In short, the funds placed within a supplemental/special needs trust must be used for the “sole benefit” of the beneficiary. In addition, it may only cover expenses that are not covered by government benefits, such as Medicaid.

The funds in a supplemental/special needs trust may be used for medical and dental expenses when there are no other means of paying. This also includes any equipment needed for the rehabilitation of the individual. These funds may also be used for education purposes, entertainment purposes, eyeglasses, reading materials, etc. These items are considered “supplemental” and are not covered by government benefit programs.

Likewise, some of the items for which the funds cannot be used for including groceries, rent, utilities, or anything that constitutes “shelter.”

Shelter is defined as expenses that are directly correlated with the living conditions of the individual. More specifically, it includes the following: mortgage payments, homeowners’ insurance, bills pertaining to a house or apartment such gas and electricity, property taxes, and garbage collection.

If the funds are used for prohibited items, like groceries or mortgages, then it will negatively affect the supplemental security income. It will reduce the amount received by SSI by up to one-third.

In-kind income and in-kind support and maintenance are the terms used to describe when the funds of a supplemental/special needs trust are used for items covered by SSI. For example, if you were to use the money allocated in the trust for groceries, this would be legally considered in-kind income and be deducted, up to one-third, from your monthly SSI.

It is not advisable to use the funds in a supplemental/special needs trust for anything that is covered by other government benefits, such as SSI. Some people may find they are willing to take the penalties, especially if times are difficult, though it is best to consult an attorney before doing so.

Usually, a supplemental/special needs trust is funded through life insurance, cash, retirement benefits, and property. It varies based on the person.

The trustee has sole discretion over the funds in the supplemental trust. They have access to the funds and decides how they will be used.

In a third-party supplemental/special needs trust, the beneficiary does not have access to the funds in the trust.

No, a beneficiary may not revoke a supplemental/special needs trust. It is one of the rules that must be followed for the trust to be maintained.

Yes, you should inform other family members of the establishment of a supplemental/special needs trust. It is important everyone knows that it exists because if other family members were to give inheritances or gifts separate from the trust it could negatively affect the individual’s eligibility for government benefits.

No, the trustee may not directly give funds to the beneficiary. Under the terms and regulations of a supplemental/special needs trust, the trustee cannot distribute funds directly to the beneficiary.

If a trustee distributes funds directly to the beneficiary, they would be in direct violation of the regulations of the trust. Additionally, these funds would negatively affect the eligibility of the disabled to collect government benefits.

Yes. In fact, many special needs trusts are created as part of the creator’s will and is put into practice upon the death of the donor.

No, there is no limit. The funds in the supplemental/special needs trust can become as high as necessary.

While there is no minimum per se, it is generally advisable to have at least $100,000 in the Supplemental/Special Needs trust.

The trustee should not give in excess of $2,000 per month from the supplemental/special need trust. This is because certain government benefits, such as Medicaid and SSI, require that the beneficiary does not have more than $2,000 in assets to qualify for their benefits. Staying under $2,000 from the supplemental/special needs trust will ensure they remain eligible for those government benefits.

A revocable supplemental/special needs trust is one that can be changed later. These funds can be taken back and made part of the estate. An irrevocable supplemental/special needs trust is a trust in which the funds are locked in and cannot be removed later. It will not be taxed, but it is permanently a part of the special needs trust.

Yes, a lawyer can help draft and move forward with a supplemental/special needs trust. They will have extensive knowledge and experience pertaining to trusts and estate planning, and they will be able to guide you through the entire process so that you are getting what you want.