Can a Special Needs Trust Pay a Special Needs Planner?

Generally, a trustee of a special needs trust can use trust funds to pay a special needs planner for their advice, provided the advice directly benefits the trust beneficiary and aligns with the trust’s purpose. The overarching principle is that the trustee has a fiduciary duty to manage the trust in the best interest of the beneficiary.

Key Considerations

• Benefit to the Beneficiary: The primary factor in determining the permissibility of such a payment is whether the planning advice directly benefits the individual with special needs. This advice should help ensure the beneficiary’s continued eligibility for government benefits (like Medicaid or Supplemental Security Income) and enhance their quality of life.
• Reasonableness of Fees: The fees charged by the special needs planner must be reasonable and customary for the services provided. Trustees have an obligation to avoid excessive or unnecessary expenditures.
• Trust Document Provisions: The trust document itself may contain specific language regarding the types of expenses the trustee is authorized to incur. While most special needs trusts are drafted broadly enough to allow for professional advice that benefits the beneficiary, it’s always important to review the specific terms of the trust.
• Prudent Investor Rule: Trustees are generally held to a “prudent investor” standard, meaning they must act with the care, skill, and caution that a prudent person would exercise in managing their own affairs. Seeking professional advice from a qualified special needs planner can often be considered a prudent action, especially given the complex rules surrounding government benefits and special needs planning.
• Avoiding Disqualification of Benefits: One of the main goals of a special needs trust is to supplement, not replace, government benefits. A special needs planner can help ensure that any distributions from the trust, including payments for their own services, do not jeopardize the beneficiary's eligibility for these crucial benefits.
• Documentation: The trustee should meticulously document all payments made from the trust, including those to a special needs planner. This documentation should clearly show the purpose of the payment and how it benefits the beneficiary.

When it Might Be Questionable

• Personal Benefit to Trustee: If the advice primarily benefits the trustee rather than the beneficiary, or if the fees are exorbitant, such payments could be challenged.
• Unrelated Services: Payments for services unrelated to the beneficiary’s special needs or the administration of the trust would likely be inappropriate.

It is highly advisable for a trustee of a special needs trust to consult with an attorney specializing in special needs law to ensure that any expenditures, including those for planning advice, comply with legal requirements and the specific terms of the trust, and do not negatively impact the beneficiary's eligibility for public benefits.