Can Special Needs Trust Pay for Beneficiary’s Food and Rent?
Can a special needs trust help pay for my son’s food and rent, if SSDI is not enough? What if he receives SSI?
Certainly. Social Security Disability Income (SSDI) is not affected by the beneficiary’s income or assets. Instead, it is a benefit of the Social Security system. Your son would be eligible for SSDI based either on his own work record or, if he became disabled as a child, by that of one of his parents. He could only receive benefits based on a parent’s work record when that parent either begins taking Social Security benefits themself or passes away. As a result, many adult children with disabilities switch from Supplemental Security Income (SSI) to SSDI upon the retirement or death of a parent.
In contrast, SSI eligibility is based on the income and assets of the applicant. They can have only $2,000 in countable assets (an amount that has remained unchanged since 1984) and the SSI benefit is reduced on dollar for every dollar the beneficiary receives in income. In general, payments made to the beneficiary from a special needs trust are considered income and payments made on the beneficiary’s behalf to pay for items or services are not considered income and do not affect their SSI eligibility or monthly stipend.
But you are right to ask about food and rent. Payments made by a special needs trust for food or housing for an SSI beneficiary are considered “in kind” income and cause a one-third reduction in the SSI beneficiary’s monthly stipend. (The reduction can be less than a third if the value of the food or housing benefit is less than a third of the monthly stipend, but that’s unusual.) Often the benefit of a trust paying rent far outweighs the loss of the SSI benefit. For instance, the trust may pay rent of $1,000 a month. If the SSI benefit would normally be $800 a month, it would be reduced to approximately $535 a month. The loss of $265 a month is unfortunate, but usually families determine that it’s worth it to make sure the beneficiary has decent housing.
One work around may be to use an ABLE account. If the beneficiary was disabled before age 26 (to be changed to age 46 in 2026), they can have an ABLE account holding up to $100,000 that would not affect their eligibility and they can spend the funds as they wish. However, ABLE accounts may only receive up to $17,000 a year. In the example above, the special needs trust could transfer $1,000 a month (or $12,000 at one time) to the ABLE account and the rent could be paid from the account, thus avoiding the one-third reduction in the monthly SSI benefit. It’s unfortunate that families are forced into this workaround, but at least it works.