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Estate Planning – Caring for Loved Ones with Special Needs: Part 4

As discussed in Parts 1-3 of this series, a “Special Needs Trust” is used to hold assets for a person with a physical or mental disability or with chronic illness.  The trust is not intended to provide basic levels of support for such things as food and shelter.  Rather, it is intended to supplement the basic assistance provided by government programs.

The rules surrounding special needs trusts are very complicated.   Part 4 of our discussion is a brief introduction to the responsibilities of the trustee (the person who manages the trust assets and handles the administrative duties).  It should be noted that given the extremely complex nature of special needs trusts, in almost every case, trustees will require the help of attorneys as well as professional investment, tax, and accounting assistance.  The following highlights a few key issues:

1.  First and foremost, the trustee must be fully informed about the various government assistance programs (see Part 3 in our series) for which the special needs individual (also known as the beneficiary) is eligible.  And, the trustee must be fully informed about the specific rules for each of these programs.  As noted above, in virtually every case, this will require that the trustee seek professional assistance.  This is critical because once the beneficiary is enrolled in these programs, the trustee must ensure that trust assets are used only for things not provided by government assistance.  If trust assets are used to purchase goods or services that fall under the government assistance umbrella, then the beneficiary may very well lose some or all of his/her government benefits.   Since most individuals with special needs are limited in their income earning power, and since they often do not have enough other assets to cover all their financial needs, losing government assistance may seriously hurt their ongoing well-being.

2.  The assets set aside in a special needs trust are intended to improve the beneficiary’s quality of life over a lifetime.  It is important that the trustee manages trust assets carefully so that they are not prematurely depleted. When investing these assets, the trustee must understand and implement prudent investment practices.

3.  The trustee must provide accounting information to the beneficiary such that the beneficiary can clearly identify any payment or investment made from the special needs trust.   Although not always the case, a special needs trustee may also be responsible for filing annual taxes regarding the trust.

Trustee responsibilities associated with special needs trusts are in many ways similar to responsibilities associated with administering other trusts.  However, the intersection of special needs trusts with government assistance programs complicates matters significantly.  It’s important to repeat that the complexity of administering special needs trusts will, in all likelihood, require the trustee to seek professional assistance.

Our final discussion in this series, to be posted next week, will address “Special Needs Children- Special Divorce Considerations.”

Getting Legal Help

Experienced Estate Planning Attorney, Elga Goodman, can help you navigate through the very complicated issues involved in establishing special needs trusts.   Contact us today at 973-841-5111.

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