Tidings of Comfort and Joy: How a Special Needs Trust Can be Used to have a Happy Holiday Season
Special Needs Trusts are notoriously restrictive. In consultations with new clients, we spend a significant amount of time on what SNTs cannot be used for. While the list is short, it’s broad. If the client has Supplemental Security Income (SSI), the trust cannot be used for food or shelter, at least not without an automatic reduction in that month’s SSI payment. The trust can never issue cash or payment directly to the client. This restriction also applies to those whose income would be deemed to the trust beneficiary, like a spouse or parent of a minor. Funds in the trust cannot be used for others – the funds must be used solely or at least primarily for the trust beneficiary. The trust must always be used to purchase exempt assets or services. While this generally includes household items and the home itself, items held for value or investment are not excluded. Finally, the trustee can always say no to something extravagant, outside the beneficiary’s annual budget, or otherwise imprudent. Enforcing all these rules, trustees usually seem like the Grinch, but with a little creative planning, the beneficiary of a special needs trust can have a happy holiday season. Below is a list of common questions we get from trust beneficiaries and how we address them.
Can I buy presents?
For others, unfortunately no, at least not using the money in the trust. We often hear the argument that buying gifts for others is in the trust beneficiary’s best interest because it gives them joy. We understand the sentiment, but unfortunately the Social Security Administration does not see it that way. To address situations like this, we usually take another look at the beneficiary’s budget to see if there are any monthly bills the client is paying that the trust could properly pay for. If the client is paying their own cell phone bill, cable bill, lawn service, etc., perhaps the trust could pay for those things for a month or two, freeing up the client’s money to spend on others as they choose.
The beneficiary can buy themselves a gift, within reason. It does take some of the fun out of being surprised, but we all like to do something nice for ourselves occasionally. The “gift” just needs to be an excluded asset, which includes household effects and services, so this could include a new purse, TV, or a day at the spa. These things could be purchased any time of the year but might not have been included in the beneficiary’s monthly or annual budget. In this case, the trustee could make an exception or help the client plan for the purchase by trimming the monthly budget a few months in advance. Social Security and Medicaid also exempt one vehicle (generally with no limit on the value), which means that purchasing a new car, so long as it was not a luxury car, would be permissible.
Can I decorate my home?
Yes, but again, within reason. Purchasing a reasonably-priced Christmas tree, menorah, or some holiday decorations is generally ok. Spending a few thousand dollars for a light display coordinated to music is not.
If the beneficiary lives in a group home, then the trustee might only allow the client to decorate his or her room. This is an area where the recent relaxation of the sole benefit rule to the primary benefit rule helps trustees be somewhat flexible. The beneficiary does not have to be the only one to enjoy the decorations.
Can I fly home to see my family in another state?
Yes. Flights, rental cars, and hotel stays are generally permissible. If the beneficiary needs assistance to travel, the trust could also pay for a companion’s travel expenses as well. The companion does not need to have medical training or certifications, but they do need to perform some service or other assistance to the beneficiary. Alternate forms of transportation, such as RV, can be permissible under the right circumstances.
On a related note, the trust could not be used to fly an entire family to their holiday destination. We sometimes get this question when the beneficiary is a minor child, and the parents want to take a family vacation. The argument is often made that the trust beneficiary really wants to go, but they (the parents) cannot afford to pay for the entire family and cannot leave their other children at home. As trustees, we very much understand that one child’s injury or disability has an impact on the entire family, and as much as we would like to say yes, there is no leeway to justify paying for the whole family. However, the strategy we use to “free up” money for gifts could also be employed here. If the parents are paying for things the trust could pay for, then the parents might be able to afford something for the family.
Can I pay for a special holiday meal?
If the client has SSI, then the answer is no (bah humbug); however, if the beneficiary is traveling, they could pay for their own meal and the meal of their companion. If the beneficiary does not have SSI, they can pay for their own meal, but would not be able to pay for anyone else’s, buy the turkey or ham for the whole family, etc.
The key is for the beneficiary to work with, not against, the trustee. Not only do trustees generally want to help their clients, they have a duty to do what is in the beneficiary’s best interest and treat them fairly. Given some time and an understanding of what the beneficiary is trying to achieve, trustees can help injury victims navigate the complicated web of public benefits rules to have a happy holiday season.