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HAVENS MALCZYNSKI GRIGOLLA, LLP

What Is The Most Challenging Part Of Special Needs Trust Administration?


For the trustee, the most challenging issue is probably balance. To balance the wishes and needs of the beneficiary with the instructions and limitations of a special needs trust, and to try to use the funds in such a way to give the maximum benefit to the beneficiary, but still preserve enough assets so the trust will continue to be able to benefit that person over their lifetime.

What Should The Trustee Know When Distributing A Special Needs Trust?

First, the trustee needs to be familiar with the terms of that particular trust. They are not all the same. There are a lot of similarities, but special needs trusts can have very specific provisions that relate to that particular beneficiary that were the desire of whoever established that trust. Therefore, the first thing you must be aware of is any special instructions, or restrictions in that trust. Secondly, they need to be sure that they are distributing resources to the beneficiaries in a proper manner. This is always items that are purchased and given to the beneficiary, like reimbursing a friend, or a family member of the beneficiary who has purchased something for them. Remember; never give money directly to the beneficiary, and only in very rare circumstances giving a credit card to the beneficiary.

Should The Trustee Have An Attorney Involved Throughout The Entire Process?

Absolutely, the trustee should retain an attorney in this process. This is complicated enough that even though there are resources available for the trustee to read, and learn about special needs trusts, there are still subtleties that need to be taken into account, and having an attorney will protect the trustee from making errors. In addition, if they still make an error, they have an attorney who has advised them, and that attorney is the one who would be responsible for that error, not the trustee personally.

What Are The Common Issues In Distributing A Special Needs Trust?

The biggest frustration is for the parties involved when distribution is involved in a special needs trust. It is communication. The beneficiary, and the trustee have different motives, at least they can perceive it that way. The communication between the beneficiary and trustee can be strained, it can be difficult, and that tends to lead to conflict between those two parties.

What Recourse Is There If The Special Needs Trust Was Not Properly Drafted?

There is recourse if the trust was not properly drafted. That is to going to court and have the court authorize the changes to the trust. You would have to have a good reason to do that, and if you did, the courts would make the changes and revise the trust. However, when that is accomplished, it may change the nature of that trust from what we call a third-party trust to a first-party trust. That is a critical difference when the beneficiary dies. When the beneficiary dies, if it is a third-party trust, the assets are awarded to residual beneficiaries named in the trust. This is a trust that would have been set up by someone else for the benefit of the beneficiary.

Generally, they are parents, grandparents, or someone. In addition, when the beneficiary dies, it is whoever the parents or grandparents said they wanted to receive the remainder of that trust. A first party trust or a self-funded trust is one that is established with the special needs beneficiary’s own assets. As such, there are restrictions when that beneficiary dies about who can receive the money. Before anything can be given to individuals, the trustee must pay back to the government agencies part of what the beneficiary has received. Therefore, for any Medical, they would have to reimburse that entity for all the benefits that the beneficiary received. Changing from a third-party trust to a self-funded trust can have a significant impact at the death of the beneficiary.

You only want to go to court to make changes to the trust if it is absolutely necessary. In doing so, we try our best to have that trust remain characterized as a third-party trust.

Can Someone Practically Handle A Special Needs Trust Without An Estate Planning Attorney?

In theory, yes you can handle this on your own. In practice, as I said earlier, there are just too many subtleties to start up without any prior knowledge in this arena, and try this on your own. There are many resources, books written about the topic, websites, and other places to get assistance. The problem is that the trustee does not know what he or she does not know. Without knowing that, you do not know what information you need to obtain. Therefore, while in theory it is possible, I would never advise it.

What Sets You Apart In Handling Special Needs Trust Administration Matters?

I offer the best of both worlds, because of the way I operate in assisting the trustee with the administration. I give the trustee the confidence to know that he or she is doing the right thing at the right time, and that there are no requirements left unfulfilled. However, I do not actually manage the trust, so there is not the expense of having an attorney manage it, and because the person managing the trust is someone who is familiar with the beneficiary. They get more of a personal interaction with the trustee, which results in some of that frustration that can occur between the trustee and the beneficiary.

By just being there to assist the trustee, and not serving as trustee myself, I give them this middle of the road option to be sure that everything is handled correctly, but without having to pay the exorbitant rates of having an attorney manage the entire process.

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

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