Special Needs Trusts: 10 Common Mistakes

Conversations about tax and estate planning often lead to conversations about trusts. Special Needs Trusts in particular can be very complex and difficult to understand.

The Following are 10 Common Special Needs Trust Mistakes:

1. Confusing Public Benefit Programs
2. Failure to Keep Current with Trust Administration Laws
3. Confusing First Party and Third Party Special Needs Trusts
4. Misunderstanding the “Sole Benefit” Rule
5. There is No System for Requesting Distributions
6. Trustee Refuses to Make Distributions
7. Failure to Distribute for Food or Shelter
8. Distributing Cash Directly to the Beneficiary or Reimbursing the Beneficiary
9. Failure to Maintain Excellent Records
10. Trust Termination and Disbursement Priority

Eligibility for public benefits may be adversely impacted if a Special Needs Trust isn’t handled properly. Trustees must be sure to follow strict rules when administering a Special Needs Trust to ensure that the beneficiary’s need-based public benefits are not compromised.

Do you have a Special Needs Trust set up for a loved one or do you plan to create this type of trust in the near future? If so, it is imperative that you consult a qualified attorney who specializes in estate and tax planning to ensure that your trust doesn’t inadvertently cause a problem for the Special Needs Trust beneficiary.