Creating a special needs trust is one of the most important steps you can take to support a loved one with disabilities. These trusts are designed to preserve eligibility for government benefits while providing additional financial support—making proper planning essential.
However, mistakes in setting up or managing a special needs trust can lead to unintended consequences. From disqualifying a beneficiary from public aid to creating legal or financial complications, small oversights can carry big risks. Here are four common pitfalls to watch out for.
1. Failing to work with experienced professionals
Special needs trusts require careful attention to legal, tax and benefit rules. Trying to set one up without guidance can lead to missteps that impact your loved one’s eligibility for programs like Medicaid or Supplemental Security Income (SSI). A qualified attorney and financial advisor can help you navigate complex rules and make sure your trust meets all requirements.
2. Not funding the trust appropriately
Even a well-drafted trust will fall short if it is not funded correctly. Some people create the trust document but never transfer assets into it. Others underestimate the costs of long-term care or living expenses. To be effective, the trust must contain enough resources to meet future needs, whether through direct funding, life insurance proceeds or planned gifts from family members.
3. Overlooking a successor trustee
Choosing a trustworthy and capable trustee is critical—but naming a successor trustee is just as important. If the original trustee becomes unable to serve, a successor must be ready to step in. Failing to plan for this transition can lead to gaps in trust management or court involvement, both of which may disrupt care and benefits.
4. Neglecting to update the trust
A special needs trust should not be a “set it and forget it” document. Life changes, including new diagnoses, changes in public benefits laws or shifts in family circumstances, may require updates. Reviewing the trust regularly helps ensure it still serves its intended purpose and reflects your loved one’s evolving needs.
Seeking legal guidance can be helpful in avoiding these pitfalls and creating a trust that truly protects your loved one’s future. A carefully crafted plan, tailored to your family’s needs, can offer long-term security and peace of mind.
