Why a Special Needs Trust is Just the Start


Guest Writer: Brian J. Cotroneo, CFA, CFP, ChSNC with Moors & Cabot

Congratulations, you’ve done it!  You’ve worked with an attorney to create your Special Needs Trust.  The documents have been signed, the trust has been executed; now it’s time to sit back, relax, and let your concerns about special needs planning fade away.  

Except, not really.  As a financial advisor and special needs consultant, I endlessly preach the importance of Special Needs Trusts.  However, SNTs are like commencement ceremonies – they signify the completion of something important but also the beginning of something much bigger.  Creating a trust is a huge step in the right direction, but a long path still lies ahead: the rest of the planning process.

Afterall the nature of trusts is to hold resources on behalf of a beneficiary.  So how many resources do we need?  When do we need them?  What resources are we holding? Who is managing the resources?  These are all very important questions related to but not determined as part of the trust creation process.

How Many Resources Do We Need?

Determining the level of resources required in a special needs trust is (in this author’s opinion) the most important step in special needs planning because it has a ripple effect on almost every other part of the process.  Done properly, it requires the following steps:

  1. Lifetime Cost of Care Estimation: determine all expenses required to provide the desired quality of life for the individual with special needs – broken down by year.
  2. Estimate External Funding Support – government benefits, educational grants, non-profit support, etc.
  3. Calculate the Funding Gap – the difference between expenses and outside funding.

The takeaway from the third step – the Funding Gap – is the amount of assets that need to work their way into the Special Needs Trust over time.  

When Do We Need Them?

This is a tricky question because the answer is always “it depends”.  Most special needs trusts are not fully funded when they are created.  This is a function of practicality; most SNTs are created when the beneficiary is young and parents are both funding and providing care.  There is no reason to place large sums in the trust under these circumstances.

This changes when an individual reaches 18.  At that age the deeming rules surrounding SSI & Medicaid no longer apply.  The individual may qualify for government benefits, but only if they aren’t receiving support or gifts in an improper manner.  At this point SNTs become invaluable because they can do what the individual can’t: hold title to financial resources for the individual’s benefit.

An additional scenario is one no one likes to talk about, the unlikely passing of parents & caregivers.  In this case assets need to flow into the trust immediately after the passing so that payment for services is not compromised.  This makes beneficiary designations and living trusts incredibly important.

If the primary strategy you are using to build assets for your special needs trust is an insurance policy, then at the very least the trust should be named as beneficiary of the policy.  This will help to ensure that if something unthinkable happens, the benefit will flow immediately to the trust and not the individual, disqualifying them for benefits.

What Resources Are We Holding?

There is no one solution to funding a special needs trust – a properly funded trust requires a variety of investment options to be balanced, diversified, and not unduly burdensome on the grantors.  Put more plainly: it will require a combination of savings, investments, insurance, and inheritance to properly fund the trust.

Unfortunately, there is also no one solution for how to combine those instruments to match the needs of your child.  The appropriate combination will be based on your age, risk tolerance, savings capacity, the lifestyle for which you are planning, and other factors.  We strongly recommend working with a Certified Financial Planner (CFP) to determine the appropriate asset mix to accomplish your objectives.

Who is Managing the Resources?

When you created your special needs trust, you likely assigned yourself or a trusted relative as the trustee – the individual with control.  This job comes with numerous responsibilities and decisions that must be made to efficiently accomplish the trust’s objective.  One of the most impactful decisions is who will manage the trust assets, now and in the future.  

In some cases, the trustee manages the assets personally.  We do not recommend this.  However confident, amateurs who don’t deal with complicated investments daily typically lack the knowledge, tools, and time to do the job properly.  In our experience, beneficiaries are best served by employing a fiduciary investment advisor with experience managing special needs trusts.


Planning for an individual with special needs means planning for a lifetime of care.  You’ve already completed the first step by establishing your special needs trust.  Don’t lose momentum – make sure you continue the process to set your children (and yourself) up for long-term success by contacting a Chartered Special Needs Consultant to continue planning today!