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What Expenses Can a Special Needs Trust Cover?

July 14, 2022

Expenses Covered by a Special Needs Trust

Trusts are an essential component of estate planning for people who have unique requirements for their care. Trusts for people with special needs are another name for them occasionally. They provide families with a method that is safe, secure, and protected to assure the long-term care as well as the financial well-being of their children or other loved ones who have special needs. Unfortunately, when some forms of government assistance or benefits intersect with special needs trusts, complexities and conflicts can result. This is also related to having a good awareness of the many types of costs that can be covered by a special needs trust. As a consequence of this, you should consult with a legal professional before establishing a Special Needs Trust and before learning how to manage it going forward. For further information, please get in touch as soon as possible with an experienced special needs planning attorney at the Choi Law Firm.

An Overview of Trusts for Individuals with Special Needs

Medicaid, SSI, and Social Security Disability payments are extremely important to a large number of families and children, and it is imperative that these programs continue to exist because they are typically awarded on the basis of financial necessity. If a child or beneficiary has more than a certain amount of money or assets to their name, they risk having their payments reduced or perhaps terminated entirely.

As a consequence of this, Special Needs Trusts, also known as SNTs, are created with the intention of providing supplemental benefits to people with impairments while yet allowing them to remain eligible for government benefits. SNTs are put toward the payment of costs that are not covered by other government assistance programs. The individual is able to safeguard their financial well-being in the most all-encompassing manner possible by doing so when they have both an SNT and access to benefits provided by the government.

Additionally, children who are disabled and other beneficiaries of an SNT may be unable to handle their assets on their own. Here is where the use of a Special Needs Trust can be of assistance in protecting the beneficiary’s assets while at the same time maintaining their eligibility for government benefits. This requires an understanding of the law as well as the effect that payments have on the trust. Contact the Choi Law Firm to find out what we can do to protect the financial well-being of your family and the disabled member of your family by calling 201-482-4825.

Some people believe that they can leave everything to a family and allow them to manage a disabled child’s portion, while other people may opt to set up a special needs trust (SNT) even if it is not compulsory for them to do so. In the first scenario, money should be set aside for a child with a disability in a way that is irrevocable. This is because the financial situation of a relative who is to receive the money could change, and despite the fact that the relative has good intentions, they could be tempted to use the money for themselves. In the second scenario, an SNT is not necessarily required, such as in the case where an individual wins a big court settlement for an unintended impairment. In this scenario, an SNT is not required because the individual has already received compensation. SNTs are designed for those who rely on government payments yet are unable to work or keep employment for an extended period of time.

Expenses that May be Paid for by a Trust for Individuals with Special Needs

The following is a list of potential expenditures that can be paid for using your SNT:

  • Insurance premiums, such as those for medical, dental, life, and automobile insurance
  • Accessibility improvements and/or house renovations with furniture and/or home improvements
  • Costs associated with internet access and phone service
  • Expenses related to employment coaching, as well as school tuition and summer camp fees
  • Items of clothing and appliances for the home

Any expenditure that is not regarded as an absolute requirement for the beneficiary’s survival but has the potential to significantly enhance their quality of life can be paid for with an SNT.

It is extremely important to keep in mind that an SNT can be used to pay for essentials such as food and shelter; nevertheless, this may result in the recipient’s government benefits being reduced as a direct consequence of their use of the SNT. As a result, please contact the Choi Law Firm so that we may provide you with a full review of which expenses and outlays you should cover with your SNT and which you should cover with additional government benefits.

Expenses that Cannot be Covered by a Special Needs Trust 

The beneficiaries of a special needs trust, or the administrators of the trust, are only allowed to use the money from the trust to pay for certain additional expenses. Because this money would be considered income and cause the beneficiary’s SSI eligibility to be reduced, it can’t be used to pay for things that are really necessary.

It is not possible to use the funds from a Special Needs Trust to pay for necessities such as: 

  • Groceries or utilities
  • Rent and mortgage payments
  • Real estate tax responsibilities
  • Insurance for private residences, whether rented or owned
  • A payment paid to the receiver in the form of cash, typically in the form of an allowance.

The cost of wheelchairs, mechanical beds, accessible vans, specific therapies, and/or life-enriching recreational and/or cultural events are some examples of other non-essential expenses that can be paid by an SNT in addition to the list that was given above. It may be difficult to determine if a certain expenditure falls into the category of supplemental or not, as well as to explain how the child’s or beneficiary’s life will be improved as a result of the expenditure. However, the knowledgeable estate planning attorneys at the Choi Law Firm can assist you in differentiating between demands that are supplementary and needs that are necessary so that you can construct a plan that is both precise and complete for the financial security of your loved ones.

Trustee Discretion with SNT Compared to Help from the Government

To manage a beneficiary’s funds and/or trust, a trustee, administrator, or executor might be appointed, just like in the case of any other type of trust. To achieve the best results, the trustee should be a person who is both accountable to the beneficiary and committed to serving him or her. This can be a member of the family, or in the event that there are no family members available, it can be a professional trustee.

The trustee or administrator of an SNT is required to use their best judgment whenever they are tasked with making spending decisions on behalf of an SNT beneficiary. They are also required to maintain regular consultations with an experienced attorney in order to guarantee that the SNT trust is managed appropriately and that the beneficiary not only has their requirements met but also keeps their eligibility for government benefits and access to those benefits.

Get in Touch with the Choi Law Firm Right Away for a Detailed Analysis of Your Situation.

Establishing a Special Needs Trust in the right way can be difficult, and any mistakes that are made during the process can cause significant harm to your disabled loved one or the receiver. There are a great number of important considerations to make in relation to your eligibility for public benefits, your tax status, and the impact that an SNT can have on your overall financial and estate planning. The qualified special needs planning lawyers at Choi Law Firm are waiting to take your call. Our experienced attorneys are available to meet with you to gain a comprehensive understanding of your requirements, construct a robust financial plan and trust for your family, and provide guidance on the entirety of the process. Do not put off contacting us today; do so immediately.

The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.

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