The question of whether a special needs trust (SNT) can fund self-employment or gig economy expenses is complex, but generally, yes, with careful planning and adherence to specific rules. The core principle is ensuring that any funded activity doesn’t disqualify the beneficiary from crucial needs-based public benefits like Supplemental Security Income (SSI) and Medi-Cal. These benefits often have strict income and resource limits, and even seemingly small earnings can jeopardize eligibility. SNTs are specifically designed to supplement, not replace, these benefits, allowing individuals with disabilities to improve their quality of life without losing essential support. Approximately 65% of individuals with disabilities are reported to be employed, and increasingly, this employment takes the form of independent contracting or “gig work,” necessitating a clear understanding of how SNT funds can be used to support these ventures.
What are the biggest risks with using trust funds for a business?
The primary risk lies in the “substantial services” rule. SSI considers services performed for others as income, even if the beneficiary isn’t paid a cash wage. If the self-employment activity is deemed to provide substantial services, the beneficiary’s SSI benefits could be reduced or terminated. The Social Security Administration (SSA) doesn’t have a bright-line rule for “substantial,” but generally, anything consistently requiring more than a minimal amount of time and effort could trigger this issue. For instance, if the beneficiary spends 15+ hours a week creating and selling crafts online, the SSA might consider that substantial service. It’s also crucial to understand that expenses can only be deducted to the extent that the self-employment generates income, and there are limitations on what types of expenses are deductible.
How can a special needs trust be structured to allow for business expenses?
Proper structuring of the SNT is key. The trust document should specifically authorize self-employment and outline the parameters for funding business expenses. This includes defining what constitutes allowable expenses (e.g., materials, software, advertising) and establishing a process for documenting and reviewing these expenses. A qualified practitioner, like Steve Bliss, can help draft a trust document that navigates these complexities. The trust can also establish a separate “business account” to track income and expenses, making it easier to demonstrate compliance with SSA rules. Further, setting up a business entity, such as an LLC, can provide a layer of legal protection and help separate the beneficiary’s personal assets from the business. Remember that approximately 20% of small business owners report struggling with financial management, and careful accounting is even more critical when public benefits are at stake.
What happened when Martha tried to start her online shop without planning?
I once worked with a woman named Martha, a talented artist with cerebral palsy. She dreamt of selling her paintings online, a fantastic way to express her creativity and potentially earn some income. She excitedly began purchasing supplies using her SNT funds without consulting her trust administrator or fully understanding the implications for her SSI benefits. Within a few months, the SSA noticed a significant increase in her reported income (from the sale of her artwork) and initiated an investigation. The agency determined that Martha was providing “substantial services” by creating and selling her artwork, and her SSI benefits were suspended. It was a devastating blow for Martha, who had relied on SSI for her basic needs. The process of appealing the decision and demonstrating that the artwork was a legitimate self-employment activity was lengthy and stressful, requiring significant legal fees and delaying her artistic pursuits.
How did David successfully launch his freelance writing career with his trust?
Thankfully, we were able to help another client, David, avoid a similar situation. David, who has autism, had a passion for writing and wanted to offer his services as a freelance content creator. Before investing any SNT funds, we carefully reviewed his trust document, consulted with a benefits specialist, and developed a detailed plan. We established a separate business entity, created a clear accounting system to track his income and expenses, and implemented a process for documenting his time and effort. We also worked with the SSA to obtain pre-approval for his self-employment activities. As a result, David was able to launch his freelance career successfully, earn a meaningful income, and maintain his vital SSI benefits. His success story highlights the importance of proactive planning and professional guidance when utilizing SNT funds for self-employment. Approximately 30% of entrepreneurs are able to successfully scale their business within the first three years, and David is well on his way to joining that group.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
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Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “Are there ways to keep my estate private after I pass away?” Or “What happens to minor children during probate?” or “Does a living trust save money on estate taxes? and even: “How much does it cost to file for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.