Can a Special Needs Trust pay a beneficiary’s credit card bill?

The answer is: It Depends

If a special needs trust (a “SNT”) pays a credit card bill, the consequence of that payment depends upon what was on the bill!  For example, if the SNT pays a restaurant charge made while the beneficiary is home, it will reduce his or her Supplemental Security Income (“SSI”) benefit.  If, on the other hand, the SNT pays a charge for clothing it will not result in a reduction of SSI benefits.

Any income received by the beneficiary during a month will generally result in a reduction in his or her SSI benefit for that month. Payments from the SNT directly to the beneficiary are considered unearned income in the month received and will result in a dollar for dollar reduction of SSI Benefits in that month.  

Payment of credit card charges for “food” and “shelter” items are considered “in-kind support and maintenance” (“ISM”) which will also result in a reduction of SSI benefits in the month paid.  “Shelter” items include: mortgage payments, property insurance, rent, gas, electricity, heating fuel, water, sewer, garbage collection service, and real property taxes.  “Food” items include purchases of food products and edible items as well as restaurant charges, but does not include paper products, cleaning and household supplies.  The deemed receipt of ISM results in a reduction of the beneficiary’s SSI up to an amount roughly equivalent to one-third of his or her monthly SSI benefit.  The penalty imposed by the receipt of ISM is the reason for the general rule that the SNT should not pay for “food” or “shelter” items, even by credit card.  

If the credit card bill includes non-food, non-shelter items, the beneficiary is not deemed to receive income if the goods or services received in exchange for the credit card charge are for an “excluded resource.” Included in this category of items are: clothing, internet access, cable charges, personal effects or household goods, paper products and cleaning and household supplies.