Trustees of special needs trusts generally have wide discretion in determining whether to distribute funds to trust beneficiaries. But if the person with disabilities receives Supplemental Security Income (SSI), careful precautions should be taken before any trust funds are used to pay for housing costs.

For the year 2018, federal guidelines set the maximum monthly SSI benefit at $750 for individuals, $1,125 for eligible individuals with an eligible spouse, and $376 for an “essential person,” such as a child. Certain states add a supplement on top of the federal maximum.  

The most critical factor in determining whether SSI recipients are eligible for the maximum benefit is their housing arrangement.

People living alone who pay their full rental expenses, including utilities, are eligible for the maximum monthly SSI benefit, assuming they would otherwise be eligible for the maximum. Likewise, where the SSI recipient lives with another person or persons but pays their proportionate share of the rent, the recipient is eligible for the maximum SSI benefit.

However, where a third party pays the rent—be it a parent or a special needs trust—the Social Security Administration (SSA) will cut the maximum federal SSI benefit by one-third, plus $20. For example, if a person receives $750 from SSI, but his special needs trust covers his monthly rental expenses, his benefit will be reduced to $520.

Spouses of SSI beneficiaries and parents of minor children who are SSI beneficiaries are not considered third parties under the applicable SSA rules, and thus shelter payments by them will have no bearing on the SSI recipient’s monthly benefit.  However, SSA income rules apply to parents of minor children and spouses and would likely disqualify a person from SSI for that reason.  

The rules are identical for other types of housing arrangements, such as where instead of a special needs trust or other third party paying for rent, it covers the SSI recipient’s monthly mortgage payments, co-op fees or, homeowner fees. The same rules apply for monthly utilities payments, such as electricity, gas or water expenses.

Generally, people who are temporarily institutionalized, such as in a hospital, nursing home or assisted living facility, are not eligible for SSI, with some exceptions. A permanent address, however, is not a requirement for continued SSI eligibility. SSI benefits will generally continue where the person is homeless or living in a shelter.

Finally, for SSI recipients who travel, third parties may pay for hotel and food expenses during travel without causing a reduction in the recipient’s benefit.

Payments from special needs trusts can affect a beneficiary's eligibility for Section 8 housing assistance as well.  For more information on distributions from special needs trusts and how they will affect a beneficiary’s eligibility for SSI and other government benefits, please contact us.

According to court documents, legendary singer Aretha Franklin did not have a will when she died, despite reportedly having a son with special needs. The lack of a will opens up the intensely private singer’s estate to public scrutiny and unnecessary costs, and means that there are no specific provisions to protect her son.

Franklin, who died in Michigan at age 76, left behind four sons, but no guidance on how to distribute her estimated $80 million estate. The eldest son, Clarence, age 63, has unspecified special needs and requires “financial and other forms of support for his entire life,” according to the entertainment news site TMZ.

When someone dies without a will – called dying “intestate” -- the estate is divided according to state law. Under Michigan law, an unmarried decedent's estate is distributed to his or her children. (Franklin had been married twice but long since divorced.)

Even if the “Queen of Soul” had wanted her estate to go solely to her children, by not having a will or trust, her estate will have to go through a long public probate process, which will likely cost her estate considerable money. If Franklin had created an estate plan that included a will and a trust, she could have avoided probate and kept the details of her financial circumstances private.

But perhaps even more importantly, that estate plan could have made special provisions to ensure that Clarence would receive proper care for the rest of his life. Franklin could have established a special needs trust to preserve any public benefits Clarence may be receiving, or perhaps allocated him a larger share of her estate. She also could have accompanied a financial plan for him with a Memorandum of Intent (also called a “Letter of Intent”) to serve as the primary source of information about her son’s care, providing a roadmap for the courts, guardians, caregivers and others involved in his life.

Clarence could also be harmed by the absence of a will because it opens up an estate to potential challenges that could drag out the probate process. Without a will to clearly state the decedent's intent, litigation resulting from family conflicts often eats into estates.

Finally, Franklin’s estate will be subject to unnecessary estate taxation, leaving even less for Clarence and her other sons. Although she may not have been able to avoid estate tax entirely, there are steps she could have taken to reduce the amount her estate will have to pay.

"I was after her for a number of years to do a trust," attorney Don Wilson, who represented Franklin in entertainment matters for the past 28 years, told the Detroit Free Press. "It would have expedited things and kept them out of probate, and kept things private."

Estate planning is important even if you don't have Aretha Franklin's assets, and it’s doubly crucial if you have a child with special needs as she did. It allows you, while you are still living, to ensure that your property will go to the people you want, in the way you want, and when you want, and to create special protections for the child with special needs before it’s too late. You don’t want your plan for your loved ones to simply be “I Say a Little Prayer.”

Contact us to begin working on your estate plan now.