The main purpose of a special needs trust is typically to provide supplemental financial support for individuals who cannot live independently. Parents, grandparents and other family members may fund a trust to help a loved one with special needs live independently, afford medical expenses and even enjoy enrichment activities.
Those establishing special needs trusts should ensure they have adequate funding set aside for the trust. They also need to carefully consider their options when naming someone to act as trustee.
Additionally, they need to include appropriate restrictions on distributions from the trust. Why do trustors limit what beneficiaries can receive?
Distributions can affect benefits
People with special needs may be eligible for numerous state benefits. They can receive Medicaid and housing benefits that improve their quality of life. However, they are subject to income restrictions. A large distribution from a special needs trust could theoretically render an individual ineligible for benefits that they typically receive.
Even in cases where the distribution may be to cover medical or educational expenses, it may be necessary for the trustee to work out a monthly payment arrangement to ensure that the distributions do not make the beneficiary ineligible for key benefits. Proper limitations can also help ensure that distributions don’t diminish the trust to a point where it no longer has adequate capital to provide the beneficiary with ongoing support.
Those attempting to create and fund a special needs trust may need help creating a trust that truly meets their loved one’s needs. Partnering with an attorney familiar with special needs planning is a smart step for those who want to provide for vulnerable family members.
