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How Can Special Needs Trust Funds Be Spent?

12/21/2022 | Special Needs Trust
How Can Special Needs Trust Funds Be Spent

When you have a disability and are surviving on Social Security Disability (SSI), Medi-Cal (California Medicaid), and living in Housing and Urban Development (HUD) lodging, the value of personal assets you are permitted to retain is extremely limited.  If you make a mistake, and end up receiving anything which appears to be income, you could be disqualified from receiving these urgently needed government benefits.  By having a California special needs trust, you can help supplement your program payments without risking your eligibility. However, to avoid problems later on, it is vital that you and your trustee know how special needs trust funds can be spent.

Supplement v. Replace

One way to understand the restrictions on special needs trusts, is to remember that these resources are supposed to supplement rather than replace your public benefits. The benefits are meant to help provide for your necessary shelter, food, and medical care.  The trust payments are supposed to cover the expenses associated with your disability, which are not covered by government assistance programs.

Income to the Beneficiary

When a special needs trust beneficiary’s disbursement is used for food or shelter or paid directly to the individual, these payments can be counted as income.  The trustee is responsible for making distributions which do not risk the beneficiary losing their eligibility for public benefits.  That means that he or she must be careful not to give the beneficiary cash or gift cards, or make any payments which appear to violate the rules. Generally, distribution from the trust for things such as mortgage payments, home owner’s insurance, rent, property taxes, groceries, regular meals at restaurants, and utility bills are all prohibited.

Allowable Expenses

Government benefit programs are geared towards covering an individual’s essential necessities rather than paying for expenses which improve the recipient’s quality of life.  Generally, trust payments can be made for things such as housekeeping services, massage therapy, transportation, vacation, travel, internet services, computers, vocational training, psychological services not covered by Medi-Cal, clothing, pets and their care needs, and recreation and entertainment.

Contact a Special Needs Trust Attorney

If you have concerns regarding you or a loved one’s California special needs trust payments, it would be best to consult with a California special needs trust attorney who can help you evaluate your situation.  At the Law Offices of Alice A. Salvo, we understand the importance of maintaining a California special needs trust and can help you understand which expenditures are permissible. Contact us today to schedule your free consultation.