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March 2008 - Vol. 2, Result 6

Introduction

Young girl with hands on cheekSometimes it is difficult to effigy out what expenditures are appropriate from a Special Needs Trust. Confusion may arise considering of differences in state law, trust size, historic period or condition of the beneficiary, terms of the trust itself, or whatsoever number of other variables. To compound the problem, there has been piddling directly guidance from the courts, and the legal literature is far from extensive.

The Range of Choices.

A Special Needs Trust might have been created to handle gain from a personal injury settlement or an inheritance left directly to an private with a disability. Information technology might be designed to protect eligibility for Supplemental Security Income (SSI), Medicaid or other public benefits programs — or for a number of programs (ordinarily including those 2) at the aforementioned fourth dimension. Common questions about use of trust coin revolve often revolve effectually travel and entertainment, transportation and housing — but all manner of other expenditures crop up equally an consequence from fourth dimension to time.

One time, a mother acting every bit trustee might wonder nearly her ability to pay another family member for personal care not covered past Medicaid. In the next, a corporate trustee might exist willing to pay for a trip to Disney World, but not know how to encompass the costs or whether to pay for other family unit members who travel with the trust beneficiary. In yet another, the father who established the trust might chafe at the proffer that he should non apply money he contributed to the trust to pay for improvements on the family unit home.

Where to Wait for Answers.

The first advice to a trustee is usually to expect at the trust document itself. It may exist fine that state and federal police force permit a item expenditure, but if the trust does non and then the trustee cannot take advantage of the regime'southward flexibility. Sometimes in that location is nothing to prohibit a proposed expenditure in public benefits constabulary or the trust document, but that withal might non hateful that the buy is appropriate — it might be imprudent considering the circumstances, or a violation of general trust administration principles.

All that said, the very purpose of Special Needs Trusts is usually to provide extra, or supplemental, items to the beneficiary — the things that the organisation, family and other sources cannot or will not provide. One of the very few court cases addressing this concept is a 2004 Minnesota Court of Appeals case, In re: The Irrevocable Supplemental Needs Trust of Collins.

Mr. Collins had been appointed trustee of a Special Needs Trust for the do good of his teenage daughter. Over the form of 5 years, he used trust income and assets to pay for a number of items that later were challenged in courtroom. A local judge ordered Mr. Collins to repay a little more than $2,000 of allegedly improper expenditures.

What had Mr. Collins paid for with trust funds that got him in trouble? Among other things, he had purchased a snowmobile for her when she was 13, and Britney Spears concert tickets for her a year later. The Judge reviewing his bookkeeping decided that some of those expenditures were inappropriate for a young beneficiary, and that was why Mr. Collins was ordered to return the funds from his own coin.

The Courtroom of Appeals Reviews the Bookkeeping.

Mr. Collins appealed the guild directing him to return funds, and the state Court of Appeals (one footstep beneath the state Supreme Court in Minnesota) agreed with him. The proper approach, ruled the appellate court, was not to second-gauge the trustee as to each expenditure, merely to determine whether the trustee was properly exercising his discretion. Since the whole point of a Special Needs Trust (or, as the trust was called in this example, a "Supplemental Needs" Trust) is to provide for actress benefits that are not otherwise available, the trial judge hither should have presumed that a trustee/father knows all-time whether his daughter is mature plenty to ride a snowmobile or attend a Britney Spears concert.

The Minnesota case gives some insight into how judges — at least appellate judges — view Special Needs Trust expenditures, but it does non provide much assistance. That is partly because the decision was "unreported." That means that the judges decided that information technology should non exist made available to cite equally precedent. Even if it had been reported, it might not exist very useful outside of Minnesota.

Yet, the Collins example tin give us some assistance in determining whether a given expenditure should exist canonical from a Special Needs Trust. Amidst the items to consider in a given example:

i. Is the expenditure permitted by the trust terms? Is it prohibited by Medicaid or Social Security regulations?

2. Does the expenditure clearly benefit the trust'south beneficiary? Does it also benefit others, such every bit family members? If it benefits the trustee (as, for case, a home improvement that clearly aids the beneficiary merely also increases the value of the habitation owned by a parent/trustee), it should be scrutinized much more closely, and may non be permissible in all circumstances.

three. Is there enough money in the trust to make the proposed payment without seriously affecting the ability to provide other benefits in coming years? Not every expenditure that reduces future benefits is forbidden, just the larger the expenditure (in relation to the trust's size), the harder it is to justify.

4. Is the proposed expenditure related to the purpose for which the trust was established? In other words, if the trust came from a personal injury settlement it will ordinarily be easier to approve expenditures for therapy or adaptive equipment related to the injury for which the settlement was obtained.

five. Are there other sources of funds? If public benefits are available to provide the same items, the money ordinarily should not come from the trust. Only if the public benefits are so express that the quality of the items will suffer, or if information technology takes an extremely long time for equipment or services to go to the beneficiary, the trust might still be available to make the buy more quickly or to buy better supplies or equipment. Where family unit resources are bachelor, information technology might be better to save trust funds — specially if the beneficiary is a pocket-sized, and parents take a full general obligation of back up.

There volition, of course, exist other considerations in each case. We practise non mean to requite an encyclopedic list here, and then much every bit to suggest that decisions about expenditures can exist very difficult. It is not enough for the trustee to really, actually desire to make the expenditure, or to be completely convinced it is advisable — it is of import to consider the proposal from all sides, admitting that there may be proficient reasons non to proceed, also. The key is that the trustee must act reasonably, remain free from self-interest or bias, and above all, be prudent.

How Does a Trustee Act Prudently?

The best way to assure that proper decisions are made, and to minimize the possibility of later on difficulties, is to seek contained advice from a qualified legal skillful. While many lawyers may insist that they know how to draft Special Needs Trusts, not all of them take experience dealing with land and federal agency treatment of expenditures.

Sometimes it may be appropriate to consider the options and risks, to make an expenditure and report information technology to the advisable government bureau and wait for a response. Sometimes information technology may be amend to seek the approving of the courtroom system, giving notice to authorities agencies as advisable and asking for a determination of the validity of the proposed expenditure in advance. The Special Needs Brotherhood advisor you consult will be able to give you guidance with expenditures, accounting requirements and authorities benefits.

About the Writer

Robert B. Fleming, CELA practices police force in Tucson, Arizona. He is the writer of The Elder Constabulary Reply Book (with his co-author and swain Special Needs Brotherhood member Lisa Davis from Connecticut) and Alive and Kicking: Legal Advice for Boomers. His police force firm, Fleming & Curti, PLC, provides one of the leading cyberspace resources on elderberry law and special needs.