How does a special needs trust affect SSI?

On Behalf of | May 12, 2020 | Estate Planning

Creating a special needs trust is necessary if you have a child or dependent with special needs. However, persons with special needs often benefit from supplemental Security income (SSI) government benefits. It is important to understand how these two entities interact with each other in order to maximize the potential of both.

For instance, if the beneficiary handles special needs trust inappropriately, it may end up reducing or eliminating SSI benefits all together. According to Special Needs Answers, a special needs trust should never give the beneficiary cash directly to pay for anything, including food or shelter.

How does cash affect SSI benefits?

Every dollar that a beneficiary receives directly from a special needs trust will remove a dollar in SSI benefits. This is why it is important for any assets from a special needs fund to never be directly in the hands of a beneficiary.

While losing SSI dollars may not be a very big deal, depending on how large the special needs trust is, it can be potentially devastating if an SSI recipient loses access to Medicaid. This is why it is important to have special needs trust in the control of a competent trust manager.

What can the beneficiary use special needs trust funds for?

The rules regarding food and shelter can be rather complicated. There are some execptions that involve using trust funds for housing and food, the beneficiary or their guardians must discuss this with a lawyer.

However, if the beneficiary focuses SSI benefits toward food and shelter, funds from a special needs trust can pay for nearly anything else necessary to supplement the lifestyle of the beneficiary.