A special needs trust is a savings mechanism that benefits a person with special needs. This type of trust allows families to save money for the trust beneficiary, or the person with special needs, without endangering their eligibility for certain means-tested public benefits programs, like Medicaid. A person with special needs can use funds in a special needs trust to assist with education, transportation, housing, medical devices, and more.
When you establish a trust, you must appoint a trustee to oversee the trust, manage its funds, and carry out its terms. Most of the time, the parents of a child with special needs will act as the trustee(s) during their lifetime. However, parents should appoint a successor trustee to oversee and manage the trust after they have passed away.
Trustee Duties
Understanding the duties of a trustee of a special needs trust is crucial to choosing a trustee. Perhaps most importantly, a trustee has fiduciary duties to administer and manage the trust assets solely for the beneficiary’s benefit. These duties include a duty of care to manage trust assets responsibly, a duty of prudence to safeguard against risk and invest trust assets for growth, and a duty of loyalty to always act in the beneficiary’s best interests. Ultimately, a trustee must act ethically to avoid any self-dealing. Prohibited self-dealing activities include commingling trust assets with personal assets and borrowing or using trust funds to benefit themselves.
Trustees also have more specific duties with respect to the trust. For instance, they must issue an annual accounting of trust assets and report trust distributions to government entities as needed. Trustees must decide whether to disburse trust funds for different purposes as requested. Trustees also must file tax returns and pay taxes, if necessary. Finally, trustees may need to obtain professional services to assist with their duties, such as accountants or investment advisors.
Given the importance of these duties and the potential to access a significant amount of money, taking the time to choose a qualified, capable, and highly ethical trustee is essential. In many cases, there is little or no court oversight of a special needs trust, leaving it vulnerable to dishonest persons. As a result, taking the time to ensure a potential trustee is both suitable and able to handle these duties is key.
Types of Trustees
A trustee for a special needs trust can be an individual, such as a close family member or trusted family friend. However, a trustee can also be an entity, such as a financial institution, such as a bank or trust company. A family member or advisor may still be involved with the entity to provide information about the person with special needs. Still, they would have no legal authority over the trust.
More than one person can serve as trustee. Co-trustees can make decisions together about managing the trust assets and deciding whether to spend those assets to meet the beneficiary’s particular needs.
Frequently Asked Questions
How often should a special needs trust be reviewed or updated?
A special needs trust isn’t a “set it and forget it” document. Families should revisit the trust whenever there is a major life change—such as a new diagnosis, a shift in benefits eligibility, a change in caregivers, or significant financial events. Even without major changes, reviewing the trust every few years helps ensure that the trustee’s powers, investment strategy, and distribution standards continue to align with the beneficiary’s evolving needs and current laws. Part of that review also involves considering whether the named successor trustee is appropriate.
What qualities should families look for when choosing a successor trustee?
Beyond financial competence and ethical judgment, a strong successor trustee should be organized, communicative, and willing to collaborate with the beneficiary’s support network. It’s also helpful if they understand (or are willing to learn about) disability‑related services, public benefits rules, and the beneficiary’s daily routines. A successor trustee isn’t required to be a family member—what matters most is reliability, impartiality, and the ability to manage complex responsibilities over the long term.
Can a trustee be compensated for their work, and how is compensation determined?
Yes. Trustees—whether individuals or financial entities—are typically entitled to reasonable compensation for the time and expertise required to manage the trust. Compensation is typically outlined in the trust document. Paying a trustee is not only permissible but often advisable, as it helps ensure consistent, professional administration and reduces the risk of burnout for family members serving in the role.
Contact Us Today to Learn More About Our Legal Services
Rubin Law is the only Illinois law firm to dedicate itself exclusively to providing compassionate legal services for children and adults with special needs. We offer unique legal and future planning techniques to meet your family’s individual needs.
Call us today at 866-TO-RUBIN or email us at email@rubinlaw.com to learn more about the services we can offer you and your family.