Using Special Needs Trust Funds to Pay for a Special Needs Planner

As a Special Needs Certified Financial Planner®, I am often asked by trustees whether they have the authority to use trust assets to pay for professional planning services. The short answer is yes—but as with everything in the world of special needs planning, the "how" and "why" are just as important as the "can."

A Special Needs Trust (SNT) is a powerful tool designed to enhance a beneficiary's life without jeopardizing their eligibility for vital government programs like SSI or Medicaid. To maintain this balance, a trustee must act with extreme care. Below is a guide on how an SNT can—and should—be used to engage a special needs planner.

The Trustee’s Fiduciary Responsibility

As a trustee, you are a fiduciary. This means you have a legal and ethical obligation to manage the trust’s assets solely for the benefit of the individual with special needs. Part of that responsibility involves making "prudent" decisions.

In many cases, hiring a professional planner is the most prudent action a trustee can take. The rules surrounding government benefits are notoriously dense and constantly changing. A planner provides the specialized knowledge needed to ensure that trust distributions don't accidentally cause a loss of healthcare or income.

Secure Your Strategy: Navigating the complexities of SNT administration doesn't have to be a solo journey. Schedule a strategy session with our team to ensure your trust is performing at its peak.

When is Payment to a Planner Appropriate?

For a payment to a special needs planner to be considered a valid trust expense, it generally must meet three core criteria:

1. Direct Benefit to the Beneficiary

The advice provided must specifically improve the beneficiary's situation. This might include creating a lifetime budget to ensure funds last, identifying new programs they may be eligible for, or structuring a purchase (like a modified vehicle) so it doesn't count as a resource.

2. Reasonable and Customary Fees

Trustees must ensure that the compensation paid to a planner is in line with industry standards. High-end, "unreasonable" fees can be flagged during a court accounting or by government agencies, potentially putting the trustee at risk of a surcharge or legal challenge.

3. Alignment with Trust Provisions

Every trust document is unique. While most SNTs include broad language allowing the trustee to "seek professional advice," it is essential to review the specific text of your trust. Some documents may have specific restrictions or require prior approval for certain types of professional fees.

Professional Oversight Matters: If you aren't sure if your trust language allows for planning fees, we can help. Contact a Special Needs CFP® today for a comprehensive review of your administration plan.

The Risks of Going It Alone

One of the primary goals of an SNT is to provide "supplemental" support—the things that SSI and Medicaid don't cover. If a trustee makes an error, such as giving the beneficiary cash or paying for a "basic" expense incorrectly, the consequences can be devastating.

A special needs planner acts as a safeguard. By paying for expert advice out of the trust, the trustee is effectively buying an insurance policy against the risk of benefit disqualification. It is often much less expensive for the trust to pay for proactive advice than it is to pay a legal team to fix a benefit crisis after it happens.

Moving Forward with Confidence

Ultimately, the goal of a Special Needs Trust is to provide the highest possible quality of life for the beneficiary. Using trust funds to hire a planner who specializes in this field is an investment in that quality of life. It ensures the longevity of the assets and the continuity of care.

If you are currently serving as a trustee and feel overwhelmed by the weight of your responsibilities, remember that you don't have to manage these decisions in a vacuum. Professional guidance is a recognized and often necessary expense for the healthy maintenance of a trust.

Take the Next Step: Protect your loved one’s future by partnering with a specialist who understands the nuances of the law. Reach out to our office to learn how we can support your role as trustee.

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