Michelle: You asked: Question:
What do you recommend as the best method for reimbursing the guardian of a Special Needs Trust beneficiary for monies spent on behalf of the benficiary (a severly disabled adult).
Mary Alice responded: First, for expenditures which have already occurred on behalf of the beneficiary, documentation will be required to verify that the expenditures were, truly, for the sole benefit of the SNT beneficiary. For future reference, as Patty explained I'd recommend using a credit card if possible, which will cut out the guardian as the middleman, and simplify accounting. This might not always be practical, but reimbursement gets complicated, especially if receipts include items for multiple parties. I always recommend that purchases not be commingled when reimbursement will be involved. It's never simple!
PFS response: In Texas, so long as the guardian submits a receipt to the Trustee and the distribution is within the terms of the Trust, the Trustee has the ability to reimburse the guardian. However, I explain to the guardian/parent/caretaker that it is wise to discuss any expenditure with the Trustee prior to making it to verify that the distribution is one that the Trustee can make. Small expenditures for shampoo or a DVD would not be significant if the Trustee refused to reimburse for valid reasons. However, purchasing a flat screen HDTV and then requesting reimbursement would be risky because the Trustee may not believe that it is a reasonable distribution.
The complication for reimbursement comes when the parent is asking for reimbursement for expenditures and the trust beneficiary is a minor child. If the Trustee reimburses the parent for an expenditure, that is income in the month of receipt and could cause the minor child to lose SSI eligibility. But if the Trustee pays a credit card bill directly to VISA for the parent, there is no loss of benefit unless that payment includes food and/or shelter expenditures. Of course, I advise parents to follow the same procedure above by getting advanced clearance or at least an idea of how the Trustee may come down on an issue.