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What Is Involved In Special Needs Trust Administration?


There are three general obligations for the trustee concerning a Special needs Trust administration: First is to invest the assets of the trust, second is to make distributions from time to time, and third is to do the necessary reporting as far as income taxes and accountings for the beneficiaries.

What Are The Most Common Special Needs Trust Distribution Standards?

The most common in special needs trusts are a limited discretionary trust. That means they are limited in a way that would not affect the beneficiary’s right to receive government benefits. And in order to do that, they are limited to the beneficiary’s special needs as compared to their ordinary needs of food and shelter. Within that limitation, the trustee then has discretion to make distributions to the beneficiary for these special needs in a way that the trustee believes are most beneficial to the beneficiary.

What Are The Permissible Distributions Of The Special Needs Trust?

Permissible distributions are actually different, more specific. The most common distributions out of those are additional items, or services that would improve the disabled beneficiary’s quality of life. Such as furniture, entertainment equipment, medical or social services that are not covered by Medi-cal, travel, costs for a caregiver or additional caregiver hours, education, both typical education, and recreational education like adult education classes, club memberships, entertainment like going to movies, or sporting events.

Are There Distributions That Will Affect SSI Benefits?

Any distributions that are for food, shelter, or could be converted by the beneficiary to cash should not be made from the special needs trust without looking at their effects. Sometimes they are appropriate, but the trustee must understand the consequences before distribution for these types of expenses.

Does The Type Of Public Benefit Affect Special Needs Trust Distribution?

Yes, the type of public benefits can affect a special needs distribution. There are two basic categories of public benefits. One is Means Tested, like SSI, (Social Security Income), and the other is Entitlements like SSDI (Social Security Disability Income). A means tested benefit only pays the beneficiary if they do not have other assets or income to pay for their needs. An Entitlement benefit is paid to the beneficiary regardless of their financial situation. So, if a beneficiary is on social security disability income, SSDI, there is no need to have a special needs trust for that person, because any inheritance they would receive, or any assets they have, would not disqualify them from that benefit.

What Is The Special Needs Trust Trustee’s Duties On Distribution?

The trustee has a duty to be sure that the distributions are for the benefit of the special needs trust beneficiary. He has a duty to account to the beneficiary for all distributions. Additionally, he has a duty to account to the beneficiary for any other transactions he undertakes on the behalf of the beneficiary. The trustee has a duty to give notice to social security administration if the distributions are those types of distributions that could affect the beneficiary’s benefits. Therefore, if it is a distribution, for instance, for shelter for the beneficiary, then that will affect the beneficiary’s social security income level. Notice has to be given to social security if those distributions are made.

What Are The Special Needs Trust Distributions That Do Not Affect SSI?

These are the most common and permissible distributions, all of those additional services are items that would affect the beneficiary’s quality of life. Instead of giving money to the beneficiary to purchase something, the item itself is purchased and given to the beneficiary. Therefore, as long as the items are given directly, as long as no cash is given to the beneficiary, no gift cards, or anything of that nature are given to the beneficiary, they will not affect the SSI benefits.

What Are The Most Difficult Special Needs Trust Distributions To Deal With?

The most difficult distributions to deal with are for benefits to the beneficiary that overlap with their SSI benefit that are for things like food, or most commonly shelter. It is not uncommon for the trustee and the beneficiary both to want the beneficiary to have a better place to live than they can afford on their SSI benefits, so the trustee can use the trust assets to secure better housing for the beneficiary. Nevertheless, when that is completed, certain things have to be reported to the social security administration. That will not necessarily disqualify the beneficiary from receiving benefits, but it will reduce their benefit to a certain degree. There is a principle called the In-kind Support and Maintenance Exclusion. That money is used to pay directly for shelter for the beneficiary, and will reduce, but not eliminate their benefits. Sometimes, it is the right decision, but a complicated one.

For more information on Special Needs Trust Administration, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (626) 385-6303 today.

Newell & Havens Attorney At Law

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(626) 385-6303.

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