An AM trust payment is money you send to cover a beneficiary's living expenses when they receive Supplemental Security Income (SSI) or Medicaid
An AM trust (also called an able-bodied minor trust or supplemental needs trust) is a legal account set up to hold money for someone who receives SSI or Medicaid without disqualifying them from those benefits. When you make a payment into an AM trust, you are funding that account so the trustee can pay for things the government benefits do not cover—medical equipment, therapy, education, transportation, or other support.
The key difference from a regular payment is that money in an AM trust does not count as the beneficiary's own income or assets. If you sent money directly to the beneficiary, it would reduce or eliminate their SSI check or make them ineligible for Medicaid. An AM trust sits outside the benefit calculation, so the beneficiary keeps their full benefits while the trust pays for extras.
The trustee—usually a family member, friend, or professional fiduciary—receives your payment, holds it in the trust account, and spends it only on things that benefit the person named in the trust document. You do not send money to the beneficiary directly; you send it to the trustee or to the trust's bank account.
Key Takeaways
- AM trust payments go to a trustee, not to the beneficiary, so they do not reduce SSI checks or affect Medicaid may be able to access.
- The trustee must spend trust money only on things listed in the trust document and must keep records of every payment.
- You can send money by check, bank transfer, or wire to the trust's bank account; the trustee then pays bills or reimburses themselves for expenses.
- The trust document controls what the trustee can spend money on, so review it before sending large amounts to make sure your intended use is allowed.
- AM trusts are not tax-deductible gifts, and the trustee may owe taxes on trust income depending on how much money is in the account.
How to send money to an AM trust
Contact the trustee first and ask for the trust's bank account number and routing number, or ask whether they prefer a check. Most trustees have a dedicated bank account opened in the trust's name—something like "John Smith Trustee of the Jane Smith Supplemental Needs Trust." You send your payment there, not to the trustee's personal account.
If you are sending a check, make it payable to the trustee in their capacity as trustee: "Jane Smith, Trustee of the John Smith Supplemental Needs Trust" or however the trust document names it. Write "for the benefit of [beneficiary name]" in the memo line. If you are using a bank transfer or wire, provide the account and routing number the trustee gives you and include the beneficiary's name in the transfer description.
Keep a record of every payment you send—the date, amount, and which account it went to. The trustee will need this information for their own records, and you may need it if questions come up later about the trust's finances or the beneficiary's benefits.
What the trustee can and cannot spend trust money on
The trust document spells out exactly what the trustee is allowed to pay for. Common approved expenses include medical and dental care, therapy or counseling, education or job training, transportation, equipment or assistive devices, recreation and social activities, and housing costs beyond what SSI covers. Some trusts allow the trustee to pay for food, clothing, or utilities; others do not.
The trustee cannot spend trust money on things that SSI or Medicaid already cover—like basic food, shelter, or medical care that Medicaid pays for. Doing so can trigger an overpayment notice from Social Security or a review by the Medicaid agency. The trustee also cannot use trust money to pay the beneficiary's taxes, fines, or court-ordered restitution, and cannot give the beneficiary cash or let them control the money directly.
Before you send a large payment, ask the trustee to show you the trust document or at least confirm in writing that your intended use is allowed. If you want to pay for something unusual—like a vacation, a car, or a large one-time expense—get that approval in writing from the trustee.
How the trustee handles the money
The trustee receives your payment into the trust account and then pays bills directly from that account or reimburses themselves for expenses they paid out of pocket. For example, if you send $500 for therapy sessions, the trustee might pay the therapist directly from the trust account, or they might pay for the sessions themselves and then withdraw $500 from the trust to reimburse themselves.
The trustee must keep detailed records: receipts, invoices, bank statements, and a log of what was spent and why. If the beneficiary's benefits are ever reviewed or audited, Social Security or Medicaid may ask to see these records to confirm the trust money was spent properly. A disorganized trustee can create problems for the beneficiary, so it is reasonable to ask the trustee how they keep records and whether they are willing to share summaries with you.
Some trustees charge a fee for managing the trust—usually a percentage of the trust balance or a flat annual amount. This fee comes out of the trust account and reduces the money available for the beneficiary. Ask the trustee upfront whether they charge a fee and how much it is.
Tax and reporting requirements for AM trust payments
Money you give to an AM trust is not tax-deductible. You cannot claim it as a charitable donation or a dependent care expense on your taxes. It is a personal gift to the trust, and there is no tax break for you.
The trustee may owe taxes on the trust itself if the trust earns income—interest on the bank account, dividends, or rental income. Whether the trustee has to file a tax return depends on how much income the trust earned and the rules in your state. A professional trustee or tax preparer can advise on this.
You do not have to report your gifts to the IRS unless you give more than the annual gift tax exclusion amount in a single year. That threshold changes yearly, but as of 2024 it is $18,000 per person per year. If you give more than that to the same trust in one year, you may need to file a gift tax return (though you usually do not owe tax). Check with a tax professional if you are planning to send a large lump sum.
When an AM trust payment might be refused or delayed
A trustee may refuse a payment if the trust account is already large enough to cover the beneficiary's needs, or if they believe the money will not be spent within a reasonable time. Some trustees are cautious about taking on too much money because it creates more record-keeping work and potential tax liability.
A payment might be delayed if the trustee needs to verify that the expense you are funding is allowed under the trust document, or if the trust account is frozen pending a review of the beneficiary's benefits. If Social Security or Medicaid suspects the trust is being misused, they can ask the trustee to freeze the account until the investigation is complete.
If the trustee refuses your payment, ask them in writing why they are refusing and whether there are conditions under which they would accept it. If you believe the trustee is mismanaging the trust or refusing payments without good reason, you may need to consult a lawyer about whether the trust can be modified or the trustee replaced.
What happens if the beneficiary's benefits are reviewed
When Social Security or Medicaid reviews the beneficiary's case, they will ask about the AM trust and may request records from the trustee. The trustee should provide bank statements, receipts, and a summary of spending to show that trust money was used properly and did not disqualify the beneficiary from benefits.
If the trustee cannot produce good records, or if the spending does not match what the trust document allows, the benefits agency may find that the trust was misused. This can result in a reduction or loss of benefits, or an overpayment notice requiring the beneficiary to repay benefits they should not have received. The trustee could also face legal liability if they spent trust money improperly.
To protect the beneficiary, make sure the trustee keeps clear records of every payment you send and every expense they pay. If you are concerned about how the trustee is managing the trust, you have the right to ask for an accounting—a detailed report of all money in and out of the trust.
Frequently Asked Questions
Can I send money directly to the beneficiary instead of to the trustee?
No. Money given directly to the beneficiary counts as their income and will reduce their SSI check or disqualify them from Medicaid. The whole point of an AM trust is to keep the money outside the beneficiary's control so their benefits are not affected. Always send payments to the trustee or the trust account.
What if the trustee spends the money on something not allowed by the trust?
The beneficiary's benefits could be reduced or terminated, and the trustee could face legal liability. If you suspect the trustee is misusing trust money, contact a lawyer or ask Social Security to review the trust. You can also request that the trust be modified or the trustee replaced if there is a court process for that in your state.
Do I need a lawyer to set up an AM trust?
This guide explains how AM trusts work, but setting up a trust requires a lawyer to draft the trust document correctly. A mistake in the document can cause the trust to fail and disqualify the beneficiary from benefits. Consult an elder law or special needs attorney in your state.
Can I be the trustee of an AM trust for my family member?
Yes, family members often serve as trustees. However, you must follow the trust document exactly and keep detailed records. If you are also receiving SSI or Medicaid yourself, being a trustee could affect your own benefits, so discuss this with a lawyer first.
What if the trust runs out of money?
You can send more money to refill it, or the trustee can ask the beneficiary's family and friends to contribute. If the trust is empty and the beneficiary needs help, the trustee may need to ask a court to modify the trust or find other funding sources. The beneficiary's SSI and Medicaid will continue as long as the trust itself is not being misused.