What Can a Special Needs Trust Pay For?

When organizing a special needs trust, it is very important to realize that policies regarding the possible distributions of a trust change all the time from one state to the next. A special needs trust is, because of this, very fickle as to what it can and will provide to the beneficiary.

First of all, the trust will not pay for anything provided by governmental benefits. These benefits may include most basic needs such as income, housing, medical benefits, and food. A professional special needs trustee will not issue cash or a cash equivalent because of the immediate impact it can have on the beneficiary's benefits; the trust is designed to supplement, not replace, governmental benefits.

Paying close attention to the distribution of a trust is key so as to not offset other benefits. Needs that can be satisfied with programs and entities other than the trust should be exhausted before seeking payment from the trust. In other words, the trust must be a back-up when providing basic needs. If there is an emergency where the well-being, health and safety of a beneficiary are at stake, the trustee can issue funds to pay for basic needs. Again, doing so may change the beneficiary's eligibility for other important benefits.

An adult beneficiary living with his or her parents rent-free may see a 1/3 reduction of his or her SSI check because the individual is provided for by the parents. In this case, the benefit outweighs the loss of income the check would have provided. Balancing distributions of a trust with other benefits should be done so with professional guidance so as to minimize any negative potential impact and maximize the benefits to the beneficiary.

The following criteria explain what a trustee must consider when distributing the trust: The distribution must be solely for the benefit of the beneficiary, the distribution must be in the beneficiary's best interest, the distribution must be issued because it is other unavailable from other resources and the it must be fiscally wise.

A trust may help purchase a home or transportation for an individual, but done so with the above in mind. The most important tip to keep in mind is how varying and flexible policies affecting trusts are. The trustee must always remember to use discretion and act in the best interest of the beneficiary, while setting reasonable client expectations.