Special Needs Trust Distribution Planning
If a special needs trust is not drafted or administered correctly, it can be the worst thing to happen to a person with disabilities.
Special Needs Trust Distributions
The first thing you should know is that cash (over $20) cannot be disbursed to the beneficiary nor may disbursements be made to third parties for food or shelter without loss or reduction of SSI benefits. Trust funds may be spent on many items that are not food or shelter and don’t constitute income for SSI purposes.
Here’s a Short List of Permissible Distributions
- Home purchase
- Home improvement
- Modification of residence for handicapped use
- Educational expenses - tuition, books and supplies
- Medical expenses and medical services
- Social Services
- Health insurance premiums
- Entertainment expenses - books and magazines, movie or concert tickets, sporting events, audio/video equipment
- Vacation/travel and in some instances transportation expenses, including purchase and maintenance of a car, or bus passes, airline tickets, etc.
- Household goods and other items or personal property of reasonable value
- Telephone expenses, cable television, and other communication expenses, such as a computer
- Dental care, physical therapy, massages, support services and other medical costs not covered by any benefit programs
- Personal care services
- Durable medical equipment, such as a wheelchair
There are distributions that will reduce SSI benefits.
Here are the 3 basic rules:
- Money paid directly to the beneficiary will reduce his or her SSI benefits, dollar for dollar. Do not give more than $20 per month cash to a recipient of SSI. $20 of unearned income a month is exempt.
- Money paid directly to someone else to provide the beneficiary with food or shelter reduces the SSI benefit, but only to a limit. No matter how much money is spent for these items, no more than 1/3 is subtracted from the beneficiary’s SSI check for the month he or she receives the benefit from this payment. This is known as, “in kind support and maintenance” or ISM. Here is a list of ten ISM items:
- Real estate taxes
- Heating fuel
- Garbage disposal
If you pay for any of these items from the trust directly to the provider, no matter how much, the beneficiary will lose no more than 1/3 of the SSI check. For example, if you pay the mortgage of $1,200 a month, the SSI recipients will lose no more than 1/3 of the monthly SSI check.
- Money paid directly to someone else to provide the beneficiary with items other than food and shelter does not reduce SSI. Such items include:
- Medical care
- Telephone bills
- Cable bills
- DSL computer access
- Lawn maintenance
- Condo fees
- Car insurance
- Other transportation expenses
Bills paid by the trustee for these items do not count as income.
If you want to create or review a special needs trust, please contact us. We can help!
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