As we have previously discussed, a special needs trust provides for the care of a beneficiary that is unable to care for themselves. It is often set up to provide for disabled people. It can also be set up to anticipate the needs of an elderly parent.

As Ohio attorney Katherine N. Barr duscusses in her article, Special needs trusts and home ownership: a trustee’s concerns, “one of the most challenging responsibilities of a trustee of a special needs trust is balancing the benefits of purchasing a handicap?modified house for a beneficiary with the financial pressures of a steadily decreasing trust balance and steadily increasing household expenses.”

To illustrate the issue, Ms Barr, a trustee of 60 special needs trusts, discusses a special needs trust she manages for a disabled adult woman named Sasha. While she has attained a level of independence as an adult, Sasha needed modifications made to the home she shares with her mother to meet her particular needs, including making physical changes to the home to create a more open floor-plan and the addition of an elevator to her bedroom. She also needed the assistance of an aide for several hours each day while her mother was away from home.

Special Needs Trusts: Balancing Costs vs. Available Funds

Unfortunately, the cost of the needed modifications and services have seriously depleted the funds available to the special needs trust, with no other assets available to help the family. In the article, Ms Barr discusses the options available to Sasha, as well as the factors trustees need to weigh in order to meet both short-term and long-term goals, such as:
  • Is the trust beneficiary receiving Supplemental Security Income (SSI)?
  • Are any payment made by the trust for costs that are considered “shelter” to the beneficiary, like the payment of gas and electricity bills? If so, does the SSI income need to be reported to the Social Security Administration, which could reduce the beneficiary’s monthly SSI benefit by up to a maximum of one?third of the Federal Benefit Rate (FBR)?
  • Is there anyone else able to pay other carrying costs for any residence owned by the trust, above and beyond the monthly utilities?
  • What are the additional costs that may incurred to meet the beneficiary’s needs, other than maintaining a residence, including costs of transportation, caretaker services or equipment purchases?

“After estimating the expenses for the residence and the beneficiary’s needs, as well as identifying the available income and assets to meet these expenses, a trustee of a crisis trust with declining balances often is faced with impossible choices,” Barr stated. One example she uses to illustrate this dilemma is the question of whether to use limited available funds to make repairs to an automobile or to repair a broken window in the home.

For more information about how she deals with these and other issues related to “critically low” special needs trusts, read Ms Barr’s article, Special needs trusts and home ownership: a trustee’s concerns.

If you need to establish a special needs trust for yourself or a loved one, contact the Family Trust Institute. We specialize in the formation and management of all types of family trusts, including both revocable and irrevocable trusts, charitable trusts, and generation-skipping transfer trusts. We can help you establish a trust custom-designed to your specific wants and needs.

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