The Rights of Special Need Trust Beneficiaries






Let’s say a rich uncle died and left you a hefty inheritance. Instead of receiving one lump sum, you learn that the money is to be held in a trust and you are to be given $5,000 a month with the money being used in a specific way. You quickly google trust and trust fund and learn that a trust is a legal agreement outlining how financial and other assets, held in a trust fund, will be managed and distributed on behalf of another person. You also learn that the trust will be administered by a third-party and you are the beneficiary of the trust.

Legal Rights

Under the law, a beneficiary of a trust has the legal right to monitor the activities of the trust. This means they can review, usually with an attorney or financial advisor, the investments as well as all expenditures and receivables of the trust. Every trust has stipulations on how the trustee in trust must manage the trust, even outlining how much the trustee in trust should be paid. The trustee in trust is responsible to ensure that assets are invested productively.

Special Needs Trust

When a trust has been established on behalf of a person with special needs, the beneficiary may not have the intellectual ability to know if a trust is being managed well on their behalf. In this case, a special needs trust must include language that allows a family member of the person with special needs, or an independent third-party, to exercise the beneficiary’s legal right to monitor the activities of the trust.

A trust should be written with regularly scheduled audits and identify who will receive the audit reports. Typically, a trust fund is required to issue at least one annual report to beneficiaries and their representatives. This report should contain information on the total value of the trust, where funds are invested with a history of returns, and commissions paid out. If a trust does not provide at least one annual report after one full year, the beneficiary can request a court to intervene and require the trustee in trust to provide the report.

Auditing Rights

With an attorney or financial advisor, the beneficiary or a representative of the beneficiary can examine the performance of the trust. If the trust contains real estate, stocks and bonds, annuities, etc. the beneficiary would be well advised to bring in an expert with knowledge of those areas. But overall, whomever is auditing the performance of the trust fund should ensure there is a good level of diversification with funds spread across many different type of investments with different rates of return.

Thankfully laws are on the books whereby a special needs trust beneficiary, with the aid of someone on their behalf, has the legal right to monitor their trust.

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