Special Needs Trust Spending Rules

Mother plays with toys with her special needs daughter

A special needs trust is an important legal document for families with a loved one who lives with a disability. The trust allows the person with a disability to receive government benefits while also providing money for supplemental care. There are specific spending rules that must be followed in order to protect the beneficiary's eligibility for government assistance.

Most people with special needs qualify for government benefits to help with the costs of daily living, which provide basic income and health care assistance. These benefits are often essential to the disabled person's well-being. However, unfortunately, government benefits are typically limited in scope and do not cover all of the beneficiary's day-to-day needs. A special needs trust can be used to supplement government benefits and provide for the beneficiary's additional expenses.

The trustee of a special needs trust has a fiduciary duty to manage the trust property in the best interests of the beneficiary at all times. The trustee must also follow the spending rules that are outlined in the trust document. The spending rules may vary depending on the type of special needs trust, but there are some general guidelines that must be followed.

In this blog post, we will discuss the general spending rules as they relate to special needs trusts.

Special Needs Trust Spending Rules

Rule #1

The first rule is that the trustee must use the funds for the sole benefit of the beneficiary. The trustee is not allowed to use the funds for his or her own benefit or for the benefit of any other person. Additionally, the trustee must use the funds in a way that is consistent with the purpose of the trust.

Rule #2

The second rule is that the trustee must use the funds in a way that does not decrease the beneficiary's eligibility for government assistance. This means that the trustee cannot use the funds to purchase items or services that would be considered "countable assets" under government benefit programs. Countable assets include, but are not limited to, cash, investments, and real property. For example, if the beneficiary is receiving Medicaid, the trustee cannot use trust funds to pay for medical expenses that would be covered by Medicaid.

Rule #3

The third rule is that trust funds can only be used for supplemental care and services. Supplemental needs are defined as expenses that are not covered by government benefits. This means that trust funds can be used to pay for basic living expenses, such as food and shelter. Examples of supplemental needs include but are not limited to medical costs, housing expenses, transportation costs, and educational expenses. Trustees should consult with an attorney or financial advisor to ensure that they are following the spending rules correctly.

Our Team Can Help Secure a Financial Future for You and Your Family

Special needs trusts are an important tool for families with a disabled loved one. By following the spending rules, trustees can ensure that the beneficiary continues to receive government benefits and receives the supplemental care that he or she needs. If you have any questions about special needs trusts or the spending rules, please contact the legal professionals at Legacy Enhancement Trust.

Our team has helped many others secure financial futures for themselves and their families, and we want to do the same for you. Don’t hesitate to reach out right away with your questions and concerns. We are ready and willing to do everything we can to help you now.

Call Legacy Enhancement Trust today at (888) 988-5503 or fill out the online contact form to learn how we may assist you!

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