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Can A Special Needs Trust Pay for a Trip to Disneyland?

by | Apr 11, 2024 | Firm News

I represent a lot of trustees of special needs trusts (SNT) including court supervised first-party SNTs.  My clients who are trustees of first-party SNTs that have been established through a court process have to report every penny that comes and every penny that comes out of the SNT and get court approval for those transactions.  A common question I get (and clarification I must give if I was not asked in advance) surrounds using SNT funds to pay for trips – usually to Disneyland.

Generally, an SNT can pay for a special needs beneficiary to go on vacation.  There are a couple of issues.  The first issue involves the payment for food and shelter during a vacation. Some of the biggest expenses on vacation are restaurant meals and hotel costs and those are costs that my trustee clients are requesting that the SNT cover.  Funds from an SNT are not to be used to pay for food and shelter because that is what the Supplemental Security Income (SSI) is to be used to pay.  However, when an SNT beneficiary is absent from their permanent living arrangement, the Social Security Administration (SSA) will not count distributions from an SNT as an in-kind support and maintenance (ISM) distribution and the SSI will not be reduced.

The next issue that typically comes up is whether the SNT can pay for a travel companion for the SNT beneficiary.  The expense to pay for a travel companion is closely scrutinized in a first-party SNT because the SNT funds are to be used for the “sole benefit” of the SNT beneficiary.  For the payment of a travel companion to pass scrutiny, the trustee must show that the travel companion is necessary for the beneficiary’s safety and will provide caregiving services.  One way to show this fact is by obtaining a written opinion of a medical professional that the SNT beneficiary requires assistance with bathing, dressing, eating, and transportation.

When I have a trustee that wants to use SNT funds to pay for the whole family to go to Disneyland, I must break the news that the SNT cannot pay for everyone to go, but if the SNT beneficiary needs a companion, then the SNT can pay for the beneficiary’s trip and the travel companion’s trip.  The trustee must be prepared to show receipts for all expenses when it comes time to report these disbursements to the court.

A recent California appellate court case – McGee v. Department of Health Care Services (CO93796, Filed May 24, 2023, Third District) – found that the trial court was wrong in narrowly defining the term “special needs” in the underlying SNT.  Instead, the appellate court held that the SNT’s definition of “special needs” was broad.  This allowed the trustee of that SNT to use trust funds to pay for pets and food for travel companions on trips.  The key take-away from McGee is to closely review the terms of the SNT regarding its definition of “special needs.” And, if there are unusual disbursements or distributions from the SNT, be sure to specifically address those in the petition requesting approval of the accounting.

If you are a trustee of an SNT and have questions regarding what it can pay for, please contact me to discuss.