Special Needs Trusts Often Need a Professional Trustee

Special Needs Trusts Often Need a Professional Trustee, not a Family Member- When a family sets up a special needs trust (SNT), they often assume a relative will be the best person to manage it. After all, who knows the beneficiary better? However, while personal connection matters, administering a special needs trust is a complex responsibility that involves navigating benefit eligibility rules, tax laws, investment strategies and strict reporting requirements.

A professional trustee brings the objectivity, experience and systems needed to manage the trust in the beneficiary’s best interest, while avoiding costly missteps. In many cases, appointing a professional trustee alongside a family member offers the best balance between personal care and experienced oversight.

The Role of a Trustee in a Special Needs Trust

A special needs trust is designed to preserve a beneficiary’s eligibility for means-tested public benefits, such as Supplemental Security Income (SSI) and Medicaid, while still providing for supplemental needs like transportation, education, recreation, and medical services not covered by government programs.

The trustee is legally obligated to manage and distribute funds according to the trust document and government regulations. Mistakes—such as paying for rent, giving cash to the beneficiary, or failing to keep detailed records—can result in reduced or complete loss of benefits.

The trustee must also file tax returns, monitor investments, communicate with care providers and adapt the trust’s use as the beneficiary’s needs change. This is not a one-time duty—it’s a long-term commitment, often lasting the beneficiary's lifetime.

Why Family Members May Not Be the Best Fit

While family members may be deeply committed to the beneficiary’s well-being, they are not always equipped to handle a special needs trust's administrative and legal responsibilities. The emotional stress of caregiving and the pressure of trust administration can lead to burnout or mistakes.

Conflicts of interest may also arise. Disagreements between siblings, caregivers, or co-trustees can create tension or lead to disputes over how funds are spent. Even well-meaning relatives may make decisions that unintentionally disqualify the beneficiary from receiving vital support.

Family members often lack experience with trust management, government benefits and the financial tools necessary to grow and preserve trust assets. Professional trustees are trained to meet these demands and provide consistent, unbiased oversight.

Special Needs Trusts Often Need a Professional Trustee, not a Family Member

Benefits of a Professional Trustee

A professional trustee—whether a corporate fiduciary, bank, or attorney—offers several advantages. They are neutral, knowledgeable and focused on compliance. Their systems are designed to track distributions, file taxes and coordinate with public agencies and service providers.

They also offer continuity. A family member may age, become ill, or be unable to continue serving as trustee, especially if the trust must last for decades. A professional trustee ensures that the administration will continue smoothly regardless of family life changes.

Some families choose a hybrid approach by naming a family member as a co-trustee or trust protector. This allows the family to provide input and maintain a relationship with the beneficiary, while the professional trustee handles technical and administrative responsibilities.

Making the Right Choice

Deciding who will manage a special needs trust should not be rushed. Consider the complexity of the beneficiary’s needs, the size of the trust and the family’s long-term capacity to manage those responsibilities.

An elder law or special needs planning attorney can help you weigh your options and structure the trust to meet both legal standards and family expectations. The goal is to preserve benefits, maintain financial security and support the beneficiary in living independently and meaningfully.

Key Takeaways

• Trustees must follow strict guidelines: Misuse of funds can jeopardize eligibility for Medicaid and SSI.
• Family members may lack the necessary experience: Managing a trust requires knowledge of tax law, benefit rules and recordkeeping.
• Professional trustees ensure compliance and consistency: Experience and knowledge reduce risk and support continuity of care.
• Hybrid approaches offer balance: Co-trustees or trust protectors can combine family insight with professional oversight.
• Legal guidance helps you choose wisely: An attorney can help evaluate trustee options and build a trust that supports the beneficiary’s long-term needs.

Schedule your phone consultation: THE LAW OFFICES OF CLAUDE S. SMITH, III

Special Needs Trusts Often Need a Professional Trustee, not a Family Member

Reference: Special Needs Alliance (October 2012) "When a Family Member Serves as Trustee – Fair and Honest Is Not Enough"