Which Expenses Cannot Be Paid from a 3rd Party Special Needs Trust?

Which Expenses Cannot Be Paid from a 3rd Party Special Needs Trust?

Special needs trusts can pay some expenses for their beneficiaries without penalties. If you are a family member of a person with special needs or the trustee of an SNT, you should learn about which expenses the trust money can pay for and which it cannot.

SNTs are supposed to supplement the benefits available from the federal government, state government, and other public programs. When Congress approved the law that permits SNTs, it did not intend for people with special needs to pay everyday expenses from their trusts. Instead, the money from SNTs is for those additional items that will improve the lives of trust beneficiaries.

You could use the money from an SNT to pay for the person with special needs’:

  • Specialized medical care or equipment, if necessary for treatment
  • Surgery or procedure not covered by Medicaid
  • A private room instead of a shared room at a care facility
  • Computers or cell phones
  • A vacation
  • A vehicle
  • Tuition or tutoring
  • Household furnishings like a couch or bed
  • Other unusual or “special” expenses

You should not use the money from an SNT to pay for most ongoing, typical expenses of everyday life. The Social Security Administration and other benefits administrators may impose a penalty or reduction in benefits for using the money in this way. Ongoing, typical expenses include:

  • Rent
  • Food or groceries
  • Regular meals out at restaurants
  • Cash in hand given to the person with special needs – for any reason
  • Mortgage payments or property taxes
  • Utilities such as gas, water, and electricity

The SSA in particular may reduce SSI benefits by one-third if SNT funds are used to purchase these items. If you are a trustee of an SNT, familiarize yourself with the detailed rules involved so that the trust beneficiary does not lose out on necessary benefits.

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 email@rubinlaw.com or call 866-TO-RUBIN.