Special Needs Trust out of money?

[Anonymous]

This sounds bad. I would have expected the trust to still have $400k in it and he just be living off of the interest. You need to have it investigated even if you don’t have a lawyer.

[Anonymous]

Can someone ask for an accounting of the expenditures?

[Anonymous]

I’m a trustee for a special needs trust for my sibling. Started out at about $500k in 2014 and the vast majority of the funds are still there because my sibling mostly lives off the interest plus their SSDI benefits. I follow the 4% retirement rule with the trust and as a result they have about $3500 month to live on with SSDI. Since they get SSDI/Medicare vs SSI/Medicaid, we do have more flexibility on what the $$ is used for. We’ve spent above that amount here and there for medical expenses. It is a hard and stressful role, so I feel for your relative that had to do this but it does sound like the money might not have been managed very well.

[Anonymous]

Anonymous wrote:My BIL has a mental health handicap and lives in an apartment paid by Medicaid and SSDI. His expenses seem to be minimal; cigarettes, food in addition to food stamps, clothing, cable tv, internet, birthday gifts to family. His uncle is the trustee and now says the money is all gone. The Trust was funded with cash and real estate sold in 2011, balance was $400,000. In your experience, is it realistic the beneficiary required this much money over 12 years? Attempts for an accounting were denied and there’s no money to pay lawyers.

That's about $3,300 a month. So, yes. It's realistic.

[Anonymous]

The fact that they won’t give you access to the accounting is a huge red flag. I’d file a complaint and have it investigated based on that alone.

[Anonymous]

Anonymous wrote:The fact that they won’t give you access to the accounting is a huge red flag. I’d file a complaint and have it investigated based on that alone.

Complaint? As in lawsuit? Or…?

[Anonymous]

Anonymous wrote:

Anonymous wrote:The fact that they won’t give you access to the accounting is a huge red flag. I’d file a complaint and have it investigated based on that alone.

Complaint? As in lawsuit? Or…?

First step is contacting the attorney who drafted it and tell him you are concerned that the Trustee misappropriated some funds and he refuses to show you the statements. He or she can direct you on what steps to take next. If that’s not possible find an attorney who specializes in disability law.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My BIL has a mental health handicap and lives in an apartment paid by Medicaid and SSDI. His expenses seem to be minimal; cigarettes, food in addition to food stamps, clothing, cable tv, internet, birthday gifts to family. His uncle is the trustee and now says the money is all gone. The Trust was funded with cash and real estate sold in 2011, balance was $400,000. In your experience, is it realistic the beneficiary required this much money over 12 years? Attempts for an accounting were denied and there’s no money to pay lawyers.

That's about $3,300 a month. So, yes. It's realistic.

No, because most people would invest the money in an interest bearing account like a mutual fund. You could only burn through $400k at $3300 per month if it was parked in a checking account.

[Anonymous]

So you said it was cash and real estate. Were there any dividend yielding stocks or mutual funds? The issue may have been how the trust was set up and getting poor advice. Real estate can be fussy if the rental has a lot of repair issues and isn't in a desirable area. Cash just sits there and gets used up fast. The ideal would have been a bunch of savy investments with dividends where he could have lived off the dividends each year and the principal would be there.

[Anonymous]

Anonymous wrote:So you said it was cash and real estate. Were there any dividend yielding stocks or mutual funds? The issue may have been how the trust was set up and getting poor advice. Real estate can be fussy if the rental has a lot of repair issues and isn't in a desirable area. Cash just sits there and gets used up fast. The ideal would have been a bunch of savy investments with dividends where he could have lived off the dividends each year and the principal would be there.

DP but I took OP to mean the account was funded with real estate sale proceeds, i.e. the parent's house sold and the money put into the trust.

The bottom line is this doesn't pass the sniff test and OP is right to be concerned. The sibling is in a vulnerable position.

[Anonymous]

Anonymous wrote:

Anonymous wrote:So you said it was cash and real estate. Were there any dividend yielding stocks or mutual funds? The issue may have been how the trust was set up and getting poor advice. Real estate can be fussy if the rental has a lot of repair issues and isn't in a desirable area. Cash just sits there and gets used up fast. The ideal would have been a bunch of savy investments with dividends where he could have lived off the dividends each year and the principal would be there.

DP but I took OP to mean the account was funded with real estate sale proceeds, i.e. the parent's house sold and the money put into the trust.

The bottom line is this doesn't pass the sniff test and OP is right to be concerned. The sibling is in a vulnerable position.

OK, but how was that money invested? Sitting in a savings account does nothing. You would need wisely chosen dividend yielding investments to keep it going well for the long haul. It absolutely needs to be investigated and I would make a formal request for accounting, but I would not jump on a lawsuit bandwagon until you see what was going on.

[Anonymous]

How is the person in charge of the trust related to your BIL? Is it his father? His uncle? How is that person related to you?

[Anonymous]

If the apartment was funded by Medicaid, it’s possible that Medicaid required contribution or reimbursement of some sort. Regardless, it doesn’t sound like there is a remedy for running out of money.

[Anonymous]

OP here. It was money from house sales, no interest bearing securities or a well crafted portfolio, just money in a parked checking account as far as I can tell. I was told the Trust pays for any legal fees or accounting related to it, which is especially outrageous when there’s no money to even do this. I don’t have the resources to hire a lawyer to get blood from a stone. I just want to know if it really is common, in people’s experience, to have money in an SNT go so fast. Thank you everyone.

[Anonymous]

Anonymous wrote:OP here. It was money from house sales, no interest bearing securities or a well crafted portfolio, just money in a parked checking account as far as I can tell. I was told the Trust pays for any legal fees or accounting related to it, which is especially outrageous when there’s no money to even do this. I don’t have the resources to hire a lawyer to get blood from a stone. I just want to know if it really is common, in people’s experience, to have money in an SNT go so fast. Thank you everyone.

Everything depends on how it was structured. If the money was your BILs but accessed through a trustee, Medicaid has spend down provisions which would deplete the money extremely fast. And those provisions would not allow him to continue receiving Medicaid if you tried to limit immediate access to money. It’s not easy to be a trustee under these circumstances.

I think there may be a way to structure trusts to prevent this but it can’t be done with the Medicaid recipient’s own money after the Medicaid placement is established.

Honestly you all are in a great position given that he has a Medicaid placement. You have no idea how hard they can be to get. I know there are things you all will want to pay for but the placement should be providing for all needs.