1. Food and Shelter. Any distributions for food and shelter will cause a disruption or have a negative effect on benefits. Part I discussed situations where the benefits to the individual outweighed the penalty imposed. It is strongly recommended that these types of distributions should be made with professional guidance from a special needs planning attorney.

2. Entertainment. Requests for entertainment are generally without issue for the beneficiary and a caregiver. Some states require that the caregiver be a non-family member or a penalty will be imposed. Entertainment which includes food and/or shelter can be problematic, such as a restaurant or even popcorn at a movie, if paid for by the trustee. However, SSA disregards the first $20. So, the Trustee could pay for food, such as popcorn at a movie, or give the beneficiary $20 in cash without affecting SSI benefits.

3. Vacations. Vacations can potentially be especially problematic since it includes elements of both food and shelter. Even though a hotel, or other vacation housing payment, is technically shelter, under the POMS an ISM penalty is not imposed during a temporary absence from their primary residence. Food while on vacation can become an issue. Cruises or all-inclusive resorts are great options. If the beneficiary requires assistance, a trustee can generally pay for one individual to accompany the beneficiary. More than one caregiver can be paid for as long as the need for such assistance can be properly documented by a physician.

4. Medical expenses not covered by Medicaid. Most medical expenses are covered by Medicaid. However, there may be certain specialists, therapies or testing that are not. As state programs are cut in an attempt to balance budgets services like podiatry, non-emergency dental care, glasses, hearing-aids, and chiropractic services are eliminated and can be paid for out of the special needs trust.

5. Incidentals or on-going expenses. Generally, the provider of a good or service should be paid directly from the special needs trust. However, this may not be possible or convenient when dealing with issues like personal hygiene needs, gas, or clothing and a friend or family member will pay for these items with the expectation of reimbursement from the special needs trust. In some regions this reimbursement is treated as unearned income to the recipient. This interpretation diverges from federal regulations, but is a reality nonetheless. The use of credit cards is an easier way to deal with these types of purchases. Gift cards are generally treated as cash and are not suggested.

6. Vehicles. Vehicles are one of the most frequent significant purchases. There can be issues with insurance and ownership. If a trust is supervised by a probate court I strongly recommend prior court approval. If the vehicle is owned by the trust, there can be liability issues, which exposes the trust and puts it at risk in the event of an accident, damage or theft. If in a family member’s name alone, then there is no recourse if the vehicle is sold or transferred. When there is a responsible family member, friend or guardian of the beneficiary, the vehicle can be in their name, but the trust should place a lien on the vehicle to prevent unauthorized transfer. Creativity may be required depending on the policy in the beneficiary’s region.

7. Older adults. If the beneficiary is over age 65, some of the most typical disbursements are for bed-hold payments, non-covered medical expenses, guardianship expenses, translators, advocacy or additional care management services, and legal expenses.

8. Other expenses. There is no limit on the value of personal items, including computer or adaptive equipment, televisions, gaming devises, furniture, expenses to develop interests or skills, training or education.

A special needs trust must be prudently administered in the best interests of the beneficiary, while avoiding negative impact to the beneficiary’s benefit eligibility. This type of trust is extremely helpful in promoting a higher quality of life for a beneficiary. Because of the complexity, generally professional guidance is recommended. However, where a need is demonstrated, with creativity, it can generally be met.

Copyright Michele P. Fuller 2009