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Special Needs Planning and SNTs: What Should a Trust Not Pay For?

Published May 17, 2017

A supplemental needs trust (SNT) is an important tool that can be used to make sure a child with special needs has access to the services and care he or she requires. Establishing a supplemental needs trust as a part of an overall financial plan is one step in providing a solid base of lifetime support. Once a child turns 18, his or her income no longer deems to their parents and will be used to determine eligibility for public benefits such as Medicaid and Supplemental Security Income (SSI).  SSI rules only allow for $2000 in assets at any given time and require that an individual is not partaking in substantial gainful employment. Funds paid into an SNT are not counted as assets, nor are distributions from an SNT counted as income, therefore, allowing an individual with special needs to retain public benefits.

There are rules governing what the funds paid from a supplemental needs trust may be used for. SNTs are meant to “supplement” necessary income, to pay for “luxuries” that Medicaid or SSI does not cover. Therefore, if funds from the trust are used regularly to purchase necessities, such as food or shelter, those funds may count as income. Certain items should not be paid for from an SNT if the beneficiary is receiving SSI. These include:

• Cash given directly to the beneficiary
• Food, including groceries and eating out if it is done on a regular basis
• Housing expenses, such as rent, mortgage, or property taxes
• Homeowners or renters insurance, if it is required by the mortgage or rental community
• Utilities and utility connection charges

Utilizing an SNT for any of the above may cause a reduction in benefits called in kind maintenance and support which caps at a maximum the amount of benefits an individual can lose if others or other services provide food and shelter to the claimant. You should consult a special needs planning attorney about specific situations if you wish to use funds for these purposes. Seeking advice will better inform a trustee with regard to potential loss of benefits and analysis regarding maintaining trust funds as well as receiving benefits.

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