What Can a Special Needs Trust Pay For? The Trustee’s Role

 August 15, 2012
Posted by M&LAdmin4

Have you heard about special needs trusts, but want to learn more? Here at CCT, we are often asked what disbursements can be made from a special needs trust. We hope that you will gain some insight from the information provided in this article:

A special needs trust (SNT) is a tool that allows funds to be set aside for an individual with a disability to be used for supplemental needs that will improve, to the extent possible, the quality of life of the Beneficiary. SNTs can be established for a Beneficiary with funds from an inheritance, personal injury award settlement, Social Security back payment, or other source of either the Beneficiary’s own funds or funding from a third party. A properly administered SNT can benefit an individual who needs assistance managing their finances, and assures that means tested benefits such as SSI and Medicaid are not jeopardized.

Once a family or individual decides to set up an SNT, they must select a Trustee. The Trustee manages disbursements, invests the funds, and keeps up with changing regulations. Because the regulations are complex and constantly changing, it is important to select a Trustee that specializes in these types of trusts. One option is to participate in a pooled SNT, which is established and administered by a nonprofit organization. A separate account is maintained for each Beneficiary, but the funds are “pooled” to provide greater investment opportunities and lower administrative expenses. Participating in a pooled SNT, such as Commonwealth Community Trust (CCT), can be an affordable and effective Trustee option for families and individuals.

In a pooled SNT situation, an Advocate is typically designated who understands the family’s wishes and the Beneficiary’s needs. This person is generally someone close to the Beneficiary such as a family member, guardian, conservator, case worker, power of attorney, or sometimes the Beneficiary him/herself. The Advocate works closely with the pooled trust organization in submitting requests for disbursements for the benefit of the Beneficiary.

What Can a Trust Pay For?
An SNT is established to pay expenses that will enrich the quality of life for the Beneficiary. While evaluating how to meet the needs of the Beneficiary, a Trustee may also consider the following criteria in determining how to best utilize funds in an SNT:

Whether benefits such as SSI and Medicaid would be jeopardized —
• For SSI and Medicaid recipients, a Trustee must be accountable for the items paid for by an SNT and insure that disbursements do not duplicate those benefits. Duplication could result in reduction or loss of benefits. Generally, the following disbursements would impact SSI benefits: food, mortgage (principal and interest), rent, real estate taxes, gas, electricity, water, sewer, and homeowner’s insurance. Cash payments to the Beneficiary would affect both SSI and Medicaid. There is more flexibility in what the trust can pay for when the Beneficiary is not receiving means-tested government benefits such as SSI and Medicaid.
Whether the request is for the sole benefit of the Beneficiary —
• Disbursements from the SNT should always be for the sole benefit of the Beneficiary. Gifts for other individuals, tithing, and purchases that will benefit other individuals are generally not appropriate.
Whether the request is prudent —
• It is the responsibility of the Trustee to exercise common sense and good judgment in approving disbursements from the SNT. The funds should be spent carefully with thought given to providing for any future expenses.
Whether the request is consistent with the intent of the Grantor —
• When a trust is established, any information that the Trustee can obtain about the intent of the Grantor will help guide their management of SNT funds. Particularly with third-party funded SNTs, information about the intent of the Grantor can help the Trustee manage how long the trust funds will last and what types of expenses to pay.

The following are a few examples of disbursements that can be paid for by an SNT:
• Medication and Devices – prescription and nonprescription medication and devices not paid for by Medicaid including eye glasses, hearing aids, prosthetic devices and expenses for maintenance of these devices.
• Medical Services – services that are not paid for by Medicaid such as dental care, eye exams, and hearing exams.
• Assistive Technology
• Education – vocational training and educational expenses such as tuition, books, subscriptions, supplies, computer and software, and training in their use.
• Transportation – purchase of a car titled in the name of the Beneficiary, insurance, and maintenance.
• Certain Housing Items – home modifications such as ramps and rails to accommodate the Beneficiary
• Recreation – including fitness and community center memberships
• Furniture, Clothing and Electronic Equipment

Article by Commonwealth Community Trust, a nonprofit organization that administers third party and self-funded pooled Special Needs Trusts.

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