The Importance of a Special Needs Trust

 In Special Needs Trust

Why create a Special Needs Trust?

The advantages gained by the establishment of Special Needs Trusts (SNT’s) for the benefit of significantly injured minors or incapacitated adults have proven to be very important with respect to the beneficiaries’ well-being and quality of life.  By creating an SNT, funds received through personal injury litigation are eliminated from consideration in deciding the injured person’s eligibility for needs-based benefit programs such as Supplemental Security Income (“SSI”) and Medi-Cal (“Medicaid” in states outside of California).   By combining an SNT with needs-based benefit programs, the quality of life of the individual who is disabled can be improved beyond what could be afforded by either one of these sources alone.  Applicants who may be considered candidates for an SNT must be disabled and under the age of sixty-five (65).

An SNT is an important and flexible agreement authorized by federal law and companion state laws which allows for continuation of needs-based benefits following:

1) a significant recovery in personal injury litigation or
2) a transfer of assets through inheritance or gifting.


special needs trust advisor in California

Administration of a Special Needs Trust

Every family of a substantially injured child or adult faces numerous problems regarding the care of their disabled family member.  The duties imposed on the family may include “prudently” investing the funds, determining what expenditures should be made, making the expenditures, keeping the financial records regarding the investments and expenditures, determining the tax liabilities, filing tax returns, and preserving the injured party’s needs-based benefits.

Most often the injured party is better served when the family’s efforts are focused on providing care, without the distraction of complex financial and legal concerns.  For these reasons the family of a substantially injured child or incapacitated adult should consider the services of organizations which specialize in administering a special needs trust.

This SNT program combines the administrative services of Ibar with corporate trustee/financial services.  This simple but effective program involving a corporate trustee and a Trust Advisory Committee (TAC) has proven to be very successful with regard to:

  • Fulfillment of care needs
  • Protection of needs-based benefit eligibility
  • Conservation of trust funds
  • Compliance with tax laws
  • Adherence to court orders

What is taken into consideration when making trust expenditures from a special needs trust?

The court expects each member of the Trust Advisory Committee (TAC) to exercise prudent judgment regarding all authorizations for payment.  Before submitting an authorization to the trustee each trust advisory member should determine if the:

  1. Expenditure will directly help the injured party;
  2. Amount of expenditure is reasonable in relation to the benefit or enjoyment it will provide the injured party;
  3. Expenditure complies with the SNT;
  4. Expenditure complies with court-ordered guidelines;
  5. Needs-based benefits from the government do not provide for the same item or service and/or have been previously denied;
  6. Family or other entity, such as medical insurance, is legally required to provide for the goods or services for which the disbursement is directed;
  7. Expenditure does not disqualify the injured party from needs-based benefits;
  8. Expenditure is not so great that the SNT cannot meet ongoing or projected future needs.

If the answer to all of those questions is yes, then the expenditure is appropriate.  An important role performed by Ibar is to assist the other members of the TAC in determining if the proposed disbursement meets the guidelines stated above. For the expert advisory services necessary for proper administration of the SNT, please get in touch with Ibar, California’s leading special needs trust company. You can reach us at 626-570-4888 for more information.

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