A Trustee's Responsibilities under a Special Needs Trust

I am the Trustee - Now What

The terms of a Special Needs Trust actually set forth the trustee's responsibilities to the trust beneficiary. While a trustee may have substantial discretion over the trust funds, in exercising that discretionary authority, a Special Needs trustee must also administer the trust so as to supplement (but not supplant) any benefits the trust beneficiary receives from the SSI and Medicaid programs.

Duties of as Trustee

Being appointed and serving as a trustee is a very serious undertaking. Every trustee is held to a high standard of performance, considerably higher than the performance acceptable for one's own affairs. One who holds property for another is considered a fiduciary. Every trustee is a fiduciary and every trustee has certain duties which must be strictly adhered to. Those duties include, but are not limited to, the duty to carry out the terms of the trust agreement, the duty of loyalty to the beneficiary, the duty to act and invest prudently, the duty not to delegate trustee responsibility and the duty to maintain book and records and keep the beneficiaries reasonably informed of the trust administration.

It is important to understand that if you do not carry out the trustee duties with diligence, you can be personally responsible to the beneficiary and may have to pay back any damages that result from your actions.

For a Special Needs trustee, assuring that public benefits are kept can be tricky because it requires that you know and understand the rather complicated eligibility rules. As trustee, if you don't satisfy these rules, then your actions can cause the beneficiary to lose some or all of his or her public benefits. That would be a breach of the trustee's duties as the trustee is not carrying out the primary purpose of the trust.

Since the trustee is typically encouraged to employ professionals to assist in the administration of the trust, a trustee could, for example, hire a care manager or other qualified person to prepare an annual assessment of the beneficiary's needs to be reviewed by the trustee. The report should include both assessment of the beneficiary's current needs and recommendations for maximizing his or her quality of life.

Understanding Social Security's Rules

How and when distributions are made from the trust are also critical. To do this properly, a trustee should have some knowledge of the SSI rules on assets and income. The Social Security Administration has promulgated what is known as the Program Operations Manual (also known as POMS). The trustee should also have some basic knowledge about the different rules SSI has for "income" and "resources." Understanding of the "income" and "resource" rules will make a big difference in maintaining the beneficiary's eligibility and benefit levels for the governmental programs.

Keeping Good Records

Since a trustee is managing someone else's monies, good record keeping is a must. When making distributions, the trustee must ensure that the records are kept in an organized fashion and done timely. For example, they can be done on a monthly basis, with an annual review in preparation for the accounting and filing income tax returns. These records will be needed if Social Security or the Department of Human Services wants verification of the expenditures the trustee has made.

Keeping Current

As a trustee, you must also stay informed about changes in the beneficiary's benefits to make intelligent decisions as trustee. Failure to learn about a change in benefits can have catastrophic results to the trust beneficiary. SSI and Medicaid should have the address of the trustee , as well as the beneficiary's address, as sometimes the trust beneficiary fails to advise the trustee of a notice received concerning the public benefits. Be sure to obtain and keep copies of all correspondence from each benefit agency. This will help in determining the applicable rules on eligibility, reporting, and appeals.