Can you imagine saving money into an account for years or decades and then not be able to use it? Seems like a lousy deal, right? It does not happen in retirement accounts. There, we put money away during our working years and then can take it out pretty much any time we want without penalty after age 59 and a half. We would not save into 401ks and IRAs if we had concerns about being able to use those funds.

For some, they feel like putting money into a special-needs trust means saving into an account for the future that can never be used. That’s not the case but it’s not an uncommon concern.

At a family group one evening someone asked the question, “What can a special-needs trust pay for?” The parent had heard there were limitations on the use of a trust and it was a great question as everyone in the room wondered the same thing – can the trust really be used? My answer is usually that it’s easier to talk about what it cannot pay for as the assets of a special-needs trust can pay for a huge variety of life’s expenses.

We fund special-needs trusts through estates (when someone passes away), usually, and we do that to provide money to support our family members with a qualifying disability. Government benefits are limited and through the trust we can add color, enrichment and additional advantages to our family members’ lives by purchasing goods and services not covered by benefit programs. In 2023, Supplemental Security Income (SSI) pays $914 per month. Who can live on $914 dollars a month with rents today? And if someone could, would there really be money left for movies, travel, clothes, therapies, medical equipment, professional services and more? Probably not.

SSI and Medicaid-funded benefits will pay for food, housing and medical needs. Again, at $914 a month that doesn’t mean anything great for housing or even food these days. The trust can be used to supplement those benefits; it cannot pay for item covered by those governmental benefits. Basically, a trust cannot pay or add to rent and cannot be used for groceries and meals.

The trust payments must be for the sole benefit of the beneficiary (the person the trust is named to help). The trust cannot buy something that can be converted to cash easily and given to the beneficiary (like certain gift or pre-paid debit cards). And any payments made that count as ISM (in-kind maintenance and support), basically food and costs related to housing, will reduce SSI. The trust can be used for a wide-range of spending to help improve the life of your loved one, just not certain ones related to food and housing.

Once you have taken cash, housing, and food off the table, a special-needs trusdt can typically pay for most other things a beneficiary might need to supplement their lifestyle.

That leaves a wide range of items for the trust to pay for. Want your son or daughter to go to a baseball game or movie? The trust can do that. How about stuff for the house – furniture, TVs, streaming services, pots/pans and more? Sure. Get creative. The trust can pay educational expenses, for medical equipment and treatments not covered by Medicaid, phones, decorations, just keep going. One trustee I know flew the beneficiary on a private plane for a vacation – his medical and emotional condition did not allow him to fly commercial and he was not expected to live long. A nurse and aides went with him and it was all covered by the trust.

Build your professional team with your attorney, CPA and financial planner to figure out the best way to fund your trust in the future and have a great trustee in place to assist with spending once it’s needed. With a special-needs trust, you can fund an account to make life enjoyable and fulfilling for your family member with a disability.