Special Needs, Supplemental Needs & Settlement Preservation Trusts
Why does the trust need a corporate trustee? The purpose of these types of trusts is to improve the quality of an individual’s life while maintaining eligibility for public benefits. The trustee must understand public benefits programs and how trust distributions may affect eligibility. Incorrect administration may cause the loss of benefits. A corporate trustee has the knowledge and experience to properly administer the trust.
The court may require an individual trustee to post a bond and pay bond premiums from the trust. A corporate trustee’s professional liability insurance generally fulfills the bond requirement allowing the court to waive the bond requirement saving this expense.
If the trust is court supervised, the trustee must file annual accountings with the court. The corporate trustee will manage and file accountings, and make court appearances. Certain trusts require the filing of annual account with the Minnesota Department of Human Services.
Who will we work with?
Each trust is assigned a dedicated Relationship Manager who will be the primary point of contact. Each Relationship Manager works together with an assistant and Portfolio Manager, who monitors and managers investments.
How long will it take to fund the trust?
Trust funding could take a few weeks or a few months depending on how the trust is being funded and whether the trust needs court approval prior to funding.
What types of items can the trust pay for?
Trust distributions will depend on the type of trust, the trust language, and the public benefits received by the beneficiary. Some examples of possible distributions include: medical equipment, therapy, a vehicle, vehicle insurance and maintenance, medical expenses not covered by benefits, taxes, legal fees, tuition, books and tutoring, some types of electronics, some types of utilities, travel and entertainment.
Can the trust be used to pay for food and housing?
If the trust beneficiary is on Supplemental Security Income (SSI), then the trust cannot distribute money for food and housing. These restrictions are due to federal laws. If the Trustee were to make such payments, those expenditures would be treated as “income” to the trust beneficiary and cause a reduction in the beneficiary’s SSI benefits.
What is the distribution process?
Distribution requests with supporting documentation showing the cost must be submitted in writing (most often via email) to the Relationship Manager. Once a week, the Relationship Manager meets with the Trust Administrative Committee which is made up of senior managers to discuss distribution requests. The committee then approves or denies the request. The committee may ask for additional information before making a final decision. Once the request is approved, distributions are generally processed within two business days. The distribution is either made directly to the third party vendor or service provider (this is the preferred method), or to a beneficiary’s parent, guardian, or representative to pay for the approved item or service. Depending on the type of trust, the trustee may be prohibited from paying the beneficiary directly, as this may jeopardize eligibility for public benefits.
Is the distribution process different for very large distribution requests?
On occasion, there may need to be court approval for a particularly large or unusual distribution request. For instance, if there is a need to purchase a vehicle for the beneficiary, the Trustee may seek court approval. Also, if there is a request to purchase a home or fund a home remodeling project, court approval may be necessary. Court approvals can take weeks to months to obtain.
Do I need to keep receipts?
The trust may reimburse for items or services purchased that qualify as permissible distributions from the trust. However, you must receive approval from the Relationship Manager for the distribution prior to making the purchase. In order to receive reimbursement, you must save and submit receipts to the Relationship Manager. Again, the preference is to pay direct from the trust rather than reimburse.
If I receive a distribution from the trust, will I need to pay income taxes on the money I receive?
Depending on what type of trust is established for you, it will likely be treated as a Grantor Trust or a Qualified Disability Trust for tax purposes. If you have questions about the trust tax consequences, you should consult with your attorney and CPA as the trust is being drafted. Each year, you will receive a tax reporting document from the trust to report on your individual income tax return.
What does “sole benefit” mean and why does that matter?
- Both state and federal laws require that funds held in a trust for the benefit of a disabled person be used for the “sole benefit” of the disabled beneficiary. Depending on the circumstances, the trust may pay the travel expenses for a companion, such a parent, of a disabled trust beneficiary.
- Also, typically the trust assets are not available for the beneficiary to make gifts to other friends or family members. Such distributions would violate the sole benefit rule. Therefore, a request to make holiday or birthday gifts to children or grandchildren are typically not approved.
What are the fees?
Trust Point charges an annual fee based on a percentage of the value of the trust. The fee is on a tiered schedule. Fees are deducted monthly. Therefore 1/12 of the annual fee is deducted each month. For example, if the trust value is $1 million, the annual fee is 1.25% ($12,500). The monthly fee is $1,041. Additional fees apply for services such as annual fiduciary tax preparation and filing, asset administration and project management for real estate or other business interests.
What services are included in the fee?
The fee includes all services associated with trust administration, including trust accounting, investment management, bill payment, budgeting, tax management, reporting to the court, and, if necessary, reporting to the Minnesota Department of Human Services.
Can the attorney who drafted and established the trust continue to represent me?
If the trust beneficiary and the beneficiary’s family worked with a particular attorney to establish a trust, they may want to continue to seek legal advice from the same attorney during the administration of the trust. We recommend clients discuss this topic with their attorney and the options they have for ongoing legal representations. Any decisions should be based on a detailed discussion with the attorney and be documented in a written agreement that is shared with the Trustee.
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