What Expenses Can a Special Needs Trust Cover?

A Special Needs Trust (SNT) is a crucial legal tool designed to provide financial support for individuals with disabilities while preserving their eligibility for government benefits such as Supplemental Security Income (SSI) and Medicaid. These trusts ensure that funds are used for the beneficiary's benefit without jeopardizing essential assistance.

Understanding what expenses a Special Needs Trust can cover is vital for trustees, beneficiaries, and family members who want to maximize the trust's value while complying with legal requirements. This article explores the permissible expenses under an SNT and how they enhance the beneficiary's quality of life.

If you need assistance establishing or administering a Special Needs Trust, contact our experienced attorneys at Heritage Law Office by calling 414-253-8500 or filling out our online form.

Understanding the Purpose of a Special Needs Trust

A Special Needs Trust is designed to supplement, not replace, government benefits. This means that the funds should be used for expenses that improve the beneficiary's quality of life without providing direct income that could reduce their eligibility for public assistance programs.

There are different types of Special Needs Trusts, including:

First-Party SNT - Funded with assets that belong to the individual with disabilities (such as an inheritance or legal settlement).
Third-Party SNT - Established and funded by someone other than the beneficiary (such as a parent or grandparent).
Pooled SNT - Managed by a non-profit organization that pools funds from multiple beneficiaries while maintaining separate accounts.

Each type of trust follows similar rules regarding allowable expenses, ensuring that the funds are used appropriately to enhance the beneficiary's well-being.

Permissible Expenses Under a Special Needs Trust

A Special Needs Trust can cover a wide range of expenses that improve the beneficiary's quality of life, comfort, and well-being. These expenses generally fall under the categories of medical care, personal needs, education, housing, and recreation.

1. Medical and Healthcare Expenses

While Medicaid may cover many healthcare costs, an SNT can pay for additional medical needs and treatments, including:

Uncovered Medical Expenses - Co-pays, deductibles, and treatments not covered by Medicaid or private insurance.
Dental and Vision Care - Routine exams, eyeglasses, and dental procedures.
Therapy Services - Physical, occupational, speech, and mental health therapy.
Alternative Treatments - Acupuncture, chiropractic care, or other holistic treatments.
Medical Equipment - Wheelchairs, hearing aids, prosthetics, and adaptive devices.

2. Housing and Living Arrangements

A Special Needs Trust can contribute to housing costs, but caution is required to avoid reducing SSI benefits. The trust may cover:

Rent or Mortgage Payments - Direct payments can reduce SSI benefits, so it's often better to pay for home modifications or utilities instead.
Home Modifications - Wheelchair ramps, accessible bathrooms, and smart home technology.
Property Taxes and Insurance - If the beneficiary owns a home.
Assisted Living Costs - Expenses related to care facilities that provide specialized services.

3. Education and Training

An SNT can fund various educational opportunities that help the beneficiary develop skills and interests:

Tuition for School or College - Special education programs, vocational training, or higher education courses.
Tutoring Services - Academic or life-skills training.
Books, Supplies, and Software - Educational materials, adaptive learning tools, and assistive technology.

4. Personal and Recreational Expenses

A Special Needs Trust can cover personal and recreational activities that enhance the beneficiary's well-being, social life, and overall happiness. These may include:

Hobbies and Leisure Activities - Music lessons, art classes, or sports participation.
Entertainment - Concert tickets, museum visits, streaming services, or movie passes.
Vacations and Travel - Hotel stays, airfare, transportation, and travel companions if necessary for assistance.
Clothing and Personal Care - Special clothing needs, grooming services, and hygiene products.

These expenses contribute to a better quality of life while ensuring the beneficiary remains socially engaged and emotionally fulfilled.

5. Transportation and Mobility Assistance

Reliable transportation is essential for individuals with disabilities, and an SNT can help by covering:

Public Transportation Costs - Bus or train passes for local travel.
Private Transportation - Taxi, Uber, or specialized disability transportation services.
Vehicle Purchase and Modifications - Adapting a car with wheelchair accessibility or other necessary modifications.
Driver's Education and Licensing - If the beneficiary is capable of driving, the trust can cover the costs of driver training.

Providing accessible transportation enhances independence and allows beneficiaries to participate more fully in daily life.

6. Legal, Financial, and Administrative Services

A Special Needs Trust can also be used to pay for professional services that ensure proper financial and legal management, including:

Attorney Fees - For estate planning, disability rights, or other legal matters.
Financial Advisors - Guidance on managing the trust and investments.
Trustee Fees - Compensation for the individual or institution managing the trust.
Tax Preparation Services - Ensuring the trust complies with all IRS regulations.

These services ensure the trust remains legally compliant and financially sound for the beneficiary's long-term benefit.

Permissible Expenses Covered by a Special Needs Trust

Category	Examples of Allowable Expenses
Medical & Healthcare	Co-pays, dental care, vision care, therapy services, medical equipment, alternative treatments
Housing & Utilities	Home modifications, property taxes, homeowner's insurance, utility bills
Education & Training	Tuition, tutoring, books, educational software, vocational training
Personal & Recreation	Hobbies, entertainment, vacations, fitness memberships, clothing
Transportation	Vehicle purchase/modifications, public transit, rideshare services, adaptive driving lessons
Legal & Financial	Attorney fees, trustee fees, financial planning, tax preparation services

What a Special Needs Trust Cannot Pay For

While an SNT can cover many expenses, there are certain restrictions to ensure the beneficiary remains eligible for government assistance. The trust should not pay for:

Direct Cash Payments - Giving money directly to the beneficiary may count as income, reducing SSI benefits.
Food and Groceries - If the beneficiary is on SSI, food purchases can reduce benefits.
Housing Costs (in some cases) - Paying rent, mortgage, or utilities directly may lower SSI benefits, so careful planning is required.

Proper trust administration is critical to avoid mistakes that could affect the beneficiary's financial security. If you need guidance, speak with an experienced special needs planning attorney.

Expenses That May Affect Government Benefits

Expense Type	Impact on SSI Benefits	Alternative Solutions
Direct Cash Payments	Reduces SSI benefits	Use the trust to directly pay vendors for services instead
Food & Groceries	Can count as income, reducing benefits	Use personal funds for groceries rather than trust funds
Rent or Mortgage Payments	May lower SSI benefits	Consider having the trust cover home modifications or property taxes instead
Utilities	Can affect benefits if paid directly	Pay for assistive home modifications instead

Contact a Special Needs Planning Attorney

A Special Needs Trust is a valuable tool for protecting a loved one's financial future while maintaining access to government benefits. However, understanding which expenses are permissible is essential for proper administration.

If you need assistance setting up or managing a Special Needs Trust, our attorneys at Heritage Law Office can help. Call 414-253-8500 or fill out our online contact form to schedule a consultation.

Frequently Asked Questions (FAQs)

1. Can a Special Needs Trust pay for rent or mortgage payments?

A Special Needs Trust can pay for rent or mortgage payments, but doing so may reduce the beneficiary's Supplemental Security Income (SSI) benefits. Instead, it is often better for the trust to cover expenses like property taxes, home modifications, and utilities to avoid impacting government assistance.

2. Can a Special Needs Trust pay for a car or transportation expenses?

Yes, an SNT can pay for a vehicle purchase, modifications, and maintenance, as well as other transportation expenses such as public transit passes, Uber or taxi rides, and adaptive driving equipment. These expenses improve mobility and independence for the beneficiary.

3. Are food and groceries covered by a Special Needs Trust?

Generally, food and groceries are not permissible expenses under an SNT if the beneficiary receives SSI, as it could be considered income and reduce their benefits. However, in some cases, the trust may cover meals during travel or special dietary needs.

4. Can a Special Needs Trust pay for vacations and entertainment?

Yes, an SNT can fund vacations, entertainment, and recreational activities such as travel, movie tickets, concerts, and hobby-related expenses. These expenditures improve the beneficiary's quality of life and social engagement without affecting government benefits.

5. Can a Special Needs Trust cover medical expenses not paid by Medicaid?

Yes, an SNT can pay for uncovered medical expenses, including dental care, vision care, alternative therapies, and specialized medical equipment. This ensures the beneficiary receives necessary healthcare services beyond what Medicaid provides.