Special needs trusts or supplemental care trusts are carefully constructed vehicles for providing extra funds to beneficiaries who are or may in the future be receiving some form of public benefits such as Supplemental Security Income or Medicaid. They can also be used to simply facilitate money management for a beneficiary who may not be able to handle the amount of funds necessary to provide for his or her needs over a lifetime. These trusts must meet the strict requirements established by the Social Security Administration.

Funding the trust

The two most important decisions when creating a special needs trust are funding and the selection of trustee. Choosing an amount and types of assets to put into a special needs trust can be challenging. The nature of the beneficiary’s needs and likely life expectancies of both the creator of the trust and the beneficiary are important factors and there is no one right answer. Each situation needs to be evaluated to determine if the right level of funding is being allocated and the decision needs to be reexamined frequently to ensure that the right amount is available to the trust. The types of assets placed into the trust can have tax and liquidity implications which can negatively impact the ability of the trust to provide for the beneficiary.

Selecting a trustee

Selecting a trustee is a critical decision in the trust drafting process. Given that a special needs trust has complicated rules governing its distributions and is intended to last for the lifetime of a beneficiary, a corporate trustee is typically an ideal choice. However, corporate trustees do charge fees, typically based on a percentage of the trust assets and will not accept smaller trusts. If an individual trustee is selected, you should suggest a corporate successor or back up trustee in the event that the individual trustee is unable to continue to act at any time. The individual suggested must be able to manage the funds and handle requests for funds from the beneficiary or his or her guardian. These requests can cause strain on relationships and the potential for conflict should be considered in the trustee selection.

Professional advice is critical to ensuring that the trust meets your needs and the often complicated requirements of the public benefits system. Consult an attorney familiar with special needs planning to be certain you have the right plan for your needs. Call 574.232.3538 for an appointment with one of our estate planning team to discuss your special needs trust questions.