Special needs trusts (also known as “supplemental needs” trusts) allow a disabled beneficiary to receive gifts, lawsuit settlements, or other funds and yet not lose his or her eligibility for certain government programs. Such trusts are drafted so that the funds will not be considered to belong to the beneficiary in determining eligibility for public benefits.

Special needs trusts are designed not to provide basic support, but instead to pay for comforts and luxuries that could not be paid for by public assistance funds. These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life. Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (such a specially equipped vans), training and education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive electronic equipment and appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses.

In order to maintain eligibility for needs-based government programs, a special needs trust must prohibit the beneficiary from having any control over the assets in the trust — the trustee must have full discretion to distribute the trust funds for the benefit of the person with special needs without interference. As a result, trustees often receive requests from the beneficiary for distributions from the trust for goods or services wanted by the beneficiary. These distribution requests must be evaluated by the trustee, who must arrange for payment directly with the provider of goods or services requested. Trustees often face requests from trust beneficiaries for the trust to pay for something that the trustee does not personally feel good about, like cigarettes, liquor or pornography.

A recent question concerning trust distributions addressed to the Academy of Special Needs Planners (ASNP) members-only Listserv generated a great deal of discussion. An ASNP member asked other ASNP members who served as trustees of special needs trusts to identify unusual distribution requests received from beneficiaries of the trusts. The responses were enlightening. Following is a list of the most unusual distribution requests received by trustees of special needs trusts:

  • Money to purchase a pot farm for medical marijuana.
  • Money for a vaporizer (i.e. bong) to facilitate the beneficiary’s medical mariuana prescription.
  • Money to buy a Nascar car and racing team.
  • Money to hire a prostitute. (Denied)
  • Distributions requested to purchase a used forklift with trust funds so parent could hoist her quadriplegic adult son (who was the beneficiary) into her split level home via the deck when he came to visit.
  • Money for gambling in Reno or Las Vegas casinos (Many trustees said that they refused money for gambling, but approved distributions for the hotel stay, a show, and travel costs.)
  • A male beneficiary wanted to become an “Avon Lady” (his words, not mine). (The trustee purchased a starter kit for him to do so, and he is enjoying it)
  • One beneficiary kept asking to spend TONS of money on blueray CDs and games to add to his extensive collection of games and movies. That then lead to an inventory and increasing the amount insured as contents on his renter’s insurance.
  • One mom requested a trustee to purchase a tread mill for her son, the trust  beneficiary. Her son used a wheelchair due to his physical challenges.
  • Brothers wanted to travel from out of state to take their disabled brother (the beneficiary) to Pistons games. (The trustee refused to pay for the entire cost of airline tickets, car rental, spouses travel, fee for luggage, etc., but agreed to pay for both tickets, and mileage to and from the brothers home to the game and back.)
  • Wedding license and engagement and wedding rings. (The trustee paid for only a portion of the license and rings. Honeymoon, same result. Birth control, same result.)
  • Trustee approved distributions to purchase a part ownership in a Car Wash that is owned and run by the beneficiary’s father, and his son (beneficiary) works there part-time.
  • On-line dating services.
  • Saltwater fish tank for relaxation therapy.
  • Money for a hyperbaric chamber therapy for a young adult beneficiary with a spinal cord injury. The cost was tens of thousands of dollars and it pretty much exhausted the trust.
  • Money for drugs and alcohol. (The trustee refused to pay for any illegal activities.)
  • Money for breast reduction surgery to address back pain from which the beneficiary suffered. (The trustee felt the request was appropriate and allowed the disbursement.)
  • Money for the purchase of a horse for therapy. (Approved)
  • A beneficiary of an SNT had a problem keeping his hands to himself. His family requested that the trustee purchase life jackets for the women to protect their breasts from his groping hands. (Approved)