How Can a Special Needs Trust Trustee Spend the Money?

Most people with disabilities in our state rely on Medi-Cal as a source of health insurance, and Supplemental Security Income (SSI) provides a modest stream of monthly cash. These are need-based programs, so you cannot qualify if you have more than $2000 in countable assets in your name.

Since these folks are not in a position to work, they typically have sparse resources, so the limit is not a problem on the one hand.

On the other, a parent or another family member may be willing to provide assistance, but how do they get around the asset limit? The solution is a legal device called a supplemental needs or special needs trust.

Allowable Purchases

If you establish a special needs trust for the benefit of someone else with your funds, it would be a third-party trust. You would name a trustee to act as the administrator, and the person that you want to assist would be the beneficiary.

Since we are estate planning attorneys, we typically help people establish these trusts when they are developing estate plans, so we will look at it from that perspective.

Technically, you could act as the trustee if you create the trust, but you would not be around to assume the role for the rest the beneficiary’s life. As a response, you could use a professional fiduciary such as a trust company or the trust department of a bank.

Of course, if you know someone with an appropriate life expectancy that is willing and capable, you can use a non-professional if you choose to do so.

Medi-Cal does not cover every medical and dental procedure that someone may want or need. Supplemental Security Income is technically supposed to provide food, clothing, and shelter, but the maximum SSI benefit in 2021 is $794 a month. That is certainly not going to go very far.

The trustee would not be allowed to give the beneficiary cash to pay for food, clothing, and rent, but there is a great deal of latitude. When it comes to shelter, the trust can actually purchase a home, because a place of residence is not considered to be a countable asset.

These are some of the other goods and services that can be purchased by the trustee to enhance the life of the beneficiary:

• A motor vehicle, including a specially equipped van
• Uncovered medical, therapeutic, and dental expenses
• Vacations
• A paid companion
• Computers and other electronics
• Transportation
• Recreation
• Entertainment
• Tuition and Training
• Insurance and final expenses
• Legal fees

This is a partial list, and if the trustee is not a professional, they can work with an attorney from our firm to make sure that they follow the guidelines correctly.

Medi-Cal Estate Recovery

After the death of someone that was using Medi-Cal to cover their health care expenses, the program is required to seek reimbursement from their state. If you establish the trust with your funds for the benefit of someone else, the assets would be protected.

When you draw up the trust agreement, you would name a successor beneficiary that would inherit the assets that remain in the trust after the death of the initial beneficiary.

It is possible for someone with a disability to use their own resources to fund a special needs trust. This would be a first party or self-settled trust, and assets that remain in this type of trust after the death of the beneficiary would be available to Medi-Cal during the recovery phase.

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