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Monday, December 21, 2020

How Can Funds Be Spent with a Special Needs Trust?

Special needs trusts allow a person to set up a trust for a person with physical or mental disabilities without endangering the disabled person’s eligibility for government assistance like Supplemental Security Income (SSI) or Medicaid, but only if the trustee follows the strict rules set up for these trusts. Even if the special needs trust was flawless in its creation, the trustee could cause the beneficiary to lose government benefits by making prohibited distributions of income or assets from the trust.

A trustee needs to know how funds can be spent with a special needs trust in Florida without inadvertently costing the disabled person much-needed benefits. It would be best to work with a Florida special needs planning attorney when serving as a trustee to avoid running afoul of the statutory spending restrictions on special needs trusts.

Spending Rules for Special Needs Trusts in Florida

The Medicaid program in Florida covers the basic needs, like food, rent or mortgage payments, and utilities of qualifying beneficiaries. A special needs trust is not allowed to replace or duplicate those things. The government must provide the basic needs, while the special needs trust can pay for things that improve the disabled person’s quality of life on items that Medicaid does not cover.

Here are some examples of allowed expenditures from special needs trusts in Florida:

  • Medical care that Medicaid does not provide. The special needs trust can pay for certain medical services and therapies not covered by Medicaid. Also, some medical equipment is not on Medicaid’s list of provided items. Often, uncovered medical services, therapies, or equipment can improve the disabled person’s quality of life and improve the comfort and enjoyment of life of the disabled person. Medicaid might not consider these things “medically necessary,” so the program does not pay for them.
  • Clothing is not a benefit of Medicaid. While a person could buy some clothing with the nominal amount of SSI income received, the special needs trust can purchase adaptive and conventional clothing for the disabled person without breaking Medicaid’s expenditure rules.
  • Many disabled people need assistance with housekeeping, cooking, laundry, and other tasks. The special needs trust can provide these items for the trust beneficiary.
  • Electronic devices are a significant part of daily life. Without these items, a disabled person can become more isolated and have less social interaction. A special needs trust can purchase televisions, computers, and other electronic equipment.
  • A disabled person can take pride in his appearance, just like anyone else. Florida law allows special needs trusts to pay for personal grooming for the trust beneficiary.
  • A special needs trust can buy musical instruments for the disabled beneficiary without damaging Medicaid eligibility.

The trustee of a special needs trust needs to document all expenditures meticulously in case the spending gets questioned. If the trustee cannot account for all actions taken or makes mistakes that cost the beneficiary eligibility for public assistance, the trustee can be personally liable.

Administering a special needs trust requires knowledge of our state’s laws, which can change from one year to the next. A Florida special needs planning attorney can help the trustee make the right decisions. Contact our office today.


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The Law Office of Jeffrey A. Herzog, P.A. assists clients in Florida, including North Pinellas County, Palm Harbor, Trinity, West Pasco County, and the surrounding areas.



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