The Settlement Alliance

What is Eligible for Special Needs Trust Distributions?

What is Eligible for Special Needs Trust Distributions?

Mar 23, 2017

A special needs trust is a type of account that protects the assets of a disabled individual and in many cases, allows the disabled individual to maintain eligibility for vital needs-based government benefits, such as Medicaid and SSI.

Most often, a special needs trust is managed by a trustee (for instance, a parent/guardian or a corporate trustee). One of the roles that the trustee of a special needs trust serves is to manage trust distributions. There are federal and state guidelines that indicate how the funds can be distributed, but generally speaking, the funds must only be used to purchase goods and services for the benefit of the disabled individual.

Examples of Eligible Special Needs Trust Distributions

State government benefit agencies (i.e. your local Medicaid and Social Security offices) may treat distributions differently depending on the office, even within the same state. For instance, Social Security may allow for the purchase of a home in the disabled individual’s name without eliminating eligibility for SSI (though SSI benefits may be reduced for the month during which the home is purchased). Medicaid, on the other hand, may require that the title for the home be held in the name of the trust.

The manner in which the trust was funded can affect the distribution rules as well—self-settled trusts (i.e. trusts funded with the assets of the disabled individual, such as personal injury settlement proceeds) tend to be among the most restrictive.

All of that being said, here is a list of goods and services that may be covered in your state:

  • Purchasing a home; paying off a mortgage on a home; modifying a home to accommodate an individual’s disabilities; home repairs, remodeling, or deferred maintenance expenses
  • Purchasing an automobile and/or paying for registration and insurance
  • Purchasing home furnishings or appliances
  • Medical expenses and/or bills not covered by Medicaid or Medicare (e.g. higher quality wheelchair than what is authorized by Medicaid/Medicare)
  • Dental expenses, eye glasses, physical therapy, support services not covered by any benefit program
  • Education expenses (including computer, software, books, etc.)
  • Entertainment/recreation expenses
  • Paying off debts (e.g. existing credit card debt, loans with supporting paperwork)
  • Personal hygiene (e.g. haircuts, manicures)

Reporting Distributions

The trustee must keep detailed accounting of all distributions made from the special needs trust. There are often reporting requirements for the Court, as well as the state government benefit agencies. Failure to maintain and report proper accounting can be costly for both the trustee and the beneficiary.

Contact our settlement planning team today

The Settlement Alliance has access to local elder law attorneys across the nation who specialize in drafting special needs trusts. Contact us today at 800-464-2500 or info@settlement-alliance.com.

Categories: Special Needs Trusts

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