Why do I need to understand the distribution standard of a special needs trust?

If you are the trustee of a special needs trust, you may quickly discover that there are many unique rules and obligations that are associated with the administration of this type of trust. It is important for trustees to fully understand when and how distributions of the trust assets should be made to the beneficiary. Failing to do so could jeopardize certain benefits received by the beneficiary.

4 Tips for Understanding Distribution Standards and Special Needs Trusts

The following are four tips for trustees to consider with regard to the distribution standard contained within the special needs trust they are administering:

  1. If the trust distribution standard does not allow the trustee to make distributions that will reduce the Social Security benefit, the trustee will not be allowed to make distributions to the beneficiary for in-kind support and maintenance—for such things as food, rent, mortgage, property taxes, insurance, electricity, heating fuel, gas, water, garbage collection, and sewage expenses.
  2. If the trust distribution standard does not allow for the payment of these expenses as in-kind support, the trustee should consult with an attorney to determine whether the trustee should be modified in order to authorize such distributions. While this may reduce Social Security benefits, in some cases the payoff might outweigh that reduction.
  3. If a beneficiary receives Section 8 housing benefits, the public housing authority could consider that amount as income and adjust the monthly rent.
  4. Even if there are government benefits, it is important for the trustee to understand when and how distributions should be made, such as for the beneficiary’s health, education, maintenance, or support.

When it comes time for you to serve as a trustee, we can provide valuable guidance. We encourage you to learn more about how we have helped other trustees by checking out our client testimonials page today.