You may know that a special needs trust generally pays for the supplemental needs of the disabled, in order to preserve access to means-tested public benefits.
But what are those supplemental needs?
Commonly paid items
Below is a list of items that are often paid for by special needs trust.
Education – tuition, tutors, books, supplies
Computer, printer, internet, technological support
Home care, if not paid by another program
Phone or mobile phone, voice and/or data plan
Clothing (wasn’t always allowed to be paid for, but has been since 2005)
Medical supplies and equipment, such as wheelchairs, hearing aids, etc.
Vacations, including tickets or other travel charges, hotel
Exercise and physical therapy equipment
Health insurance premiums
Life insurance premiums
Household supplies and cleaning products
Tools used for home repair and maintenance
House and vehicle
Two items that raise more complicated questions are the purchase of a house and a vehicle. Both may be beneficial and even necessary, and can often be purchased with funds from the trust. However, keep in mind that the purchase of such items raises complex questions of title and ownership, upkeep, insurance, and contribution by other family members.
Keep in mind that this list is not comprehensive. There any number of other items that will not reduce benefits and could be paid for by a special needs trust.
Check the terms of the trust. Even if an item is on this list, make sure the trust document itself allows the expenditure.
The general rule is that a special needs trust pays for items other than food and shelter. Such items could be paid for, but the purchase raises the issue of “in kind support and maintenance,” also referred to as ISM, which can reduce benefits. There may be reasons why the trust should make ISM payments, but that is a complicated topic for another blog post.
Check the rules of your local jurisdiction. Some states have rules that are more restrictive than others.
And of course, it’s best to seek competent professional advice before making distributions from a special needs trust. (Corporate trustees such as banks, trust companies, and nonprofits that are approved for handling special needs trusts, often serve as trustees of special needs trusts, rather than a family member or friend, because of the legal complexity.)