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special needs trusts
for example, the trustee should pay the department store directly for the purchase of a television (an exempt asset) and have it delivered directly to the beneficiary. a gift card that can be used to buy food or shelter is considered the same as cash and should not be given to the beneficiary.
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distributions from the trust to pay for certain kinds of medical and social services not covered by government benefits are not income because they are not cash, food or shelter.
IN-KIND INCOME
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in-kind income occurs when the trustee gives the beneficiary something other than money. in most cases, the trustee can provide inkind income to the beneficiary without any impact on public benefits because the value of the non-cash item is not counted as income if the item is retained into the following month. examples of such items are the purchase of household items such as household supplies, books, dishes, towels, furniture or recreational equipment.
IN-KIND SUPPORT AND MAINTENANCE
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the trustee must also be concerned with in-kind support and maintenance. in-kind support and maintenance is any direct payment by the trustee for necessities of life such as food or shelter for the beneficiary. ssi benefits are intended to pay for the beneficiary’s food and shelter. therefore, if a beneficiary receives food and shelter as a result of payments by the trustee, it is considered to be inkind support and maintenance. receipt of in-kind support and maintenance is treated as income and reduces the beneficiary’s ssi payments. the trustee may pay for a vacation for the beneficiary and the beneficiary will maintain his or her benefits. a vacation is considered a temporary absence from a permanent living arrangement and the social security administration does not count in-kind support and maintenance received during their temporary absence. however, the trustee should not provide spending cash to the beneficiary while on vacation because any amount distributed in excess of $20 will reduce the beneficiary’s benefits dollar for dollar. as you can see from this brief discussion of special needs trusts, the rules concerning eligibility for public benefits are complex. the trustee should consult with an estate planning professional who is familiar with the administration of special needs trusts in order to avoid running afoul of the public benefit rules while ensuring they provide the most benefits allowed to the trust beneficiary.
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Maria Capritto is a senior associate attorney at Arnold LaRochelle Mathews Van Conas & Zirbel, LLP, in Oxnard. Contact Capritto at 805.988.9886 or mcapritto@atozlaw.com.
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SEPTEMBER 2012