Whether you are a trustee of a supplemental needs trust (SNT) or a parent who created a SNT, it is good practice to have the trust reviewed periodically with your special needs planning attorney. Some questions which should be reviewed include:
- Have there been any changes in the laws which affect the SNT or government benefits?
- Do you need to make any changes to the trustees or trust advisors? Perhaps a successor trustee is no longer capable of serving due to illness or the person is no longer close with your family and you need to designate a new successor trustee. Perhaps you want to consider a corporate trustee if you have not previously designated one.
- Have the beneficiary’s care or health needs changed?
- Do you understand the tax ramifications? It is important for you to understand how the income earned in the SNT is reported. Questions you want to review are whether your trust is a “grantor trust” for income tax purposes or whether it is considered a “qualified disability trust.” Also, what are the gift tax reporting implications, if any, when a third party makes a gift to the trust?
- Is the trustee making any distributions that will cause the beneficiary to lose government benefits? Constant monitoring and oversight must be made regarding distributions from the trust.
- Are the assets designated to be distributed into the SNT as intended? Your last will and testament may not control the disposition of certain assets, such as annuities, insurance policies, and retirement plans, if you designate beneficiaries other than the SNT. Beneficiary designations on these assets should be reviewed and updated if necessary to make certain that they pass to the trust at your death, if intended.
- Can the trustee distribute trust assets to an ABLE account for the beneficiary? If so, does it make sense to have an ABLE account?
Supplemental needs trusts and the planning around them are complex. It is essential for the trusts to be reviewed periodically and for settlors, trustees and trust beneficiaries, if capable, to understand the terms in the written trust agreement. A special needs planning attorney can ensure that the trust document will meet the needs of your loved one, the person who is funding the trust and the trustee who is administering the trust.