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Being the trustee of a special needs trust is a very important role as it serves to protect the interests of a beneficiary with special needs.
Often, a special needs trust is established so that the beneficiary can have the use of funds that are left to them via an estate or funded during an individual’s lifetime. A special needs trust often preserves certain government benefits that are means-tested for the beneficiary. If the terms of the trust are violated, this could jeopardize the beneficiary’s benefits.
Responsibility #1: Understand the Benefits
An important responsibility of the trustee is to fully understand the benefits that the special needs beneficiary is receiving. For example, if the special needs beneficiary is receiving Supplemental Security Income (SSI) or Medicaid, there are certain restrictions on what is allowed to be received by the beneficiary.
Responsibility #2: Ensure Proper Distributions
By understanding the benefits, the trustee of the special needs trust can ensure that proper distributions are being made from the trust. The trustee would confirm that the distributions follow the terms and restrictions of the special needs trust. The trust will contain certain language that prohibits or allows the trustee to make certain distributions, so that government benefits may be maintained.
Responsibility #3: Follow Tax Reporting Requirements
In addition to making sure that distributions are made properly, another responsibility of the trustee of a special needs trust is to follow all tax reporting requirements. Trustees are required to file the trust income tax returns. Following these rules and guidelines are crucial because the beneficiary will be penalized should taxes not be filed properly and in a timely fashion.
Responsibility #4: Properly Invest Assets
Another responsibility of the trustee is to make sure assets are invested properly. It is the duty of the trustee to invest the trust assets in a manner that will result in the best use and growth of the trust assets. The trustee may seek to hire a qualified financial professional to make sure this is being accomplished. The trustee must also keep accurate records of any distributions made and any other transactions to or incoming/outgoing of the trust.
The duties listed above should not be taken lightly. The trustee of any trust is held to a fiduciary standard. Mismanagement of the trust may result in financial harm to the beneficiary of the trust.
We recommend that you seek professional guidance from an attorney that practices in the area of special needs planning, as well as an accountant, and a financial planner who is familiar with the rules and regulations of special needs planning.
Please contact us with questions or comments.