When you have a disabled loved one, providing for their future needs can be difficult. You want to leave your assets behind to help them live a happier, more fulfilled life. However, you also don’t want to interfere with their access to certain need-based benefits, like Supplemental Security Income, Medicaid, SNAP benefits and HUD housing.
A special needs trust may be the answer. Before you set it up it’s critically important that you (and the trustee who will eventually have control) understand how the money in this kind of trust can be used.
The number one rule: Never give the money directly to the beneficiary
Because of the way these trusts are established, the money in them doesn’t belong to the beneficiary – even if that money is designated for their use. If any money is given directly to the beneficiary, that becomes income (when it is received) and an asset (as long as it remains unspent). Whatever goods or services are purchased for the beneficiary of the trust need to be acquired by the trustee.
The number two rule: Never use the money for their basic needs
The public benefits the beneficiary receives are designed to pay for their basic needs – so you cannot use the money in a special needs trust for things like housing, utility bills and groceries.
What’s left? Plenty. Here are some of the things that can be bought:
- Durable medical equipment that’s not covered by insurance
- In-home care services like companion care
- Housekeeping and lawn care services
- Uber rides, bus passes or a vehicle
- Recreational day trips and vacations
- Hobby items and hobby camps
- Entertainment items like movie tickets and televisions
- Electronics, like a computer or tablet
Setting up a special needs trust takes experience and skill. Make sure that you have the appropriate legal guidance.