The mechanics of the Supplemental Needs Trust:

The supplemental needs trusts are typically established as irrevocable trusts. It is our intention when creating this trust to provide for the use of family wealth as a supplemental to public source benefits. Generally, public source benefits for the disabled take into account assets that the disabled person owes or controls. When a supplemental needs trust is used to hold assets, if the beneficiary does not have demand rights, does not participate in funding the trust, and is not the trustee, the assets should not count against her for purposes of calculating his or her public source benefits.


Payback Provisions

In certain circumstances, public source benefits provided to someone who has a special needs trust may be subject to repayment. This depends on the payback provisions associated with the public benefit received. while payback is not a great result, this can postpone costs associated with care until after death and result in the net cost being lower, that is, paid at the public source rate and not private pay rate. Payback does not apply in all cases.

You will need to establish a separate bank account to hold trust assets. The trust will be the owner of the account with the trustee as named in the trust as the person able to write checks for the trust. You will need the taxpayer identification number mentioned above in order to do this

You should keep annual records showing the use of funds. We discussed this in our meeting. Please do not hesitate to call or email if you have questions about the records to be maintained or the accounting itself. I anticipate that annually your trustee will prepare a balance sheet showing assets at the beginning of a year, indicating the change in assets and the purpose fort the change (e.g. sold car to buy new car), and showing the assets at the end of the year. I also would like the trustee to keep a list of expenditures by month and type of expenditure. This need not be too onerous. Print monthly bill pay online reports and keep track of other expenditures. If public source benefits are being used, we will want these records to be more complete.


Tax returns for Supplemental Needs Trust

The supplemental needs trust is subject to tax and may from time to time be required to file tax returns. I recommend that you utilize a non-interest bearing checking account to hold short term funds and that any money earned from investments be used fort the payment of expenses related to your care. These accounting measures could increase the probability that you will not have to file a return after the person is deceased, and only then if we have income that is not offset by expenses.


Waltz, Palmer & Dawson, LLC

3701 Algonquin Rd. Suite 300
Rolling Meadows, Illinois 60008

Phone: (847) 253-8800
Fax: 847-253-8822

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