Handling Payments from Special Needs Trusts
Q I have a Section 8 housing applicant who has a special needs trust. Payment for her part-time attendant and some other expenses are made through the trust. Are regular payments from the trust for the benefit of the applicant considered income for the applicant? Can attendant costs be used as a medical deduction if they’re included as income?
A According to HUD Handbook 4350.3, par. 5-1(G)(1)(c), a special needs trust is a trust that may be created under some state laws, often by family members for disabled persons who aren’t able to make financial decisions for themselves. Generally, the assets within the trust are not accessible to the beneficiary.
If the beneficiary doesn’t have access to income from the trust, then it isn’t counted as part of income. But if income from the trust is paid to the beneficiary regularly, those payments are counted as income.
Mark Chrzanowski, a HUD compliance expert at Gene B. Glick Company, points out that the amount distributed for medical expenses, including the cost of a live-in aide or care attendant, are not counted as income. Those amounts are excluded from annual income as stated in Exhibit 5-1 of HUD Handbook 4350.3. The exhibit states that “amounts received by the family that are specifically for, or in reimbursement of, the cost of medical expenses for any family member” are excluded from income.