If you have a disabled son or daughter, you may want to consider forming a special needs trust as part of your overall estate plan. This type of trust improves your child’s quality of life without interfering with his or her eligibility for certain government programs, such as Medicaid or Supplemental Security Income.
When setting up a special needs trust, you have an opportunity to name a trustee to oversee the trust. This individual has a fiduciary duty. To comply with this duty, the trustee must perform four essential tasks.
1. Approve fund disbursements
Your disabled child may qualify for needs-based benefits that help him or her cover everyday expenses, such as rent or utilities. If your son or daughter has increased income, though, he or she may become ineligible for government benefits. Therefore, the trustee must carefully review and approve disbursements to be certain they do not harm program eligibility.
2. Keep accurate and current records
As with other types of trusts, special needs trusts require some bookkeeping. Therefore, the special needs trustee must maintain accurate and current records. He or she must also provide documents to interested individuals, including you, the beneficiary or the government. If the trust has tax implications or requires an audit, the trustee’s records may be essential.
3. Invest trust funds
While you may make an initial investment into the special needs trust, the trust is apt to grow with careful investment. The trustee you designate must oversee these investments, including managing risk. This is likely true even if a separate broker or financial advisor makes investment transactions.
4. Communicate essential information
You want your special needs trust to serve the interests of your disabled son or daughter. To do so, the trustee may need to communicate with your child and his or her caregivers. If your child’s needs change, the trustee may also need to make certain adjustments.
To ensure your disabled child has what he or she needs to thrive, your special needs trustee must take his or her fiduciary duty seriously. If you find a trustee who communicates well and understands all requirements of the job, you are likely on the right track.