Guardianship – What You Need to Know

If someone is the beneficiary of a Special Needs Trust {SNT}, the question is, ‘Do I have to ask the trustee for everything? 

Let’s start by pointing out that the trustee might be a bank or trust company, or perhaps, a relative or close associate.  If the trustee is a corporate fiduciary, that could be intimidating for the beneficiary who might not feel comfortable making requests to the trustee.  Alternatively, If the trustee is someone the beneficiary knows, then that might create additional tension for the beneficiary, who might not enjoy having to ask a relative for assistance. This is one of the reasons why we caution clients to think very carefully about who they select as trustee of an SNT.  Sometimes, it is best to allow siblings to be siblings and not complicate things by appointing one of them as a trustee. 

In either case, though, the beneficiary (or someone on behalf of the beneficiary, if the beneficiary does not have capacity) will need to make requests to the trustee. The trust is a separate legal entity, whose assets are managed and controlled by the trustee. If the beneficiary has concerns about asking for help, perhaps some expenses can be paid automatically each month.  In any event, working closely with the trustee will make things easier for all.  If that is not possible, perhaps a change in trustees is appropriate.  The beneficiary might not have the authority to change trustees, however; the SNT may contain other provisions which could give others the power to change trustees. 

Sometimes, a good trustee is forced to say “no” to a beneficiary’s request for a distribution.  A variety of factors can go into that decision, including the amount of money in the trust, the language of the trust document, the life expectancy of the special needs beneficiary, the interests of the remainder beneficiaries, among many others.  Being the trustee of an SNT is not an easy job. It is usually best for everyone if the trustee and the beneficiary can work things out amicably. 

While there are many restrictions on what an SNT can pay for without jeopardizing the beneficiary’s eligibility for means-tested government benefits, there are still many items that the trustee may pay for, including home internet connection, cell phone, travel and transportation, clothing, education, household furnishings, entertainment, and medical equipment and needs, just to name a few. However, it is very important that the trustee not make a cash distribution to the beneficiary since this could adversely affect the beneficiary’s eligibility for some government benefits programs. Best to have the trustee pay for what the beneficiary wants directly to the provider of those benefits.  

If the onset of the beneficiary’s disability occurred before age 26 (scheduled to increase to age 46 in a couple of years), you might be eligible to set up an ABLE account. That can make a real difference for some beneficiaries.  ABLE accounts, similar to an SNT, do not count as an asset for means-tested government benefits.   Moreover, amounts in ABLE accounts can grow tax-free and distributions for qualified disability expenses are not taxable. Most importantly, the beneficiary does not have to ask a trustee for a distribution. 

In closing, the relationship between the beneficiary and the trustee of an SNT can be complicated.  However, if both parties work together, the arrangement can significantly improve the quality of life of the beneficiary. 

Bernard A. Krooks, Esq., is a founding partner of Littman Krooks LLP. He was named 2021 “Lawyer of the Year” by Best Lawyers in America® for excellence in Elder Law and has been honored as one of the “Best Lawyers” in America since 2008. He was elected to the Estate Planning Hall of Fame by the National Association of Estate Planners & Councils (NAEPC). Krooks is past Chair of the Elder Law Committee of the American College of Trust and Estate Counsel (ACTEC). Mr. Krooks may be reached at (914-684-2100) or by visiting the firm’s website at www.littmankrooks.com.