Founding Attorney
A Special Needs Trust can be used during your lifetime to provide for a loved one with special needs. The trust may also be used after your death to protect your loved one’s inheritance while providing for the needs of your loved one. These types of trusts can be complex, and the consequences for getting it wrong – dire. It is best to work with an experienced special needs trust lawyer.
Why Do I Need to Set Up a Special Needs Trust?
In many cases, a person with special needs may lose vital government benefits, such as SSI disability payments, Medicaid, or Medicare if they have access to income, assets, or other resources. A Special Needs Trust helps protect the right to receive government benefits in addition to providing additional assistance for the care and upkeep of a person with special needs.
In addition to maintaining eligibility for government benefits, a Special Needs Trust can protect property from creditors and government agencies seeking reimbursement of benefits or payment of debts. Placing assets in a Special Needs Trust can also protect those assets from your creditors to ensure your loved one has sufficient resources to pay expenses during and after your lifetime.
What Expenses Cannot Be Paid From a Special Needs Trust?
You must be very careful when using the trust assets to pay expenses for the beneficiary. If the Trustee improperly uses the trust assets, any government benefits may be terminated or reduced. The income and assets in a Special Needs Trust are intended to pay for the supplemental needs of the beneficiary. The trust is not intended to be used for payment of basic living expenses or needs.
Therefore, a trustee should not use the funds from a Special Needs Trust to pay basic living expenses for the beneficiary such as:
- Food and restaurant meals
- Renter’s insurance or homeowner’s insurance
- Mortgage payments, property tax, or rent
- Utility payments (i.e. water, sewer, gas, electricity)
- Garbage removal services
- An allowance given directly to the beneficiary
The above list is not an exhaustive list of expenses that should not be paid with funds from the trust. If in doubt, the trustee should seek professional advice to determine if an expense is considered a “basic living needs” to avoid eligibility problems for government benefits.
What Expenses Can Be Paid With a Special Needs Trust?
A trustee can use the trust funds to pay for a variety of expenses for the beneficiary. For example, the funds in the Special Needs Trust may be used to pay for medical expenses, medications, and medical equipment that is not covered by Medicaid. A trustee may use the funds to pay for recreational activities or cultural experiences for the beneficiary.
The trustee may also use the funds in the trust to purchase personal items for the beneficiary, such as clothing and shoes. Personal items, including a cell phone or computer, may also be purchased by the Special Needs Trust.
A few of the other examples of items the trustee may use funds from the Special Needs Trust to purchase include:
- One vehicle
- Memberships to clubs or organizations, such as zoos, museums, advocacy groups, etc.
- Dry cleaning and laundry services
- Furniture
- Bus passes or publication transportation costs
- Home alarm systems
- House cleaning services
- Non-food items, such as laundry detergent, soap, lotion, paper products, etc.
- Vacations and travel (except for food)
- Pets and pet supplies
The above list is not an exhaustive list of expenses that may be paid with the funds from a Special Needs Trust. If the trustee is unsure of an expense, it is always best to check with a professional to avoid any issues later. Schedule a consult with one of our experienced special needs trust lawyers today.