Transportation is an essential need for all individuals, including those with disabilities. Individuals need transportation to travel to and from work and other activities, as well as to obtain necessities for daily living, such as food and medications. Although means-tested public benefits programs, like Medicaid and Supplemental Security Income (SSI), have strict asset limitations, they also exclude a motor vehicle as a countable asset.
However, buying and maintaining a safe motor vehicle is expensive, and the vehicle may need modifications to make it accessible or accommodate a disability. A special needs trust (SNT) is often the only source of funds significant enough to allow an individual with disabilities to make such a purchase. In this situation, the trustee of an SNT would have to decide whether to approve a vehicle purchase, which involves weighing various factors.
Assets Sufficient to Fund the Vehicle Purchase
Above all, the trustee must consider whether the special needs trust can afford not only the initial purchase, but also the ongoing costs of its maintenance. While some SNTs may have funds more than sufficient to purchase a vehicle, others may not. A trustee must consider:
- The beneficiary’s overall needs, both current and future;
- Whether alternative forms of transportation are readily available and accessible for the beneficiary; and
- If any public funding for the vehicle purchase exists, such as through a state vocational rehabilitation program.
Even if the trustee determines that a vehicle purchase is necessary, the trustee must then determine the most appropriate details for the purchase. The trustee must decide whether to purchase the vehicle outright, lease a vehicle, or take out a vehicle loan. For instance, the choice of vehicle may depend on anticipated repair costs. An SNT containing non-liquid assets or periodic income, such as from an annuity, may make a lease or even a loan more appropriate or necessary. Finally, necessary modifications to a vehicle to accommodate a disability may qualify for a medical income tax deduction in some cases, helping offset costs.
Ownership of the Vehicle
A related decision involves who should own the vehicle, if purchased – the SNT beneficiary or the special needs trust itself? The most appropriate owner may differ depending on the situation.
For instance, in some cases, SNT beneficiaries may be vulnerable to financial exploitation. In that case, keeping the vehicle titled in the trust’s name allows the trustee to maintain control over it, which could prevent the beneficiary from improperly transferring title to the vehicle. Likewise, if the beneficiary is a minor, keeping the vehicle titled in the SNT’s name may be necessary.
On the other hand, if the special needs trust owns the vehicle, insurance coverage could be more difficult to obtain. First, the trust could face liability for an asset over which the trustee has little or no daily control. However, comprehensive liability insurance can help address this concern. Trustees should also review insurance coverage for the vehicle’s adaptive equipment, if needed.
Additionally, the SNT’s ownership of the vehicle can make it harder for the beneficiary to maintain insurance coverage, as the trust or trustee will not be the driver. In this situation, the special needs trust can remain the legal owner, but the beneficiary may be the registered owner or driver of the vehicle.
Likewise, while it may seem like a good solution to title the vehicle in a family member’s name, or even jointly in the beneficiary and family member’s name, that is likely not an available option. Distributing ownership of an asset purchased with SNT funds to someone other than the beneficiary, even if titled jointly, arguably violates the trustee’s fiduciary duty to provide for the beneficiary. In theory, the family member could transfer the vehicle, sell it and keep the proceeds, or prevent the beneficiary from using the vehicle. Furthermore, titling a vehicle in a family member’s name, such as a parent, exposes the asset to the family member’s creditors. Since these potential outcomes would be detrimental to the beneficiary, trustees may breach their duty to provide for the beneficiary if they take such action.
Additionally, titling the vehicle in another’s name can affect the beneficiary’s eligibility for means-tested public benefits programs. For example, if the SNT is funded with the beneficiary’s assets, distributing a vehicle purchased with those assets to someone other than the beneficiary could constitute a transfer of assets that makes the beneficiary ineligible for public benefits. Generally, assets in SNTs are exempt from eligibility requirements for public benefits programs because they are held solely for the beneficiary’s benefit. Therefore, if SNT funds are used to purchase an asset that is transferred to another person, ineligibility for means-tested public benefits programs could result.
Frequently Asked Questions
What types of vehicle‑related expenses can a special needs trust pay for besides the purchase itself?
A special needs trust can typically cover a wide range of vehicle‑related costs if the expenses directly benefit the beneficiary. These costs may include adaptive equipment, insurance premiums, routine maintenance, major repairs, registration fees, and accessibility‑related upgrades. Trustees should document how each expense supports the beneficiary’s needs and ensure payments are made directly from the trust to avoid creating countable income for the beneficiary.
How should a trustee evaluate whether a vehicle is the most appropriate transportation solution?
Before approving a purchase, trustees should assess the beneficiary’s mobility needs, driving ability, and daily routines. They may also consider whether ride‑share services, paratransit, or public transportation could better meet the beneficiary’s needs at a lower cost. A vehicle may be appropriate when the beneficiary requires frequent medical appointments, works a regular schedule, or lives in an area with limited accessible transportation options.
What documentation should a trustee maintain when approving a vehicle purchase or lease?
Trustees should keep detailed records showing why the vehicle was necessary, how the decision supports the beneficiary’s long‑term needs, and how the trust evaluated affordability. These records may include quotes for adaptive equipment, insurance estimates, maintenance projections, and notes from discussions with the beneficiary or caregivers. Thorough documentation helps demonstrate that the trustee acted prudently and in the beneficiary’s best interest, which is especially important if the trust is ever reviewed by a court or benefits agency.
Contact Us Today to Learn More About a Special Needs Trust
Rubin Law is the only Illinois law firm to dedicate itself exclusively to providing compassionate legal services for children and adults with special needs. We offer unique legal and future planning techniques to meet your family’s individual needs.
Call us today at 866-TO-RUBIN or email us at email@rubinlaw.com to learn more about the services we can offer you and your family.