For families with children who have special needs, ensuring their care and provision is always on the forefront of the mind. Special needs trusts are a great tool for making sure they are cared for, but what does that entail? It is important to note that special needs trusts are made to supplement Medicaid and Supplemental Security Income (SSI) and not replace them. In other words, these funds are meant to pay for luxuries that state funds would not typically pay for. If you are looking into ensuring financial stability for someone with special needs, having both state funds and private funds like the special needs trust will be the best route to take.
What Special Needs Trusts Should not be Used for
First, knowing what these trusts cannot be used for can save you a lot of time and hassle. Since special needs trusts are made to supplement government programs, using funds from the trust to pay for things that are covered by SSI and Medicaid could jeopardize the amount of funds available to them. This includes:
- Utilities like power, gas, and water
- This can be either food from restaurants or grocery stores. The only exception is the occasional “gift” that is allowed by taking the beneficiary to a restaurant.
- Cash, given directly for any reason is prohibited.
- Property taxes, rent, HOA fees, or mortgage payments
Mis-use of special needs trusts can result in a drop of the government funds available to them. Typically, there will be a one-third reduction in the funds available, but this can vary. The government will see payouts from the trust like income if they are used for these items, and it should only be considered for use after consulting with an attorney.
So, what can it be Used for?
Although necessities are off limits, items that can improve the quality of life and other “luxury” items are allowed:
- One Home. The beneficiary can purchase one home with the funds from the trust. But if they only receive Medicaid, the value of the home may be limited to $500,000-$700,000. Home improvements and necessary repairs can also be covered by the trust.
- One Vehicle. SSI eligibility will not be affected by purchasing one car with the funds from the special needs trust.
- Home Furnishings. This is a very broad category, but it will cover anything you can really think of to put in a home. From dishes to TV’s, you are most likely safe from affecting government funds.
- Self-Employment Property. Trusts can buy property that is deemed necessary for self-employment, whether you have a business or a trade. Some of these items do have limits on the value and variations, so be sure to ask for council before buying these items.
- Assets Needed for a Career Goal. Typically, attending vocational school or college would affect the SSI benefits available to you. However, there is a program called PASS (Plan for Achieving Self-Support) that can allow for these funds to be used for learning.
- Estate Planning. Some end of life items is allowed to be ascertained by using a trust. This includes burial and life insurance policies.
If you are unsure if an item you are looking to purchase is covered, do not hesitate to speak to an attorney to make sure that Medicaid and SSI are not affected. It is never a good idea to risk losing the government funds, as this typically will result in putting the beneficiary in a precarious financial situation.
Countable resources are considered to be any assets directly under the disabled persons name. This can include cash, stocks, checking and savings accounts, IRA’s, or other investment accounts. Anyone who owns $2,000 or more directly will be ineligible for SSI. Also, any countable assets that are given to the beneficiary less than the $2,000 will be deducted dollar for dollar from the SSI income.
It is advised to ensure that a person remains eligible for Medicaid and SSI as much as possible. Even if there is a trust, proper use of it will make sure that the beneficiary is financially stable for their lifetime. Having a professional attorney assist with establishing the trust as well as advising what it can be used for is the best way to make sure your loved one is taken care of.