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Can additional money be taken out of a special needs trust for extra living expenses?

My adult cousin is special needs and living in a home that is paid for by the special needs trust set up for her. Can she use money from the trust to purchase items that might be considered "extra", such as additional clothing and discretionary spending (christmas and birthday presents, music for herself, etc)? The trust was originally set up by our grandparents and her parents, but my brother and I are now in charge of it (she has no siblings and her parents are deceased).

Feb 29, 2012 by Parker from Oklahoma City, OK in  |  Flag
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6 votes

Hi Parker, as a financial advisor that is also the parent of a special needs child, I want to first thank you for fulfilling the trustee role for the benefit of the beneficiary. I agree with Parker that the ability to use funds for various purposes will be spelled out in the trust. Usual the purposes are written in layman’s terms, but also usually fairly ambiguous so as to provide some latitude to the trustee. For example, in my son’s trust it states “for the beneficiary’s therapy, rehabilitation, training, education, quality of life, independent living, and protection and advocacy”. As you can see, there is some leeway. For example, how do you define “quality of life”? For example, music can certainly be expected to improve one’s quality of life.

So you should seek out the terms of the trust, but remember there are only two risks to be considered: [1] you get sued by the beneficiary (including someone taking action on the beneficiary’s behalf) for filing your duty to honor the terms of the trust, and [2] you fail your accepted obligations ethically or morally. Gifts for the beneficiary would almost certainly always seem to improve the quality of life of the beneficiary, while gifts to others may cause concerns depending on the recipient. A small gift to a caretaker shouldn’t be any big deal, big a car for your child would be (unless it was a vehicle specially adapted for the special needs beneficiary and used to transport the beneficiary) … You see where I am going – anything that can be deemed in the best interest of the special needs patient should pass scrutiny even if not very specifically mentioned in the document, as there are usually enough ambiguous terms to get you by provided you can demonstrate it is in the interest of the beneficiary.

(Please be advised that this is the opinion of David Schlossberg who is not an attorney, and this personal opinion should not be construed as legal advice. Please seek legal counsel on this matter).

Comment   |  Flag   |  Mar 01, 2012 from East Dundee, IL

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Parker:

We do trust planning here (we have an in-house legal team), and I have been involved in special needs trust planning for many years. While I am not an attorney, it all comes down to the terminology and the terms of the trust. When your grandparents set it up, they had their own concept as to how the money was to be utilized for the benefit of your cousin. The Trustee's job is to take care of and dispense money from the trust based on the wishes of the Grantors (your grandparents) and within the confines of the terms of the trust. Then, open to interpretation,money can be dispensed for the benefit of the beneficiary. If you are confused, give me a call directly at (800) 358-0016 and perhaps I can help on a more personal basis.

Comment   |  Flag   |  Mar 01, 2012 from Suffern, NY

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