6 Common Mistakes to Avoid When Creating a Special Needs Trust

Creating a special needs trust is a critical step for families that are looking to protect the financial well-being of a loved one with disabilities and ensure that the person’s needs will be provided for. These trusts are designed to provide supplemental support without jeopardizing the beneficiary’s eligibility for government benefits like Medicaid or Supplemental Security Income (SSI). However, the process of establishing a special needs trust is fraught with complexities, and missteps can have significant repercussions. 

By being aware of the common pitfalls that may arise and working with an attorney who has experience in estate planning involving family members with special needs, a family can take steps to ensure that their loved one’s financial security will be protected. Some mistakes to watch out for include:

Overlooking the Impact on Government Benefits

One of the primary purposes of a special needs trust is to preserve the beneficiary’s eligibility for public assistance programs. The trust must be structured correctly to ensure it does not count as an asset that could disqualify the beneficiary from these benefits. Failure to tailor the trust to comply with specific requirements of government programs could lead to significant financial issues. By working with a knowledgeable attorney who understands the intricacies of federal and state laws, a family can ensure that a special needs trust meets all necessary criteria.

Choosing the Wrong Type of Trust

There are several different types of special needs trusts, each with its specific purposes and benefits. Selecting the wrong type can lead to unintended consequences. For example, third-party special needs trusts and first-party special needs trusts have different rules and implications for the beneficiary’s assets. An experienced estate planning lawyer can help determine the most appropriate type of trust that will fit a family’s situation, considering the source of the funds and the beneficiary’s needs.

Failing to Choose the Right Trustee

The trustee plays a crucial role in managing the trust’s assets and making distributions on behalf of the beneficiary. Choosing an inappropriate trustee can jeopardize the trust’s effectiveness and the beneficiary’s well-being. A family will want to avoid selecting a trustee without considering their ability to manage the trust’s financial and administrative responsibilities. A trustee who is trustworthy, knowledgeable, and capable of advocating for the beneficiary’s best interests can ensure that assets will be managed correctly and that the beneficiary’s best interests will be protected.

Not Providing Detailed Instructions

A special needs trust should include specific instructions on how the funds should be used to benefit the beneficiary without affecting their eligibility for government benefits. Leaving too much discretion to the trustee without clear guidelines could result in inadvertent violations that could jeopardize the beneficiary’s ability to receive public aid. Detailed instructions should be provided in the trust document regarding the use of funds, while also considering the beneficiary’s future needs and lifestyle.

Neglecting to Update the Trust

A person’s life circumstances may change, and laws may be updated. A special needs trust should reflect these changes to ensure that it will remain effective and relevant. It is important to periodically review the trust with an attorney to ensure it aligns with the current laws and meets the beneficiary’s evolving needs.

Overlooking the Coordination With Other Estate Planning Documents

A special needs trust should be integrated with a family’s broader estate plan to avoid conflicts and ensure cohesive management of assets. Inconsistencies between the trust and other estate planning documents, such as wills or powers of attorney, could lead to complications in the future. A family can work with an attorney to coordinate all estate planning documents, ensuring that they will work harmoniously while reflecting the family’s overall objectives and the beneficiary’s best interests.

Contact a DuPage County Special Needs Trust Lawyer

To avoid these common mistakes and ensure that a special needs trust will be set up and maintained correctly, your family can work with a Naperville special needs trust attorney at the Gierach Law Firm. Our firm is dedicated to helping families navigate the complexities of special needs estate planning. We will work to provide you with peace of mind that your loved one’s financial future is secure. Contact us at 630-228-9413 to set up a consultation and learn how we can help create an estate plan that meets your family’s unique needs.