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Allowable Expenses for a Special Needs Trust

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A special needs trust, commonly referred to as a supplemental needs trust, is a special kind of trust that can provide supplemental benefits to a person with a disability without affecting their eligibility for needs-based governmental programs such as Medicaid and Supplemental Security Income (SSI). A special needs trust is meant to provide for goods and services that the governmental benefits do not cover. Trust proceeds used to pay for covered expenses will not be counted as income for the beneficiary for the purposes of evaluating whether they qualify for such needs-based benefits. Special needs trust proceeds must be used for specific items, however, to avoid triggering adverse consequences for the beneficiary. A Vancouver trusts and estates lawyer can walk you through how to establish a special needs trust and how the proceeds of a special needs trust can best be utilized within the applicable legal limits.

What Can Be Paid for Using a Special Needs Trust?

Special needs trusts are meant to provide for certain types of additional items beyond the beneficiary’s basic necessities. Special needs trusts should not be used to cover the basic needs of the beneficiary. SSI benefits are used to pay for food, shelter, and clothing. Medicaid and/or Medicare are used to pay for basic medical care. Special needs trust proceeds should not be used to cover items already covered by these other programs.

Special needs trust proceeds are meant to be used for added “luxuries” beyond basic needs. These include items relating to, for example, education, equipment, transportation, entertainment, travel, as well as out-of-pocket medical care (items not covered by governmental healthcare) and other personal care expenses. For example, special needs trust proceeds can be used to pay for:

  • Furniture in the beneficiary’s home (but not rent)
  • A computer
  • Airfare, cab fare, and other travel expenses
  • Tuition, books, and other educational expenses
  • Job coaching
  • Medical equipment not covered by Medicare or Medicaid
  • Renovations to the home to improve accessibility
  • Camp tuition and other expenses
  • Internet services and telephone services
  • Private counseling or case management

This is not an exhaustive list of the items that can be purchased or funded using special needs trust proceeds. The special needs trustee should distribute trust funds in accordance with the trust document and the applicable laws and regulations.

Distribution Must be Determined by the Trustee

It’s vital that decisions about whether and how to distribute trust funds are left up to the trustee. The beneficiary can certainly request distribution for certain items based on their needs and desires, but the beneficiary cannot be in control of the trust funds. If the beneficiary has the capacity to remove funds from the trust at will, then the government will treat the trust as an asset and the beneficiary may lose out on their eligibility for needs-based programs.

Additionally, funds from the trust should be used to pay for the covered expenses, as opposed to distributed to the beneficiary directly. Funds paid to the beneficiary directly might be treated as income or assets.

If you have questions about Special Needs Trusts, Revocable Living Trusts, or other estate planning instruments and how they could benefit you, contact the Vancouver offices of John Lutgens for a consultation on your Washington or Oregon estate plan.

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