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.

Choosing the right person to serve as trustee of a special needs trust is one of the most important and difficult issues in creating the trust. A trustee typically manages the day-to-day operations of the trust, often making distributions to the trust's beneficiary, investing the trust's assets, and paying the trust's bills – all while maintaining the beneficiary’s eligibility for public benefits programs.

The law isn't very strict about who may serve as trustee, as long as the person is over 18 years of age and is capable of managing his or her own affairs. A trustee can be the child’s parent or other relative, a trusted friend, or a professional such as a lawyer, accountant, trust company, bank or private professional fiduciary.  Here are five considerations to help in the choice of who should serve.

Familiarity with public benefit programs. To ensure that your beneficiary's eligibility is never compromised, a trustee's knowledge of public benefit programs is crucial. Many government benefits like Medicaid, Supplemental Security Income (SSI) and Section 8 housing have very complicated and contradictory rules governing special needs trusts. The trustee of a special needs trust must know these rules well, or, at the very least, work closely with a special needs planner who can explain the ramifications of his actions as trustee.

Does the trustee have time to do the job? Serving as the trustee of an active special needs trust can seem like a full-time job. Depending on a beneficiary's needs, the trustee could spend a good deal of time paying bills, monitoring government benefits, helping to secure housing, paying for medical care and serving as a link between the beneficiary and a variety of service providers. If a trustee finds that she can't perform all of these tasks when needed, or if she is sacrificing her family life or other professional obligations in order to work as a trustee, then it may be time to look for a professional trustee.

Consider a professional trustee. This could be an attorney, accountant, trust company, investment firm, bank or private professional fiduciary. A professional allows you to take advantage of that individual’s or institution's experience with public benefits, investments, money management and tax planning. Another advantage is emotional distance. Sometimes, the strains of a beneficiary's demands for trust distributions can cause significant problems for family members. These intra-family complications can be avoided through the use of a professional trustee.

How comfortable are you giving trust control to an outsider? For those who are uncomfortable with the idea of an outsider managing a loved one's trust, it is possible to appoint a family member and an independent trustee as co-trustees. By doing so, you can rest assured that there is a person who is familiar with the beneficiary and has her best interests at heart and that the public benefit programs' requirements are being met. Another option is to simultaneously appoint a trust "protector," who has the powers to review accounts and to hire and fire trustees, and a trust "advisor," who instructs the trustee on the beneficiary's needs.

Is a pooled trust an option? A pooled trust, which is administered by a non-profit corporation, may be a good option for some families. Such trusts pool the resources of many beneficiaries, and those resources are managed by a non-profit association. Pooling trust resources can reduce administrative fees, increase the total funds available for investment, and permit access to better investment opportunities. Because a pooled trust accepts contributions from many beneficiaries, the trust is able to make more stable investments and provide additional management services that a conventional special needs trust might not be able to afford. If the trust is modest in size, it may benefit from the low costs of a pooled trust. Others appreciate the fact that their funds will be used to help others with special needs.

Make sure that whomever you choose as trustee is financially savvy, well-organized, and, most important, ethical.  We can help you make the best choice - contact us.