Special needs trusts (SNTs) are often used to help beneficiaries receive income without jeopardizing their receipt of benefits. The trust’s distributions are used to enhance the beneficiary’s quality of life. The distributions can be used for various purposes, including health/dental treatment and care, household and diagnostic equipment, or rehabilitative expenses – just to name a few.
Yet when a beneficiary receives Medicaid, state Medicaid recovery programs may take a beneficiary’s trust funds to recover Medicaid benefits paid on behalf of a Medicaid recipient. If the beneficiary uses a third-party supplemental needs trust, no Medicaid repayment is necessary upon the beneficiary’s death. But what if the third-party trust purchases a home for the beneficiary, is it subject to the SSA’s one-third reduction rule for in-kind support and maintenance (ISM)? The following explores that question.
So, if a third-party trust buys a house and the beneficiary lives in it without paying any of the expenses, like taxes, insurance, and utilities, it will result in a one-third reduction in the monthly social security payments the beneficiary receives.
Conclusion and Resources
Navigating the administration of a first-party or third-party SNT can be complicated. Therefore, If you want to learn more about using a first or third-party SNT, please use our “Find an Attorney” resource to find assistance in your state. For additional information, check the resource links below.
