Providing for disabled child after parents die
My wife and I have a 35-year-old disabled daughter who receives government benefits and will continue to do so for the rest of her life. However, her benefits don’t cover all her living expenses such as room, board and clothing. We have established a supplemental needs trust (SNT), which will be funded after both of us have died. While we understand that funds from the SNT may be used for supplemental needs such as therapeutic
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horseback riding, education, vacations, etc., we have read that the trust is not to be used for her basic living expenses. Could you please clarify if property in the SNT can also be used for rent, food and clothing?
Your daughter will be eligible for continued government benefits as long as her income remains low enough. Certain distributions from her SNT will be treated as income, while other distributions will not.
The rule is that any distributions for food and shelter are
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income to her and will reduce her government benefits. Food includes dining out at restaurants. Shelter includes rent, mortgage payments if she owns a home, utilities, real estate taxes and garbage collection fees. If cash or even most types of debit cards are distributed to her, those count as income, too.
However, there are many types of distributions that can be made that will not treated as income and will not reduce her benefits. For instance, the trust can buy her clothing and other personal effects, and it can pay for her phone, cable, internet, cleaning services, school tuition, books, supplies and even a car if it is used to transport her or someone in her household. The trust can buy her medical equipment and pay for other medical and dental expenses that are not provided by her government benefits. And it can pay for her vacations, gym membership, movies, video games and museum trips. The trust can even pay all her accounting and legal fees.
There are many other types
of permissible distributions.
It will be the trustee’s job to figure out what distributions to make and whether it is in your daughter’s best interest for the trust to make disqualifying distributions. For instance, the trust might have millions of dollars of assets that generate tens or even hundreds of thousands of dollars of income each year. The trust might be able to pay for all your daughter’s expenses for decades and never run out of assets. Of course, if your daughter requires expensive medical care, the trustee would need to be careful not to disqualify her.
Be sure the trustee you have named understands the importance of hiring a qualified elder law attorney to provide ongoing advice regarding the administration of the trust after you both have passed away. By then, the laws regarding supplemental needs trusts and government benefits might be very different from what they are today.