Special Needs Trusts are in place to protect the benefits of an adult or child with special needs and are exempt from Medicaid and Supplemental Security Income (SSI). A properly drafted special needs trust gives (you) the trustee, or someone you appoint, the sole discretion to use the funds for the benefit of your family member. A question I get asked often is what can I use the funds for, and are there any limitations?
The standard of what the funds can be used for is very broad, but if your loved one benefits from a purchase or payment, then distribution from the trust is allowed. So, purchasing a home, car, furniture, medical supplies, appliances, or even money for a vacation are all examples of what is allowed. Medicaid and Social Security do regularly review these trusts to ensure that distributions are being made correctly.
There are more limitations for those that receive SSI because SSI has more rigid regulations when it comes to distribution for things like food and shelter expenses, which include rent or mortgage payments and utilities. If you do use trust funds for payment of shelter and food, SSI benefits can be reduced since other funds, those from the trust, are covering basic expenses that SSI normally would cover. It’s always recommended that the trustee never give cash directly to a trust beneficiary, as a cash distribution is considered income and may also reduce SSI benefits.
The rules regarding what you can or cannot use funds for can be broad and exhaustive, making them confusing. If you are concerned about the use of trust funds, speaking with a special needs attorney is the best way to ensure funds are being used appropriately.