If someone in your home receives government benefits such as Supplemental Security Income (SSI) because they’re either physically or mentally impaired, then it’s likely that you’ve heard a special needs trust. While government programs like Medicaid are intended to cover an individual’s basic needs, they don’t cover “creature comforts” that we’ll all come to enjoy having access to.
It’s important that the beneficiary of a special needs trust not use their benefits to pay for certain expenses as doing so can affect their eligibility to receive government benefits. For example, a beneficiary should make sure to not to request a regularly distributed amount to pay for their housing or food.
If they do, then it’s possible that the costs associated with those expenses will be taken as the beneficiary’s income. If this occurs, these benefits may be significantly reduced.
Aside from housing or food, it’s important that a special needs trustee be careful before making additional types of distributions from the trust earmarked for certain expenses. Regular disbursements made to cover the costs of utilities, property taxes, rent or homeowner’s fees may count as income. So, too, may any frequent distributions of cash as well.
A trustee who regularly distributes trust funds to cover these expenses may put the beneficiary at risk for losing as much as one-third of the SSI benefits he or she receives.
One of the roles of the trustee is to look out for the best interests of the beneficiary when making distributions from the fund. In some cases, he or she may find that the benefits that the recipient enjoys from receiving regular payouts from the trust are far better for them than the small amount of SSI benefits they lose.
How certain types of costs disbursed through a special needs trust can impact a person’s eligibility for government benefits can be complex to understand. It’s possible that a Queens estate planning attorney may advise you of other types of trusts or asset preservation options that may be even more appropriate for your unique situation.