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Prepaid Debit Cards Enable Special Needs Trust (SNT) Beneficiaries to Quickly and Independently Make Purchases


More and more, trustees of SNTs are relying on “administrator-managed prepaid debit cards” when disbursing funds to beneficiaries. True Link is a leading provider in this area that is continuing to grow in favor with trustees. These types of cards offer trust beneficiaries greater independence and the ability to get what they need more quickly.

Up until now these cards existed in a regulatory gray area as far as the Social Security Administration (SSA) was concerned, but not anymore.


SNTs — A Little Background


Special needs trusts (SNTs) are created to protect the assets of people with disabilities. When properly maintained, special needs trusts preserve the individual’s eligibility for public benefit programs, such as Supplemental Security Income and Medicaid.

​​​​​​​However, SNTs must abide by strict rules, overseen by the SSA, concerning what trust assets can and can’t be used for. For example, SNT funds can almost never be used for food and shelter expenses or medical expenses that would otherwise be covered by Medicaid. They may also not be used for items that can be traded for cash.

To ensure that trust distributions comply with these rules, trustees are increasingly relying on administrator-managed prepaid debit cards, the most common of which is the True Link card we mentioned above. These cards allow trustees to maintain oversight of card transactions while providing people with disabilities — the cardholders — the ability to make purchases quickly and independently.


Prepaid Cards Can Provide Automatic Oversight and Protect Benefits


Since the cards can be managed online, trustees are able to link the trust funds to checking accounts and quickly transfer funds to beneficiaries for their use. Along with ongoing monitoring and the ability to print off regular reports, the cards allow trustees to block purchases that may run afoul of the SSA’s rules. Certain purchases can jeopardize the beneficiary’s continued eligibility for public benefits, so they must be monitored very closely. (Read “5 Ways to Make Purchases for SNT Beneficiaries” here.)

The wonderful thing about True Link cards, for example, is they can be customized to block transactions that might negatively affect benefits, such as purchases at grocery stores, restaurants, and bars. Administrators can also set up the card to work only at specific, authorized merchants and nowhere else.


The SSA Weighs In on Prepaid Debit Cards


A few months ago, the SSA published a new section regarding True Link and similar cards in its Program Operations Manual System (POMS). POMS is the SSA’s internal guidance system that is used by field workers who handle benefits eligibility questions. This marks the first time the SSA has recognized these cards as a legitimate way for trustees to manage funds in a SNT.

​​​​​​​Among the rules set forth in the POMS, the SSA specifies that to protect the beneficiary and the trust from making inappropriate disbursements, the trust must be the owner of the True Link card and have controlling use of the card. If the card is used to withdraw cash, such as from an ATM, then the funds will be counted as cash income and thus can affect the person’s eligibility for public benefit programs. If the beneficiary uses the card to pay for food or shelter, the disbursements will likely reduce SSI payments.

​​​​​​​To learn more about how an administrator-managed debit card can be used in conjunction with a special needs trust, or for any other questions about special needs planning, please give us a call at 913-345-2323.

To continue learning about effective special needs planning, we encourage you to check out the Special Needs Planning section of our website.