Special Needs Trusts and SSI recipients

If you receive Supplemental Security Income (SSI) benefits and you are the beneficiary of a Special Needs Trust (“SNT”) or a Supplemental Needs or Supplemental Benefits (Third Party) Trust, your Trustee must be careful in the management of the Trust to preserve your benefits. The Trust cannot be used to pay for shelter or food. It is designed to pay for supplemental or “special” needs. The Trustee can’t give out the Trust’s funds for benefit of other people without creating risks to your own eligibility. Also, the Trustee cannot give cash directly to you and cannot give you a credit or debit card that would give you access to cash. The Trustee needs to make arrangements for direct payment of your bills to the third party.

Some years ago, a client of mine created a supplemental benefits trust for her daughter and asked me to be the trustee. The daughter was middle-aged, lived on her own in Section 8 housing out of state, and received SSI and Medicaid. “Jane” had of course just $2,000 in the bank. She had a much-loved old dog, and a child who was about to get married. “Jane” bought an old car for $1,500 (the car was an exempt asset under the SSI rules). On a monthly basis, she could pay for gas, but that was it.

When the car needed repair, the mechanic would fax me the invoice and I’d send a him a check from the Trust. When the dog needed treatment or check-ups, I’d mail a payment to the Vet. I was able to pay for the car insurance from the Trust as well. As for “Jane’s” trip to the wedding, the trust paid for Amtrak and a motel and her new dress. I had to say no when it came to buying the couple their wedding gift, though. As you can see, having the Trust made a big difference for Jane’s happiness and quality of life. She maintained her benefits but also was able to enjoy these supplements.

When  a special needs trust is being established for a disabled person on public benefits, the trustees should be selected with care. They have to be scrupulous record-keepers and they may have to periodically account to the Social Security Administration. They need to stay aware of the shifting regulations for the benefit programs that are available to the trust beneficiary. If the Trust is substantial in size, it may be a good idea to select a corporate Trustee (bank or trust department) as co-trustee with a devoted family member. This can provide a team that has one person who is the “hands-on” family member or friend along with the professionals who are accustomed to managing all of the paper work, tax filings, investment decision and reporting obligations.

Call us for advice on establishing and administering special needs trusts … 732-382-6070

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One thought on “Special Needs Trusts and SSI recipients

  1. Hello there! Thiis article couldn’t be written any better!
    Looking through this article reminds me of my previous roommate!
    He alwaygs kept preaching about this. I aam going to
    send this artricle tto him. Pretty sure he’s going to have
    a good read. I appreciate you for sharing!

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