A special needs trust is designed to supplement the income of an individual with special needs so that he or she can maintain access to government benefits without necessarily sacrificing their standard of living. But government benefits like Supplemental Security Income (SSI) and Medicaid prohibit the trustee of a special needs trust from simply giving a beneficiary cash to pay for goods and services herself. Instead, a trustee must pay vendors directly. Credit cards offer a way for the trustee of a special needs trust to avoid giving a beneficiary cash while at the same time not serving as the beneficiary’s designated shopper. Because a credit card is technically a loan from the credit card company to the cardholder, the goods or services purchased by a trust beneficiary using a card are not income and do not affect his or her access to government benefits. If the special needs trust then pays off the balance of a beneficiary’s credit card bill, the payment is likewise not considered income. Because of this special treatment, an SSI or Medicaid beneficiary who is capable of managing his or her own affairs can use a credit card to make small purchases, and a trustee of a special needs trust need not micromanage every transaction.
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