The Annual Reporting Requirements for Special Needs Trusts

Special Needs Trusts are important estate planning tools for families and individuals with disabilities. However, these types of trusts have certain reporting requirements that must be met in order for the beneficiary to maintain their eligibility for public benefits. Learn more about the annual reporting requirements for SNTs and when to seek legal help for your situation.

What Are the Two Different Types of Special Needs Trusts?

A first-party special needs trust is a trust established by the beneficiary of the trust with their own assets. This type of trust allows the beneficiary to create their own trust and place their own assets into the trust while still retaining eligibility for government benefits. This type of trust is typically established for individuals who become disabled after an accident or who have received a lump sum of money from a lawsuit or inheritance.

A third-party special needs trust is a trust established by a friend or family member of the beneficiary. This type of trust typically uses the assets of the donor rather than the beneficiary and allows the donor to provide financial support for the beneficiary while still allowing them to retain eligibility for government benefits. These types of trusts are typically used to provide financial support for the beneficiary without adversely impacting their eligibility for government benefits.

When and Why Do I Need to Report an SNT to Public Agencies?

When an individual applies for Supplemental Security Income and other public benefits such as health care through Medi-Cal, that person agrees to report any changes to their financial situation to these agencies. This is because most public benefits are needs-based and take into consideration the recipient’s income. Significant changes or increases in the recipient’s financial situation may result in a reduction of benefits or may disqualify them from receiving any benefits at all.

It is understood that a beneficiary has a degree of financial interest in the trust, even if they do not access the trust funds or assets directly. For that reason, making timely reports to the appropriate agencies is key to avoiding any negative impacts on the beneficiary’s eligibility for benefits. In many cases, changes to the SNT should be reported no later than ten days after the end of the month in which the change took place. However, it is important to check the reporting deadlines of the specific agencies the beneficiary receives benefits from, as some agencies may have shorter deadlines. If the beneficiary is receiving housing assistance, the housing agency may require a report of the trust and the trust funds at the time the beneficiary files their annual recertification.

Who Should Make the SNT Report to the Government?

Certain trusts may be written to include details about who should be responsible for making the necessary reports to any applicable public agencies. In general, the report may be done by the beneficiary of the SNT, their trustee, or a guardian.

When making the report, it is best to include the beneficiary’s social security number and their Medi-Cal number if the beneficiary receives healthcare benefits. It may be a good idea to retain a copy of the letter and the documents you send to the government, as it may be useful in case you need to show proof that you did complete the report as required.

What Exactly Needs to Be Reported to the Government?

In general, the beneficiary must provide a copy of their special needs trust along with an inventory of initial assets held by the trust. The report should be made to all agencies that are providing the beneficiary with a needs-based benefit.

It is crucial for the trustee of an SNT to be extremely organized and able to maintain clear, detailed records of all aspects of the trust, documenting how trust funds are being used. This is very important because the trustee may be required to provide this information at any point, not just to government agencies such as the SSA or Medi-Cal, but also to a court or to anyone who is assigned as a new beneficiary after the original beneficiary of the trust passes away.

What Should I Do if the Assets in the Trust Will Be Counted as Income by the Government?

The main purpose of a Special Needs Trust is to provide the means for a disabled person to enjoy a good standard of living without losing their eligibility for government benefits. However, sometimes, a beneficiary may find that their benefits may be at risk even though they have reported their SNT and taken all the required steps to stay compliant.

In general, the assets in a special needs trust should not be counted as income by public agencies; however, it is ultimately the public agency’s decision and, in many cases, beneficiaries of an SNT may be surprised to find that the government is notifying them of a potential loss or reduction in benefits due to the assets in their special needs trust. If you have been notified that you may lose your benefits after sending in your SNT report, it is crucial to act quickly and seek the help of a skilled special needs trust lawyer.

It is possible to appeal the government’s decision of cutting or eliminating your benefits, but you may only have a limited window of time to do so. For example, if your SSI benefits are at risk of being changed or canceled, you may begin an appeal process with the Social Security Administration up to 60 days after you receive an initial determination notice. Your attorney can assist you with the process of asking the SSA for reconsideration or walking you through the steps required to appeal the decision of any other public agency, such as Medi-Cal.

If you need help with any aspect of starting or managing an SNT, reach out to the legal team at the Sheela Stark Law Group, APC, by calling 909-675-1545 and requesting a free consultation to learn more about how we can help you.