As a Trustee of Special Needs Trusts for multiple beneficiaries, I am pleased to hear that the Social Security Administration (“SSA”) has made life easier for managing Special Needs Trusts. In recent months, the SSA officially approved of the use of pre-paid debit cards, such as “True Link Cards” (the most widely known pre-paid card), for Special Needs Trusts. Specifically, the SSA said that the use of these cards does comply with Social Security’s rules for distributing money directly to beneficiaries of Special Needs Trusts.
How is this helpful?
Well, beneficiaries of Special Needs Trusts who are enrolled in Supplemental Security Income (“SSI”) face many restrictions when it comes to receiving money from the Trust. For example, cash distributions that the Trustee gives directly to a trust beneficiary would reduce the SSI benefit, dollar for dollar. In addition, any trust distributions made for food or shelter expenses would result in a one-third reduction of the beneficiary’s SSI. This result is undesirable for Trustees and beneficiaries alike.
Now, so long as the pre-paid debit card is owned by the trust, and the trust is the administrator of the card, Trustees have the ability to make funds available to beneficiaries without making costly cash distributions.
How does it work?
Cards like True Link are pre-loaded with a sum of money and they are tracked and managed on-line by the Trustee. These cards allow for the Trustee to block transactions which would decrease vital benefits for trust beneficiaries (i.e. distributions for food or shelter) but allow transactions to be processed through approved stores. Any mechanism which makes administering Special Needs Trusts easier for Trustees provides an inherent benefit to the beneficiaries.