How Advisors Work with Trust Companies on Special Needs Trusts

Trusts
Written By May Franco

Special needs trusts are often used to organize financial resources for individuals with disabilities while considering eligibility for government benefit programs such as Supplemental Security Income (SSI) or Medicaid. Families often review these trusts when planning long-term financial support for a beneficiary with special needs.

Advisors may play an educational role in helping families understand how special needs trusts work and when they may be appropriate. However, advisors do not typically establish or administer these trusts themselves. Instead, they often work with trust companies that have the authority to set up and administer the trust.

Members Trust Company (MTC) is a trust company that may establish and administer Special Needs Trusts (SNTs) and may work with advisors whose clients could benefit from this type of trust structure.

The Educational Role of Advisors

Advisors may help families understand the purpose and structure of special needs trusts. This educational role may include explaining the general differences between trust structures and discussing how these trusts are commonly used in planning situations involving beneficiaries with disabilities.

For example, advisors may explain the distinction between first-party and third-party special needs trusts:

  • First-party special needs trusts are typically funded with assets belonging to the beneficiary

  • Third-party special needs trusts are funded with assets from family members or other sources

These structures may have different legal and administrative considerations. Advisors may provide information and assistance to help families understand these distinctions so they can evaluate available planning options.

Because advisors are not trust companies, they typically do not establish or administer special needs trusts. Instead, they may coordinate with legal professionals and trust companies when a trust structure is appropriate.

The Role of a Trust Company in Special Needs Trusts

A trust company serves as the trustee responsible for administering the trust according to the governing trust agreement. This role may include maintaining records, administering distributions, and following the terms established in the trust documentation.

Members Trust Company is a trust company that may establish and administer Special Needs Trusts. In this capacity, the trust company administers the trust according to the governing trust agreement and maintains administrative processes associated with the trust.

While advisors may help clients understand trust structures and planning considerations, the trust company performs the formal trustee role and oversees the administration of the trust.

Funding Considerations for Special Needs Trusts

Families may review different types of assets that may be used to fund a special needs trust. These assets may include:

  • Cash contributions

  • Investment assets

  • Insurance proceeds

  • Transfers from family members or estates

Advisors may provide educational information about funding considerations and may coordinate with legal professionals and trustees and work to ensure the trust structure aligns with the intended planning approach.

Proper documentation of trust funding and distributions is an important part of trust administration and may support record-keeping associated with government benefit programs.

Understanding Trust Distributions and Government Benefits

Special needs trusts may be structured with consideration for government benefit programs such as SSI or Medicaid. Families commonly review how trust distributions may interact with these programs.

Advisors may provide educational information about how special needs trusts are generally designed to support supplemental needs while considering government benefit rules. 

Understanding these considerations can help families evaluate how trust structures may fit within their broader planning goals.

Coordination Between Advisors and Trust Companies

Planning for a special needs trust may involve coordination between several professionals. Advisors may identify when a trust structure could be beneficial and help families understand the planning concepts involved.

When a trust structure is appropriate, a trust company such as Members Trust Company may establish and administer the trust according to the governing trust agreement.

This coordination allows:

  • Advisors to focus on education and planning considerations

  • Trust companies to perform the formal trustee and administrative responsibilities

Working together, advisors and trust companies can help families understand available trust structures and the processes involved in administering them.

Conclusion

Special needs trusts are often used to organize financial resources for beneficiaries with disabilities while considering government benefit programs. Advisors may help families understand the purpose and structure of these trusts and identify when they may be appropriate.

Because advisors are not trust companies, they typically do not establish or administer special needs trusts. Instead, they may coordinate with trust companies that have the authority to serve as trustee.

Members Trust Company is a trust company that may establish and administer Special Needs Trusts and may work with advisors whose clients may benefit from this type of trust structure. Through this collaboration, families can receive guidance from advisors while relying on a professional trustee to administer the trust according to its governing terms.

This material is provided for informational purposes only and does not constitute legal, tax, or investment advice. The services described are subject to applicable laws, regulations, and governing agreements. Institutions and individuals should consult their legal, tax, and financial advisors before implementing any structure or strategy.

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Trust services provided by Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency. Trust and Investment products are not NCUA/NCUSIF/FDIC insured. May lose value including the possible loss of principal. No financial institution guarantee. Not a deposit of any financial institution. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.

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