This article is a part of True Link’s SNT Expert Series. We have interviewed leaders knowledgeable in disability planning, Elder Law, and trust administration and will be sharing their expertise with you in a series of videos and posts. Note: the opinions and views expressed in these videos do not necessarily reflect those of True Link Financial or True Link Financial Advisors. This article is not intended to provide investment, legal, tax, accounting or medical advice. Before making decisions involving investing, legal, tax, accounting or medical concerns, you should consult appropriate professionals regarding your specific situation.

As a family member serving as trustee, there are a number of rules and guidelines you must follow when administering a trust. Navigating trust disbursements and what should or should not be approved can be one of the trickier aspects of the trustee’s role – particularly when it comes to Supplemental Needs Trusts (also known as Special Needs Trusts or SNTs). Here are four expert tips on how to make informed decisions about trust distributions. 

1. Let the budget guide you 

“Having a good budget in place is super important,” stresses Special Needs Attorney Scott Suzuki. In many situations, SNTs are intended to cover an individual’s supplemental needs for the remainder of their lives, so it is important that trustees do what they can to make funds last. Being mindful of the budget when making disbursement decisions can help you avoid spending more than you planned. 

But this doesn’t mean you have to be the bad guy. Suzuki explains, “I don't like to have the answer be ‘no.’ Sometimes it has to be, but sometimes we [can] say ‘yes but, here's what we need to do to make that happen.’” This might mean shopping around together for a better deal, waiting for a big sale, or switching to a more affordable brand or product. As trustee, your role isn’t just to follow the rules, but also to maximize the wellbeing of the beneficiary – so you might need to get creative!

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2. Understand what counts as income 

When you become a trustee for an SNT, one of the first things you may hear is “don’t spend trust funds on food or housing, or the beneficiary may get a reduction in benefits.” And sometimes, this is true – food and shelter expenses paid for by the Special Needs Trust (or, actually, any other source) may be considered income In-kind Support and Maintenance (ISM).  But what actually counts as a housing expense? Here’s a list from the Social Security Administration:

• Mortgage payments  (including property insurance required by the mortgage holder) 
• Real property taxes (less any tax rebate/credit)
• Rent
• Heating fuel
• Gas
• Electricity
• Water
• Sewer
• Garbage removal

Paying for these items from the trust may reduce your beneficiary’s Supplemental Security Income (SSI) benefit dollar-for-dollar up to a maximum of one-third of the maximum SSI benefit. In some cases, this reduction in benefits is something trustees really want to avoid, but in other cases, it might be in the beneficiary’s best interest. 

As Elder Law and Special Needs Attorney Bryn Poland explains, “when I'm helping a client decide on whether a distribution makes sense, if we're going to lose a little bit of SSI, I'm always trying to maximize the non-cash benefit that we get for our beneficiary in exchange for losing some of our SSI check.” For example, in areas where safe, affordable housing is difficult to secure, it might be preferable for a trust to make mortgage or rent payments from the trust and take the reduction in SSI benefits, so that the beneficiary has suitable housing. 

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3. Avoid disbursing cash

While there may be cases where taking the one-third reduction in SSI is the right choice, Elder Law and Special Needs Attorney Pi-Yi Mayo stresses that you should avoid dispersing cash from the trust: “If you give [a beneficiary] cash, every dollar you give them, they lose a dollar of their SSI.”

And while the reduction in SSI is capped at one-third for non-cash benefits (such as the mortgage or rent payments described above), disbursing cash from the trust can reduce SSI benefits to zero. This can be particularly problematic because when someone stops receiving SSI, they automatically lose their Medicaid coverage – something many SNT beneficiaries rely on to cover healthcare costs.   

<div style="padding:56.25% 0 0 0;position:relative;"><iframe src="https://player.vimeo.com/video/858709483?badge=0&amp;autopause=0&amp;player_id=0&amp;app_id=58479" frameborder="0" allow="autoplay; fullscreen; picture-in-picture" style="position:absolute;top:0;left:0;width:100%;height:100%;" title="How Disbursements can Impact SSI &amp; Medicaid Coverage"></iframe></div><script src="https://player.vimeo.com/api/player.js"></script>

4. Think beyond the basics 

A Supplemental Needs Trust is usually set up to cover an individual’s needs and to maximize their wellbeing. In some cases this will mean using trust funds to pay for essentials like dental care, personal hygiene products, or transportation costs, but in other cases it may be about providing entertainment, recreation, or connection with friends or family. 

Steve Dale, the trustee of the Golden State Pooled Trust, recommends using funds to check in on a beneficiary and assess how they’re doing, whether their living situation is safe, if they’re being appropriately cared for, etc. Dale explains, you can use “the funds to pay for someone to go visit the beneficiary, maybe a family friend or somebody who wouldn't be able to do that on a regular basis. Not only does that impact the life of the person with the disability, but it's probably going to uncover situations where things don't seem right.”

Capital First’s Senior Trust Case Manager Stacy Scrip offers vacations as one example of a way you could use trust funds, as well as technology – like a computer, a gaming console, or an iPad. Money from the trust could also used to fund a favorite hobby, whether that means paying for pottery classes or music lessons or buying sports equipment or art supplies. 

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We hope these tips give you a better sense of the type of disbursements you can make as an SNT trustee. Every situation is different, so we encourage you to connect with an Elder Law Attorney or another trusted expert if you have questions about making disbursements that align with the rules of the trust you’re managing. 

‍Want to watch these videos on Vimeo? Here are the links to the guest expert videos related to this topic:

Deciding How Trust Funds Should be Used – Scott Suzuki, Special Needs Attorney at Scott C. Suzuki Attorney at Law

When is it Appropriate to Take a Reduction in SSI benefits? – Bryn Poland, Elder Law and Special Needs Attorney at Mayo & Poland Attorneys at Law 

How Disbursements can Impact SSI & Medicaid Coverage – Pi-Yi Mayo, Elder Law and Special Needs Attorney at Mayo & Poland Attorneys at Law

Using Supplemental Needs Trust Funds for a Vacation - Stacy Scrip, Senior Trust Case Manager, Capital First Trust Company