If you are the Trustee of a Special Needs Trust, you must be aware that it requires special administration over and above what is required of most Trustees. Assets must typically be invested in a different manner, payouts are limited by the terms of the trust, special filings and tax returns must be prepared and you may have obligations to meet with the beneficiary and care for the beneficiary in a way most trustees do not.The most challenging aspect of Administration of Special Needs Trust is to determine what you can spend money on and what you cannot spend money on. Special Needs Trusts can be very complex because those trusts are limited in what they can pay for by statute. Special Needs Trusts can generally not pay for food, shelter, electricity, gas or water and it may not pay for anything that can be converted into food, shelter, electricity, gas or water. Additionally, cash should almost never be distributed to a beneficiary from the trust.
Another concern for expenditures relates to the ability to spend money for the benefit of a special needs person in a way that indirectly benefits a third person. For example, if a special needs person wants to travel somewhere, can the trust pay for a travel companion? Local rules vary on this.
Large expenditures must be pre-approved by the Social Security Administration and annual accounts prepared for their review. There are special rules about a Special Needs Trust owning a home and the Trustee must become familiar with the eligibility requirements for Medicaid and Supplemental Security Income (SSI) to ensure that the beneficiary does not lose his or her benefits.
Please contact us if you have any questions about Administration of Special Needs Trust .
Kevin Pollock is the estate planning law attorney in charge of the firm’s Special Needs Planning Department. Attorney Pollock has focused on Wills, Trusts & Estates since 2000 when he received his master’s degree in taxation.
For more information on Special Needs Planning, please visit my blog: Kevin A. Pollock BLAWG