If a Trust Beneficiary Loses SSI, How Do You Close His Special Needs Trust?

When an SSI beneficiary loses his government assistance, how do you cash out his special needs trust?

If it is a first-party special needs trust (one set up to hold the beneficiary’s money), then there will be a payback to the state Medicaid agency before any money can go to beneficiary. If it is a third-party special needs trust (one set up to hold other people’s money set aside for beneficiary), then typically the trust will have provisions that describe how it can be terminated during the beneficiary’s lifetime. If the trust document is silent on this, most states have a law that says that in the event of changed circumstances, a trust can be terminated and the remaining money sent to the beneficiary. Or, you could simply continue to manage the trust and make payments on behalf of the beneficiary until the money is gone, which might be the wisest course of action, especially if the beneficiary is not financially savvy.

 

Article Last Modified: 10/19/2016

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