For disabled adults, medical care and living expenses can be hard to afford. Fortunately, if your disabled loved one has limited income, he or she may be eligible for certain needs-based government programs. Supplemental Security Income and Medicaid are popular examples. 

Giving money directly to your disabled relative may be problematic. After all, if your gift constitutes income, your loved one may simply make too much to qualify for government help. A special needs trust may be the workaround you have been seeking. 

Preserving eligibility for financial assistance

Because a special needs trust holds funds for the benefit of your disabled relative, funds from the trust do not usually count as income for purposes of government benefits. 

Still, to preserve eligibility for need-based financial assistance, your relative must not use trust disbursements on the same expenses government assistance covers. Medical bills, housing costs, utilities and other essential expenses are usually off-limits. 

Using trust funds correctly

When you set up a special needs trust, you designate a trustee who can ensure your loved one continues to be eligible for government help. That is, the trustee only approves fund disbursements after verifying they do not interfere with the benefits your loved one receives. 

The following expenses are usually allowable: 

  • Supplemental medical expenses, including copays and out-of-pocket costs 
  • Home modification expenses 
  • Mental health counseling and case management costs 
  • Entertainment and hobby-related expenses 
  • Academic tuition and job training costs 

While government funds may cover the basics, needs-based programs do not leave much for items or experiences that make life worth living. Fortunately, if your disabled loved one uses the special needs trust correctly, he or she has access to financial resources that may improve his or her quality of life considerably.