerge where Special Needs Trusts overlap with certain types of government benefits or assistance. This also applies to understanding the kinds of expenses that can be paid from a Special Needs Trust. As such, you should seek expert legal counsel for setting up a Special Needs Trust and understanding how to manage your trust. Speak with the expert Special Needs Trust attorney at the Law Offices of Frank Bruno, Jr. today to learn more.

Understanding Special Needs Trusts

Many families and children rely on Medicaid, SSI, and Social Security Disability payments, but these benefits must be protected since they are often means-tested. If a child or beneficiary has more than a certain amount of money or assets in their name, they can lose their benefits.

As such, Special Needs Trusts (SNTs) are designed to provide supplemental benefits to people with disabilities while allowing them to maintain their eligibility for these types of government benefits. SNTs are used to cover expenses that government benefits do not cover. Having both an SNT and access to government benefits helps the individual in question protect their financial well-being as comprehensively as possible.

Furthermore, disabled children and other beneficiaries of an SNT may not have the capacity to take care of their assets. This is where a Special Needs Trust can help protect those assets while maintaining the beneficiary’s eligibility for government benefits. Doing so requires an understanding of the law and how payments can affect the trust. Call the Law Offices of Frank Bruno, Jr. to learn more about what we can do to protect the financial well-being of your family and your disabled loved one.

Some people think that they can leave everything to a relative and allow them to manage the share of a disabled child, while others may wish to set up an SNT even if one is not needed. In the first case, funds should be irrevocably set aside for a child with a disability because the financial situation of an assigned relative can change and however well-meaning they are, they may be tempted to use the child’s funds for themselves. For the second case, an SNT is not always needed, such as if someone wins a large court settlement for an accidental disability. SNTs are for those who need to but cannot work and/or hold a job and depend on government benefits.

Expenses That Can Be Paid from a Special Needs Trust

Here is a non-exhaustive list of expenses that you can use your SNT to cover:

• Healthcare-related medications, medical equipment, case management, and services such as counseling that are not already covered by Medicare or Medicaid;
• Insurance premiums, including health, dental, and life insurance, as well as auto insurance;
• Furniture and/or home renovation and accessibility upgrades;
• Internet access and phone service expenses;
• School tuition, camp fees, and job coaching expenses;
• Clothing and home appliances.

This list illustrates the types of expenses that an SNT can pay for. Anything not deemed a basic necessity but can improve the quality of life of the beneficiary can be paid for by an SNT.

It is important to remember that basic needs (including food and shelter) can be paid for using an SNT but that may lead to a decrease in the recipient’s government benefits. As such, please speak with the Law Offices of Frank Bruno, Jr. for a thorough assessment of which expenses and outlays to cover from your SNT and which to cover from additional government benefits.

Expenses That Cannot Be Paid from a Special Needs Trust

Beneficiaries – or their trust administrators – can only use funds from their trust to cover specific supplemental needs. These funds cannot be used for basic needs, because the funds would then be considered income and this would affect the beneficiary’s SSI eligibility.

Funds from a Special Needs Trust cannot be used for basic necessities such as:

• Groceries
• Utilities
• Rent and mortgage payments or property taxes
• Homeowners’ or renters’ insurance
• Cash, such as an allowance, given directly to the beneficiary

In addition to the list provided above, non-essential expenses that are supplemental and can be paid for with funds from an SNT include wheelchairs costs, mechanical bed costs, accessible van expenses, special therapies, and recreational and/or life-enhancing cultural experiences. It can be difficult to determine – and prove – how and why a certain expense is or is not supplemental and how it would enrich your child or the beneficiary’s life. However, the seasoned estate planning lawyer at the Law Offices of Frank Bruno, Jr. can help you determine what constitutes supplemental needs vs. necessities so that you can create a thorough and comprehensive financial security plan for your loved one.

Trustee Discretion with SNT vs. Government Assistance

As for all trusts, a trustee, administrator, or executor can be assigned to manage funds and/or a trust on the behalf of a beneficiary. Ideally, the trustee should be someone who is responsible for – and is committed to – the beneficiary. This can be a relative or even a professional trustee in case there are no family members available.

The SNT trustee or administrator must use their discretion when making expense decisions on behalf of an SNT recipient. They must also regularly consult with an experienced attorney such as the special needs planning and SNT lawyer with the Law Offices of Frank Bruno, Jr. to make sure that the SNT trust is properly administered and that the beneficiary not only has their needs met but that they retain their access to and eligibility for government benefits.

Contact the Law Offices of Frank Bruno, Jr. Today for a Thorough Case Evaluation

It can be difficult to properly establish a Special Needs Trust, and any mistakes along the way can seriously harm your disabled loved one or the beneficiary. Many important considerations must be kept in mind with regard to public benefits eligibility, tax status, and the impact of an SNT on your overall financial and estate planning. The special needs planning lawyers with the Law Offices of Frank Bruno, Jr. are just a call away. Our team can meet with you to thoroughly understand your needs, create a sound financial plan and trust for your family, and walk you through everything you need to know about the process. Do not hesitate to call us today.