Many families consider establishing a special needs trust to provide their loved one with access to additional funds while preserving eligibility for SSI, Medicaid, or other public benefit programs. However, the trustees must comply with certain spending rules to avoid jeopardizing access to public benefits. Trustees must understand these rules to make informed decisions about housing, food, transportation, everyday purchases, and other expenses.
“Special needs trusts can provide a higher quality of life. It can supplement what they’re already receiving and ensure that they live the best life possible.”
Can a Special Needs Trust Pay for Housing and Utilities?
A special needs trust can pay housing and utility expenses, but those payments may affect SSI. When a trust pays certain shelter expenses for an SSI recipient, the Social Security Administration may consider the payment to be In-Kind Support and Maintenance, or ISM. Receiving ISM for housing expenses can reduce your monthly SSI payments by the actual value up to as much as $351.33—the maximum presumed value for 2026.
The actual reduction depends on the beneficiary’s circumstances, so the trustee must consider the potential impact before deciding whether the trust should cover a particular shelter expense.
Common housing expenses include the following:
| Expense | Can the Trust Pay? | What to Know |
|---|---|---|
| Rent | Yes | Paying rent may reduce the beneficiary's SSI payment under the ISM rules. |
| Mortgage | Yes | Mortgage payments may be treated as shelter assistance and affect SSI. |
| Property Taxes | Yes | Trust-paid property taxes may affect the beneficiary's SSI payment. |
| Electricity, Gas & Water | Yes | Certain utility payments are considered shelter expenses for SSI purposes. |
| Home Repairs & Improvements | Generally | Repairs and improvements may be paid without the same SSI reduction as shelter expenses, but the trustee should consider the circumstances and the trust’s terms. |
A potential SSI reduction does not automatically mean the trustee should avoid paying for housing. In some situations, providing stable or appropriate housing may be worth more to the beneficiary than preserving the full SSI payment. The trustee should evaluate that tradeoff based on the beneficiary’s needs and the terms of the trust.
Can a Special Needs Trust Pay for Food and Dining?
Support for food expenses used to receive similar treatment to housing payments under SSI rules, but that has recently changed. The Social Security Administration no longer includes food in its ISM calculation. Thus, providing food generally does not reduce SSI under the ISM rules simply because someone else, including a trust, pays for it. This change gives trustees greater flexibility to use trust assets for food and dining expenses that benefit an SSI recipient.
Common food and dining expenses include the following:
| Expense | Can the Trust Pay? | What to Know |
|---|---|---|
| Groceries | Yes | Food is no longer included in Social Security’s calculation of ISM. |
| Restaurants & Fast Food | Yes | Dining expenses generally do not cause an ISM reduction based on food. |
| Coffee Shops & Cafes | Yes | Food and beverages generally receive the same treatment under the current ISM rules. |
Can a Special Needs Trust Pay for Transportation and Travel?
A special needs trust may be able to pay for transportation needed for medical appointments, work, school, errands, social activities, and other parts of daily life. Trust funds may also be used for recreational travel when permitted by the trust, and the expense benefits the beneficiary. In some circumstances, the trust may pay a companion’s or caregiver’s travel expenses when necessary for the beneficiary to take the trip.
Common transportation and travel expenses include:
| Expense | Can the Trust Pay? | What to Know |
|---|---|---|
| Car Purchase | Generally | The trustee should consider ownership, the beneficiary's needs, and any effect the vehicle could have on benefits. |
| Car Insurance & Gas | Generally | These expenses can often be covered when they support the beneficiary's transportation needs. |
| Car Repairs & Maintenance | Generally | The trust may generally cover costs needed to keep an appropriate vehicle in working condition. |
| Rideshares & Public Transit | Generally | These expenses can help the beneficiary travel independently or reach appointments and activities. |
| Vacation Flights & Hotels | Generally | Travel may be appropriate when permitted by the trust and undertaken for the beneficiary's benefit. |
| Companion or Caregiver Travel | Sometimes | The trust may cover another person's travel when their presence is necessary to support the beneficiary. |
Can a Special Needs Trust Pay for Everyday Expenses?
One of the advantages of a special needs trust is its ability to support parts of the beneficiary’s life that government programs may not fully address. Trust assets can often be used for personal, recreational, technological, and care-related expenses that improve the beneficiary’s day-to-day life.
Depending on the trust terms and beneficiary’s circumstances, expenses may include the following:
| Expense | Can the Trust Pay? | What to Know |
|---|---|---|
| Phone & Mobile Device | Yes | The trust may generally cover devices and services that help the beneficiary communicate and stay connected. |
| Internet & Streaming | Yes | Internet access and entertainment services may support daily life, recreation, and communication. |
| Clothing | Yes | Trust funds can generally be used for clothing and other personal needs. |
| Personal Hygiene & Haircuts | Yes | Personal care expenses can generally be paid on the beneficiary's behalf. |
| Concerts, Movies, & Entertainment | Yes | Recreation and entertainment can be appropriate uses of trust funds. |
| Hobbies & Electronics | Yes | Trust funds may support interests, recreation, and the purchase of appropriate technology. |
| Care Management | Yes | Professional care-management services may help coordinate the beneficiary's care and support needs. |
These expenses illustrate why families considering a special needs trust should think beyond simply preserving government benefits. A thoughtfully administered trust can provide resources that help the beneficiary participate in their community, pursue their interests, and enjoy greater comfort and independence.
What Special Needs Trust Payments Require Extra Care?
Even when the trust has sufficient assets, the trustee should not treat the account like the beneficiary’s personal checking account. How money reaches the beneficiary and what control the beneficiary has over trust assets can affect the protections the trust is intended to provide.
Trustees should be particularly careful with the following:
- Direct cash payments: Giving cash directly to an SSI recipient can result in the payment being treated as income and may affect the beneficiary’s SSI.
- Transfers to personal accounts: Depositing trust funds into the beneficiary’s personal bank account can create income issues and provide the beneficiary with direct access to the funds.
- Cash-equivalent payments: Gift cards or similar items that can readily be converted to cash may require additional consideration before the trustee purchases or distributes them.
- Expenses outside the trust’s terms: The trustee must follow the trust document and should not make a payment that the trust does not authorize.
- Purchases that may become countable resources: Before purchasing or transferring significant property, the trustee should consider whether ownership of that asset could affect the beneficiary’s eligibility for means-tested benefits.
“The special needs beneficiary cannot dictate what those monies are used for. They can’t have control over the assets or direct any decisions related to the trust.”
Plan for the Expenses That Support Your Loved One
A special needs trust can help pay for expenses that make a meaningful difference in your loved one’s daily life, including transportation, personal care, housing, travel, and entertainment. However, using those funds without unnecessarily affecting eligibility for important benefits requires thoughtful planning.
Evans & Davis can help you set up a special needs trust to cover the expenses your loved one may have now and in the future. We can also help trustees understand how different payments may affect benefits and make informed decisions about using trust assets to support the beneficiary’s needs and quality of life.
Call 866-708-2335 or contact us online to discuss how a special needs trust can help provide for your loved one’s expenses.
