Families of individuals with special needs use special needs trusts to save for future expenses and protect eligibility for government benefits. Eventually, you or, in the case of 3rd party special needs trusts more likely the successor trustees, will need to use some of the money in the trust to pay for everyday expenses for the individual with special needs. But how should you do this? Whether to withdraw and how much to withdraw from the trust account depends on how you plan to use it.
If the child with special needs is on SSDI and no longer on SSI, then expenditures from the trust will generally have no effect on SSDI or Medicaid benefits at all. However, if they are still on SSI, the Social Security Administration calls purchases of goods and services for benefit of the individual with special needs “in-kind purchases”. These purchases could affect SSI benefit payments depending on exactly what is purchased. Essentially, SSI benefit payments decrease if a third party – such as a trust – pays for “in-kind support and maintenance” expenses (ISM) of the person with special needs. The SSI benefits do not decrease dollar-for-dollar in the amount paid for the ISM; instead they reduce the benefit by either the presumed maximum value of the items or an amount calculated by dividing the maximum SSI benefit by three and adding $20, whichever is smaller. In-kind purchases do not affect Medicaid benefits except that Medicaid sometimes restricts expenditures for certain approved items.
Food and Shelter
The SSI rules count only the following food and shelter items as ISM that reduce SSI benefit payments:
- Mortgage, including required property insurance
- Real property taxes
- Utilities: gas, electricity, heating fuel, water, sewer, garbage removal
Note that telephone, internet, and cable television are not ISMs and will not reduce SSI benefit payments. A trustee can use trust funds to pay for these expenses.
Clothing and Home Furnishings
Clothing is not an ISM under SSI rules. Further, trust funds can be used to purchase home furnishings that will be almost exclusively used by the individual with special needs such as bedroom furniture.
Tuition, books, and tutoring are not ISMs. Since tuition and tutoring can be quite expensive, they are a good use of trust funds.
Of course, there are many other types of payments that a trustee may want to make from a special needs trust on the beneficiary’s behalf. Check federal and state restrictions before doing so and consider speaking to a qualified attorney to make sure that you fully understand the impact of these payments.
Rubin Law is the only law firm in Illinois exclusively limited to providing compassionate special needs legal and future planning to guide our fellow Illinois families of children and adults with intellectual disabilities, developmental disabilities, or mental illness down the road to peace of mind. For more information, email us at firstname.lastname@example.org or call 866-TO-RUBIN.