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.
For more information on distributions from special needs trusts and how they will affect a beneficiary’s eligibility for SSI and other government benefits, contact your special needs planner.