Six Practical Tips for the Trustee of a Special Needs Trust
1. Keep the Trust Document. In simple terms, a special needs trust document is a set of instructions on
how to hold and use funds for the benefit of a person with a disability (“the beneficiary”). The initial
trustee (often a parent of the beneficiary) should keep the original document and consider giving a copy to
the proposed successor (backup) trustee(s).
2. Know the Basic Rules for Spending the Trust Funds. Three important rules are:
a) The trustee has total control of spending the funds (unfettered discretion);
b) The funds generally should not be used to pay for things that the beneficiary’s government benefits
are meant to cover. For example, in most cases, the funds should not be used for general support, food, or
shelter when the beneficiary is receiving SSI benefits; and
c) The trustee should not distribute cash to the beneficiary. Instead, the trustee should pay the
beneficiary’s bills, e.g., pay the beneficiary’s dentist bill, sending payment directly to the dentist.
3. Know About the Accounting Requirements of the Trust. Special needs trusts set up by parents
often specifically state that a formal accounting is not required and that the court will not supervise the
administration of the trust. The trustee, however, must be prepared to account to the beneficiary or the
successor trustee(s) for how the money is invested and how it is being spent. The trustee should also
understand the specific accounting provisions of the document.
4. Know the Types of Assets that may be Held by the Trust. The trustee must remember that there is
more than one type of special needs trust and that not all types of assets may be held by the different types
of trusts. For example, if a parent wants to set up a trust to shelter the parent’s money – possibly money
that would be inherited by the beneficiary – then our office would draft a “third-party” trust. The parent’s
money may be held by that trust. The trust may also hold money from other people such as grandparents
or friends. But, if the beneficiary has his or her own money – such as SSI funds – that money may not be
held by that trust. If the beneficiary has his or her own money or other assets that need to be sheltered,
our firm would draft a separate “first-party” trust, which has very specific rules. In sum, don’t put the
beneficiary’s money in a third-party trust – a trust that was set up to hold money from someone else, like
mom and dad.
5. Consider Preparing a Separate “Letter of Intent.” One of the most challenging parts of serving as
the trustee is determining the best way to spend the funds for the beneficiary. A less formal letter of
intent, which can be prepared by a parent or initial trustee, spells out the nature of the beneficiary’s
strengths and challenges, as well as likes and dislikes, and may provide suggestions on how to best use
the funds. Names and addresses of the beneficiary’s doctors, therapists, employers, social workers, etc.,
can also be listed. Our firm is happy to provide templates for letters of intent.
6. Know Who to Contact with Questions About Public Benefits. The trustee should seek the advice
of professionals concerning, among other things, the use of trust funds in a way that does not hurt the
beneficiary’s eligibility for government benefits. It is a good idea for the trustee to stay in touch with the
law firm that prepared the trust. The trustee can also seek out information from any social workers
helping the beneficiary, nonprofit disability groups in the area, etc.
Feel free to contact us!
Daniel L. Blauw, PLC
Attorneys and Counselors at Law
2020 Raybrook SE, #204A
Grand Rapids, MI 49546
www.blauwkirkpatricklaw.com
Daniel L. Blauw
(616) 336-5098; (616) 459-6792 (fax)
danblauw@iserv.net
Sarah L. Kirkpatrick
(616) 719-0465; (616) 459-6792 (fax)
sarah_kirkpatrick@comcast.net