Can Special Needs Trusts Pay for School or College in South Carolina?

Special Needs Trusts help individuals with disabilities by giving them access to funds for various purposes without compromising eligibility for government benefits like Supplemental Security Income (SSI) and Medicaid. But one frequently asked question here at Bespoke Estate Law is whether these trusts can cover educational expenses like tuition, books, or other costs associated with school or college in South Carolina.

In this blog, we will discuss the use of special needs trust (SNT) funds for educational purposes. If you have any questions for our estate planning attorney in Murrells Inlet and the surrounding areas, please get in touch. We serve clients in South Carolina and North Carolina.

The Use of Special Needs Trusts for Education

Broadly speaking, yes – funds from SNTs may be used for college or school. Special needs trusts are intended to supplement, not replace, government benefits. As such, they may cover a range of different expenses that improve the quality of life for the beneficiary. Tuition, books, transportation, and even specialized learning programs often fall within the permissible uses of an SNT.

But the funds must be administered correctly, and you will need to consult with a trust fund attorney before writing checks to a private high school or university. There are pitfalls that may hinder the beneficiary’s access to SSI and Medicaid.

Direct Payments vs. Reimbursements

Direct payments from the trust to the educational institution or vendor are the safest way to make this happen. For instance, a trustee may issue a payment directly to a university for tuition, or to a bookstore for required materials. These payments will not trigger a reduction of the recipient’s SSI income.

But if payments are made directly to the  beneficiary, who in turn makes the payments to the school or bookstore, the funds may be considered income. Furthermore, the trustee will need to keep detailed records of every transaction within the trust.

In-Kind Support and Maintenance Considerations

You would think that room and board would be considered part of the educational expenses, but the Social Security Administration does not see it this way. Housing and food are “In-Kind Support and Maintenance (ISM),” and such payments can lead to a reduction in SSI benefits.

Overview of SNT-Eligible Education Costs

SNT funds may pay for tuition, fees, books, and supplies. Many colleges have specialized programs for individuals with disabilities (vocational skills, athletic programs, life skills and so forth), and these can also be paid for by the fund. The trust can even cover costs associated with private tutoring or technology that helps the student function, like text-to-speech software or screen readers. Laptops with adaptive tech, transportation to and from school, and other education-related costs can be covered safely without reducing the beneficiary’s SSI or Medicaid eligibility.

Funds from Special Needs Trusts for Private School

Payments for private elementary through high school tuition, educational materials, and specialized therapies offered through the school are typically permissible under SNT guidelines. However, the trustee will need to work with the school to arrange payments, as direct payments to the institution are the only way to avoid SSI complications.

Many private schools have more resources for special needs students than public schools, hence the curiosity on the part of many of our clients. From sports programs to vocational training and other recreational activities, the opportunities at many private schools can be paid for by SNT funds.

Other Types of Educational Programs

Skill development falls under the umbrella of educational expenses. For instance, vocational training programs can often be funded through the trust. Technology training, financial literacy, or even music education improve the beneficiary’s quality of life and long-term opportunities, and they should be paid for by the trust.

SNTs can even cover tuition, software, and necessary technology to support online learning, as long as these expenses are documented and align with the trust’s terms.

Seek Guidance from a Local Estate Planning Attorney

Whether you would like to create a special needs trust for your child, or need help administering a trust on a loved one’s behalf, call Bespoke Estate Law. Our estate planning firm serves Surfside Beach, Wilmington, Myrtle Beach, and all of the surrounding areas, and we would be happy to help you.