Driving Toward Independence: How a Special Needs Trust Can Buy a Vehicle

I know that for many families, a car is more than just a way to get around. It represents freedom, the ability to get to doctor appointments, and a way to stay connected with the community. One of the most common questions I hear is, “Can my child’s Special Needs Trust (SNT) buy a car without causing trouble with the government?”

The good news is that the answer is usually a resounding "yes." However, because government benefits like Supplemental Security Income (SSI) and Medicaid have very strict rules, you have to follow a specific "road map" to avoid any penalties. As a Special Needs Certified Financial Planner® I can help you with this road map.

The "One Car" Rule

The Social Security Administration (SSA) is very particular about what a person can own. Usually, a person receiving SSI cannot have more than $2,000 in assets. However, the government makes an exception for vehicles.

According to the rules, one vehicle per household is considered an "excluded resource." This means it doesn't count toward that $2,000 limit, no matter how much the car is worth. It just needs to be used for the transport of the person with the disability. Whether it is a basic sedan or a van with a specialized wheelchair lift, the value doesn't matter for SSI eligibility as long as it is the only car the person "owns."

If you are trying to decide how a vehicle fits into your child's overall financial future, contact my office today for a consultation. We can look at the numbers together to see what is most sustainable.

Buying the Car: Do Not Use Cash

The most important rule when using trust money for a car is that the money must never pass through your child's hands. If the trust gives your child $20,000 to buy a car, the government will count that as income, and they could lose their benefits for months.

Instead, the trustee must pay the car dealership directly. The check or wire transfer should come straight from the trust account to the seller. This keeps the transaction "clean" and ensures the government doesn't see the money as a gift to the individual.

Who Should Own the Vehicle?

This is where things can get a little bumpy. There are two main ways to handle the "title" (legal ownership) of the car:

1. The Trust Owns the Car

If the trust owns the vehicle, it is clearly a trust asset. This protects the car from outside lawsuits and keeps it out of the child's name. However, it can be very difficult to find an insurance company willing to write a policy for a trust. After all, a trust doesn't have a driver's license!

2. Your Child Owns the Car

Because the first car is an "excluded resource," your child can actually have the title in their name without losing SSI. This usually makes getting insurance much easier. However, you should check your state's Medicaid rules first. Some states may want to claim the car after the person passes away to pay back medical costs.

Deciding who should own the car is a big legal and financial choice. Reach out to my Special Needs Certified Financial Planning® office to discuss which option provides the best protection for your family. Every situation is different, and we want to get this right the first time.

Paying for Upkeep

A car is a long-term expense. Beyond the purchase price, there are taxes, registration fees, gas, and repairs. The Special Needs Trust can pay for all of these things.

Since these payments go to the mechanic or the insurance company—and not to the child—they are generally not considered income. This is a great way to use trust funds to improve your loved one's daily life without risking their monthly SSI check.

The Insurance Hurdle

Insurance is often the biggest challenge. If the trust owns the car but a parent or a sibling is the primary driver, the paperwork can get complicated. You must ensure the insurance company knows exactly who is driving and who owns the vehicle to make sure a claim is paid if there is an accident.

Providing your loved one with reliable transportation is a wonderful gift, but it requires careful planning to stay within the law. Click here to schedule a meeting with a Special Needs Certified Financial Planner® so we can make sure your transportation plan is road-ready and your child's benefits are safe.‍