Estate Planning Isn’t Just For The Elderly

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The Do’s and Don’ts of Administering a Special Needs Trust

By Anthony J. Enea, Esq.

While many elder law and trust and estates practitioners are knowledgeable and well versed in the benefits of utilizing a Special Needs Trust (“SNT”); as well as the differences between a Self Settled SNT and a Third Party SNT, one area of confusion and consternation for the practitioner is the day to day administration of the SNT.

Pursuant to the provisions of EPTL 7-1.12 an SNT is to be utilized for the special and supplemental needs of a disabled person, and not their day to day living expenses such as food and shelter. However, understanding and distinguishing the expenses which can be paid from the SNT, and those which are not permitted, as well as how payment can be made is often confusing. It is most important that the attorney understand which expenses are permitted to be paid from the SNT for the special and supplemental needs of the beneficiary.

In administrating an SNT it is imperative that the Trustee avoid undertaking any action that jeopardizes the beneficiary’s eligibility for Medicaid and/or SSI.

For example, the beneficiary of the SNT should not be given money from the SNT to make purchases for him or herself. Payments for goods and services should be made directly to the vendor or provider. A non-refundable, prepaid gift card is permitted as it allows the beneficiary the right to obtain goods or services. In keeping with this principle, a non refundable airline ticket, or show or sporting event ticket would also be permitted. The Trustee may purchase a specific service for the beneficiary, since the service is not easily convertible to cash. For example, payment for any special therapy or training is acceptable.

A recipient of SSI and/or Medicaid may use funds in the SNT to pay for household emergencies such as the repair of a roof or payment of a telephone bill. It is advisable that the Trustee purchase any household goods or items in the name of the trust and not the beneficiary. This would avoid the possibility that the beneficiary would have control over the goods or items which could result in a loss of benefits. However, for a recipient of SSI, only if a household good or item is purchased by the Trustee and given to the beneficiary, thus, the beneficiary’s benefits will not be affected unless the beneficiary’s household goods exceed $2,000.00. If a beneficiary receives an asset as the result of the Trustee paying the bill for said asset, this could be deemed as income to the beneficiary which may disqualify him or her from benefits in the months received.

The following is illustrative of the types of purchases that can be made by the Trustee of an SNT for the beneficiary which would or would not affect the beneficiary’s eligibility for Medicaid and/or SSI:

(a) The purchase of a home for the beneficiary of a SNT will not affect his or her benefits if the title to the house is held in the name of the trust. The house will not be deemed a resource of the beneficiary, and would not affect his or her eligibility for benefits. The beneficiary is treated as if he or she is residing in his or her home, and not deemed to be receiving shelter, which would impact eligibility for benefits.

Any payment by the Trustee of the expenses for the real property, such as taxes, rent, heat, gas, water, electricity, mortgage, garbage removal and sewer would affect the beneficiary’s eligibility for benefits as they would be considered income to the beneficiary. Home improvements or renovations are not considered income;

(b) The Trustee’s purchase of cable T.V. or satellite T.V. services, telephone service, internet service, newspaper and other news related magazines and periodicals will not impact the beneficiary’s eligibility for benefits. The Trustees purchase of computers, computer software and any upgrades for the computer are also permissible expenditures;

(c) The purchase of an automobile for the beneficiary of the SNT will not impact his or her eligibility for benefits.
Additionally, the expenses for the automobile insurance, maintenance and fuel are permitted. The purchase of fuel for the automobile can be problematic depending on how payment of the fuel is made. It is recommended that the beneficiary be given a gas company credit card that can not be utilized for other purchases which will directly bill the trust for the fuel purchases;

(d) The Trustees can make unlimited expenditures for the travel and entertainment expenses of the beneficiary. If the beneficiary is unable to travel alone, distributions from the SNT for a travel companion are permitted. The payment of a beneficiary’s hotel expenses are problematic as the argument could be made that they are shelter expenses. However, the argument can be countered if the beneficiary maintains a home;

(e) Household furnishings and furniture can be purchased by the trust;

(f) Pre-Paid funeral and burial arrangements can be owned
by the trust for the benefit of the beneficiary. The arrangements should not be owned by the beneficiary as it could impact SSI benefits;

(g) Legal and Accounting Fees can be paid by the Trustee without impacting the beneficiary’s eligibility for benefits;

(h) The Trustee can purchase clothing for the beneficiary without affecting the beneficiary’s eligibility for benefits;

(i) The Trustee without any limitations can purchase and make payment of durable medical equipment, therapy, medication, alternative treatments, tuition, books, tutoring, care management and taxes of the beneficiary.

In conclusion, the above stated should provide you with a better understanding of what the Trustee of a SNT will be permitted and not be permitted to do without affecting the beneficiary’s eligibility for Medicaid and/or SSI as part of the day to day administrator of a SNT. It is clearly a challenging and complicated task.

Enea, Scanlan & Sirignano, LLP