4 Issues to Consider When Creating a Special Needs Trust

Here are some of the questions you will need to consider when creating a special needs trust:

Choice of Trustee

This can be the most difficult decision because the trustee will have ultimate power and responsibility over how the trust funds are invested and spent for the beneficiary. Keep in mind that whomever you choose, he or she must:

  • know and understand the beneficiary's needs
  • make sure not to violate the rules of any public benefits program
  • budget for the long term 
  • invest wisely
  • keep accurate accounts

    We occasionally find that the best solution is to have both a family member and a professional trustee share the role as co-trustees.

How specific should the trustee directions be?

As a parent, you are going to want to provide the trustee with as much guidance as possible to make sure that your child gets the best care and support and that your innate knowledge about her needs and wishes is not lost. But this information often is best imparted in a side document -- a memorandum of intent -- rather than in the trust itself. The trust needs to be discretionary and relatively unlimited so that the trustees can react to future realities, whether they have to do with your child's development or changes in laws and services available.

What about a trust protector or care committee?

Some special needs trusts include a so-called "trust protector" to oversee the work of the trustees or a "care committee" to advise the trustees. These additional parties can contribute significant benefits and help reduce your worries about how the trustees will act on behalf of your child. But these mechanisms should be used only on a case-by-case basis where the benefit outweighs the added cost and difficulty of involving additional people in the trust management.

How much money should go into the trust?

It's hard to get a definite answer on this question. In most cases, the answer is "as much as possible." This is because there's usually not enough to pay for a child's entire support. However, if you have other children you'll want to be "fair" to them as well. The availability of public benefits programs, of course, lowers the need for self-financing, but we can never be sure what will happen to existing programs in the future. A financial planner who focuses on special needs financial planning can help with these calculations. One solution many people choose is to divide their estate equally among all of their children, but to provide additional funds for the special needs trust through life insurance.

These are not easy questions. But we can help you find solutions. And don't fall into the trap of the perfect being the enemy of the good. It may be impossible to find the ideal solution for your child. But any plan is far better than no plan. Additionally, whatever plan you put in place now should be reviewed and updated as your child gets older and your circumstances change. Act now. Then take another look in a few years.