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can a special needs trust pay for housing without reducing SSI benefits?

Trustees of special needs trusts generally have wide discretion in determining whether to distribute funds to trust beneficiaries. But if the person with disabilities receives Supplemental Security Income (SSI), careful precautions should be taken before any trust funds are used to pay for housing costs.


For the year 2022, federal guidelines set the maximum monthly SSI benefit at $841 for individuals, $1,261 for eligible individuals with an eligible spouse, and $421 for an “essential person.” Certain states add a supplement on top of the federal maximum. 

“The most critical factor in determining whether SSI recipients are eligible for the maximum benefit is their housing arrangement”

The most critical factor in determining whether SSI recipients are eligible for the maximum benefit is their housing arrangement.  People living alone who pay their full rental expenses, including utilities, are eligible for the maximum monthly SSI benefit, assuming they would otherwise be eligible for the maximum. Likewise, when the SSI recipient lives with another person or persons but pays their proportionate share of the rent, the recipient is eligible for the maximum SSI benefit.


However, when a third party pays the rent (like a parent or a special needs trust) the Social Security Administration (SSA) will cut the maximum federal SSI benefit by one-third, plus $20. For example, if a person receives $750 from SSI, but his special needs trust covers his monthly rental expenses, his benefit will be reduced to $520 ($750 - ($750/3) + $20).  Spouses of SSI beneficiaries and parents of minor children who are SSI beneficiaries are not considered third parties under the applicable SSA rules, and thus shelter payments by them will have no bearing on the SSI recipient’s monthly benefit.  However, SSA income rules apply to parents of minor children and spouses and would likely disqualify a person from SSI for that reason.  


The rules are identical for other types of housing arrangements, such as where instead of a special needs trust or other third party paying for rent, it covers the SSI recipient’s monthly mortgage payments, condo fees, or homeowners association fees. The same rules apply for monthly utilities payments, such as electricity, gas or water expenses.


Generally, people who are temporarily institutionalized, such as in a hospital, nursing home or assisted living facility, are not eligible for SSI, with some exceptions. A permanent address, however, is not a requirement for continued SSI eligibility.


For SSI recipients who travel, third parties may pay for hotel and food expenses during travel without causing a reduction in the recipient’s benefit.


Payments from special needs trusts can affect a beneficiary's eligibility for Section 8 housing assistance as well.  For more information on distributions from special needs trusts and how they will affect a beneficiary’s eligibility for SSI and other government benefits, contact a special needs planner like Three Twenty One.

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