A special needs trust is a document intended to manage assets for a beneficiary without compromising government benefits such as Medicaid and Supplemental Security Income. There are two types of special needs trusts. The first-party trust holds money for someone’s inheritance or personal injury settlement. A third-party trust is for those who want to provide for a loved one with special needs. A parent of a disabled child will more than likely want to set up the latter.
The Social Security Administration outlines the rules of a special needs trust to allow for the beneficiary’s continued use of Medicaid and SSI benefits. To protect the future needs of a disabled child, individuals of first- and third-party trusts may want to pay attention to these exceptions.
Creators of a trust
The SSA allows an exception for trusts created by:
- The disabled person’s parents
- The disabled person’s grandparents
- The disabled person’s legal guardians
- The court
- The individual (only for first-party trusts)
In-kind support and maintenance
In-kind support and maintenance is a disbursement made by the trustee to the beneficiary for food and shelter. The SSA uses the amount of this disbursement to figure the amount of SSI benefits. In-kind support and maintenance includes:
- Mortgage payments including property insurance
- Rent
- Property taxes
- Gas
- Electricity
- Water
- Sewer
- Garbage removal
- Heating fuel
Other expenses
There are some expenses the SSA does not consider income. Those amounts do not apply toward in-kind support and maintenance. These expenditures may include:
- One automobile
- Accounting or legal services
- Appliances
- Public transportation costs
- Internet service
- Computers and software
- Academic or recreational classes
- Doctors not covered by Medicaid
- Dental work not covered by Medicaid
- Car maintenance
- Cellphone payments
- Vacations or travel
The beneficiary of the trust cannot directly receive monetary distributions. The trustee, a person chosen by the parent or guardian, administers and handles the assets within the trust. A beneficiary of a special needs trust must be under age 65 and disabled.
