Special needs trusts are often used by parents who want to provide for their disabled adult children long after they are gone — but they don’t want the assets they leave behind to interfere with their child’s access to public benefits, like Supplemental Security Income (SSI), low-income or HUD housing, food stamps or Medicaid.
There’s a lot of confusion, however, over how the money from a special needs trust can be used. It’s important that your trustee fully understand the rules.
What can’t you do?
Essentially, the money can’t be used for anything that is already covered by public benefits, such as regular living expenses. If so, that would reduce their need for those public benefits. In addition, the money cannot be given directly to the beneficiary (even if they intend to use it for a specific, allowable purpose). Otherwise, it would count as income, and their SSI or other public benefits will be reduced accordingly.
What can you do?
The money from the trust can be used in ways that enrich the beneficiary’s life and enhance their comfort. For example, the trustee could use the money to:
- Pay for vacations or trips to theme parks
- Hire in-home companion care
- Buy the beneficiary a new television or computer
- Pay for hobby items, like model kits or art supplies
- Provide them with a pet and veterinary services
- Help them obtain a car, bus pass or ride-hailing services
- Obtain furnishings for their home
Special needs trusts have become increasingly popular among parents of neurodivergent children and children with physical disabilities alike as a way to see to their future needs. If you’re curious whether it is right for your family, find out more.