Introduction

Millions of us love and care for someone who lives with a disability -- a son with Down syndrome, a daughter with cystic fibrosis, a niece with severe autism, a grandchild with schizophrenia, a spouse with emphysema. Such a disability usually means your loved one will require long-term support and medical assistance under the Supplemental Security Income (SSI) and Medicaid programs.

This chapter introduces the special needs trust -- a way to leave property to a loved one with special needs without jeopardizing those crucial SSI and (especially) Medicaid benefits.

Why It's Usually a Bad Idea to Leave Money Directly to a Disabled Loved One

Special needs trusts are used primarily as a means of preserving a loved one's access to government-subsidized health care. The special needs trust is a well-accepted estate planning technique that is logical -- even essential -- given this country's health care system. If our country adopted a universal health care system, the special needs trust wouldn't be necessary, and you could leave property directly to a loved one who has a disability without risking the loss of that person's access to health care.

Health Care for People With Disabilities

There are really three health care systems in America: the private system, Medicare, and Medicaid. These three systems share doctors, hospitals, and other medical resources, but each provides access to these resources in radically different ways.

The private health care system is most frequently available as an employment-related benefit. Great, perhaps, for working people, but usually a nonstarter for those with disabilities.

Medicare, a government-run health care system, pays for most medical services (but not long-term care) required by disabled people who are eligible for Social Security disability benefits because of their own work history or that of an eligible parent. A person need not be poor to get Medicare benefits, but many disabled people, regardless of their income and resources, fail to meet the work-related eligibility requirements.

Medicaid is left to pay for virtually all the health care delivered to people who don't have private insurance or qualify for Medicare. To get Medicaid you must be disabled or over 65. And, in most states, you must be poor enough to qualify for SSI -- an income-support program designed exclusively for people with limited income and few resources.

Many people who don't qualify for Medicaid are left with serious financial burdens from health care costs. For example, if parents leave money directly to an adult disabled child, the gift, if large enough, will disqualify the child from SSI and so from Medicaid until the money is used up. This is where the special needs trust comes in. It allows a person with special needs to enjoy the benefits of property received from others without losing SSI and Medicaid.

[Medicaid and SSI Eligibility: State Differences] omitted for online sample chapter.

How Inherited Money Can Make Medicaid Unavailable

Inheriting money seems like a good thing. But for someone who relies on SSI and Medicaid, receiving an inheritance can have a disastrous side effect: losing support and, perhaps more important, health care. That's because the SSI and Medicaid programs are available only to people who have low incomes and few resources.

To qualify for these programs, a person's monthly income usually must be no more than about $600 to $800 (it varies from state to state), and the person must own less than $2,000 worth of liquid assets (bank accounts, securities, and the like) and many other types of property. Someone whose property is worth more than the limit is not eligible for benefits. However, importantly, the value of the person's home, car, personal effects, and household furnishings usually are not counted.

EXAMPLE: John's daughter Yolanda was born with cerebral palsy and will likely need lifetime medical benefits under the Medicaid program. John wants to provide for Yolanda after his death but has been cautioned that leaving her property might disqualify her for Medicaid and support under SSI.

John is right to be concerned. An inheritance that would cause Yolanda to exceed the SSI resource limit would probably also make her ineligible for Medicaid. (Most states operate under this rule, as discussed above.) Yolanda would likely see the property she inherits quickly evaporate in a blizzard of medical bills and living expenses until she once again became eligible for those programs.

A disabled person who comes into money must spend it -- or at least enough of it so that what's left doesn't exceed the resource limit -- before reapplying for SSI and Medicaid benefits. The money doesn't have to be spent on support or medical care.

How a Special Needs Trust Can Help

How, then, can you make sure that your loved one receives the full benefit of your gift without losing eligibility for Medicaid and SSI? The answer is a special needs trust.

The beneficiary of a properly drafted special needs trust never has a legal claim to property in the trust. This means that the money won't be counted as the beneficiary's resource and so it won't interfere with eligibility for benefits. The funds from the trust can be used for your loved one's benefit for any good or service except food or shelter. (And under the current rules, the trust can even sometimes provide food or shelter without causing the beneficiary to lose Medicaid coverage or most of his or her SSI grant.)

EXAMPLE: Janine, 45, an only child, has had schizophrenia since childhood. She is able to function under heavy medication, but she cannot work and depends on SSI for her income and Medicaid for treatment. Janine's sole surviving parent, Helen, wants to leave Janine her property, which consists of a house and assets worth $75,000.

Helen creates a special needs trust for the sole benefit of Janine, naming herself as trustee to manage the trust while she is alive. Helen writes her will to state that her property should pass directly to the special needs trust rather than to Janine herself. When Helen dies, the house and liquid assets are passed to Jim, the person Helen has named to succeed her as trustee (the successor trustee).

In his new role as trustee, Jim allows Janine to live in the house, liquidates the other assets into cash, and adds the cash to the trust bank account Helen opened when she created the trust. Jim uses the trust funds to supplement what Janine receives from SSI and Medicaid. Because Janine does not control the trust money, it is not counted as a resource by SSI or Medicaid.

Do you need a lot of money to set up a trust? No, though you may decide that a trust isn't worth the trouble if you don't expect to leave a lot of money to the beneficiary. Typically, you would open a bank account in your name as the trustee of the special needs trust with an initial deposit of $250 to $500. Then, you would route property to the trust after your death through your will, revocable living trust, insurance policy, or beneficiary designations for securities or CDs. Even if the trust ends up with $5,000 or $10,000, it may be well worth creating because that money can be stretched over a long period of time. If the new trustee (the person you named as your successor trustee) has even $100 a month over five years to spend on your loved one's supplemental needs, it could make his or her life a lot easier.

Who Can Benefit From a Special Needs Trust

A third-party special needs trust can benefit anyone 65 or older who relies on SSI and Medicaid, and anyone of any age who has a disability that qualifies him or her for SSI and Medicaid benefits. If you think your loved one may at some time need SSI or Medicaid, consider creating a special needs trust to take that possibility into account.

You most likely already have a gut feeling about whether or not your loved one qualifies -- or will qualify -- for SSI and Medicaid benefits. If you are providing for all of your loved one's needs now, the issue will most likely arise when the need for government benefits arise -- presumably, after your own death.

The federal programs that provide assistance to disabled adults who are younger than 65 focus almost exclusively on whether someone has the ability to be gainfully employed. In other words, employability defines whether or not someone is "disabled" -- at least for the purpose of qualifying for federal benefits.

For SSI purposes, disability is determined under a complex set of criteria fashioned by the Social Security Administration. Some conditions are considered to be automatically disabling -- Down syndrome, for example. Others (an amputation, for example) require that a number of factors be taken into account, including age, work experience, and the type of function affected by the medical condition.

Chapter 2 discusses disability in more detail, and also discusses some other situations in which you may want to set up a special needs trust for a loved one.

Who Can Set Up a Special Needs Trust

Most articles on special needs trusts speak to a parent or grandparent leaving property to a disabled child or grandchild. However, third-party special needs trusts can work for individuals of any age and relationship. You don't have to be the beneficiary's parent or any other relative to set up a trust.

Older couples sometimes set up special needs trusts for the survivor, to take effect when one spouse or partner dies.

EXAMPLE 1: Gavin and Dennis, both 70, have been domestic partners for the past 20 years. Dennis has been diagnosed with Alzheimer's disease and will need Medicaid in the near future. Gavin creates a special needs trust for Dennis, naming himself as trustee, and opens a bank account with a $250 deposit. In his will, Gavin leaves $75,000 to the trust, to be used for Dennis's benefit. When Gavin dies, the person Gavin names to succeed him as trustee will be able to supplement Dennis's SSI and Medicaid benefits with money from the trust.

EXAMPLE 2: Rolf and Juanita are both in their 60s and about to be married. Rolf suffers from severe rheumatoid arthritis and has been receiving SSI and Medicaid for ten years. Juanita has a stock portfolio worth $50,000 in her name alone. She wants to leave the stock to Rolf but doesn't want him to lose his SSI or Medicaid. Juanita creates a special needs trust naming herself as trustee and uses a transfer-on-death beneficiary designation to leave the stock to the trust. When Juanita dies, title to the stock passes to the trust and the person Juanita has named to succeed her as trustee can manage the stock to enhance Rolf's quality of life.

You can even set up a special needs trust for someone to whom you're not related at all.

EXAMPLE 3: Agnes, age 75, leads a simple life in the house she grew up in. She puts in volunteer time at the local Boys and Girls Club and The Arc (an organization dedicated to the developmentally disabled). Unbeknown to the community, Agnes is worth several million dollars because of property she inherited from her father and mother. She gives handsome annual donations to the groups she works with, but has never given much thought to how to leave her property.

When Agnes learns about special needs trusts, she decides to create special needs trusts for 12 disabled children she has grown close to in her volunteer work. In her will she directs that at her death, each trust will receive an equal share of her property. If during her life she meets other children who she wants to include, she can amend her will (through a codicil) to add them. She can also change her mind, revoke the will, and leave her property in a different way.

Alternatives to a Special Needs Trust

Special needs trusts aren't the right solution for every family. Trusts can cost time and money to administer, and the person serving as trustee may be called on to make difficult decisions about investing and spending trust assets.

Leaving Money to a Friend or Relative

Rather than rely on a special needs trust, you may be inclined to leave some money to a friend or relative who agrees to watch out for your loved one's needs after your death.

If you don't expect to leave much property to your loved one, this approach may be preferable to setting up a trust that will last only a year or two before the money has been spent. You could attach a letter to your will or living trust explaining what you are doing and request that the money be spent in a way that doesn't interfere with your loved one's SSI and Medicaid benefits.

Unfortunately, this informal approach has several potentially major downsides. The fact is, money that legally belongs to one person will not necessarily end up benefiting someone else, no matter how honorable the intent at the outset.

Because the person to whom you leave the property will own it outright, it would be subject to that person's creditors in a lawsuit or bankruptcy. The property may pass to that person's heirs if he or she suffers an untimely death, or it may go to a spouse in the event of a divorce. Also, the laws that govern someone who is an actual trustee (described in Chapter 5) don't apply in an informal relationship. In other words, if the person spends the money for a new car instead of your disabled loved one's needs, there is nothing that anyone will be able to do about it.

Leaving Money Directly to Your Loved One

As a general rule, it may be better to leave property to your loved one outright if he or she is unlikely to qualify for SSI and Medicaid and can be trusted to manage the funds in his or her own behalf.

Using a Pooled Trust

If you don't want to set up your own special needs trust, you may be able to join a "pooled trust." Roughly two-thirds of the states have nonprofit organizations that operate such trusts, in which gifts to many disabled beneficiaries are combined so that they can be efficiently and professionally managed. The trustee invests and spends funds for the beneficiaries without affecting their eligibility for SSI and Medicaid. If you sign up for one of these pooled trusts, you can leave the trust details to them. Chapter 7 discusses pooled trusts in detail.

How the Trust Works -- Nuts and Bolts

A special needs trust is an arrangement under which a person (called the "grantor" or "settlor") places property in the hands of a manager (the "trustee"). Typically, the grantor of a special needs trust is also the trustee while he or she is alive and names one or more other persons to be successor trustees, to take over as trustee when the grantor dies or becomes incapacitated. All persons who serve as trustee are legally obligated to follow the terms of the trust document to use the property for the benefit of the disabled person identified in the trust document (the "beneficiary").

EXAMPLE: Albion (the grantor) creates a special needs trust for the benefit of his disabled daughter Chloe (the beneficiary). Albion names himself as trustee and his sister Rosie as successor trustee to take over when he dies or becomes incapacitated.

All special needs trusts are defined by two basic characteristics:

• The trust document gives the person serving as trustee absolute control over when and how the trust property is spent, as long as it's spent for the sole benefit of the beneficiary, and
• The trust document expressly states that the grantor intends for the property in the trust to supplement, but not replace, the basic benefits and services provided by SSI and Medicaid.

By including these two provisions in the trust document, you ensure that SSI and Medicaid won't treat the property in the trust as a resource of the beneficiary.

Of course, the typical special needs trust contains a lot more verbiage as well, dealing with various events that may arise. For instance, what happens if the beneficiary recovers and is no longer concerned about SSI and Medicaid eligibility? Or if the beneficiary dies, leaving a lot of property in the trust? These and other issues can be resolved by including basic statements of intent in your trust document. (Chapter 8 takes you step by step through all the major issues of creating a special needs trust and offers plain-English provisions to address each of them. No rocket science here.)

When the Trust Takes Effect

This trust will take effect when you sign it and have it notarized. Not long after that (when you get the trust's tax identification number from the IRS), you can add a little cash to the trust by opening a bank account with a minimal deposit. Then you can leave additional property to the trust at your death through a will, living trust, beneficiary designation, or other estate planning document. Or you can put all the property you intend to put into the trust while you are alive.

EXAMPLE: Barbara's daughter Kristin suffers from schizophrenia. Barbara, at age 55, creates a special needs trust for Kristen, opens a bank account with $500, and drafts a will that leaves $100,000 to the special needs trust in her will. Twenty years later, both Barbara and Kristin are still alive. During the intervening years, an effective treatment has been developed for Kristin's condition, and Kristin is completely capable of self-support without SSI or Medicaid. So Barbara changes her will to leave Kristin her inheritance outright instead of tying it up in the special needs trust. Barbara terminates the special needs trust and distributes what's left to Kristen through her will.

Who Can Give Property to a Special Needs Trust

Anyone can contribute property to a third-party special needs trust. Although these trusts are most often created by parents for their children, you don't need any family relationship to create or give money to a trust for someone. And there is no limit to the number of trusts that may be created for a particular beneficiary.

EXAMPLE: Jennifer's cousin Harvey wants to leave her some money. Instead of leaving the property directly to Jennifer, he creates a special needs trust for her and names Jennifer's mother Helen as trustee (after getting her permission). In his will, he leaves $20,000 to the trust.

Jennifer's close friend Ruth also wants to give Jennifer some money -- both as a gesture of friendship and because she is making gifts as part of a plan to get her estate under the estate tax threshold. Ruth creates a special needs trust, names Jennifer's mother Helen as trustee, and transfers an $11,000 CD into the trust.

Jennifer's aunt Frieda wants to leave Jennifer $15,000. In her will she names the trust created by Ruth for Jennifer as the recipient of the $15,000.

What Types of Property Can Be Held in the Trust

Virtually any type of property can be held in a special needs trust, including real estate, stocks, collections, a business, patents, or jewelry. But because the primary purpose of a special needs trust is to supplement government benefits, typically the trust document gives the person serving as trustee authority to sell tangible items (cars or jewelry, for example) to raise cash. Whether or not the trustee sells property will depend on:

• the significance of the items to the beneficiary, and
• the likelihood that the assets will appreciate in value -- if they won't, it's better to convert them to cash that can be invested elsewhere.

For instance, a home or an heirloom ring might be important to the beneficiary, and the trustee probably wouldn't sell them. A valuable coin collection might be likely to go up in value, warranting keeping it in the trust as long as possible. On the other hand, jewelry that is of little interest to a beneficiary might as well be sold, with the proceeds invested in an asset that will produce income. Clearly, in order to make this type of decision, the person serving as trustee will need a good understanding of the beneficiary's personal needs and basic sound investment rules. (Chapter 5 helps you create a written statement communicating these needs to the person you name as your successor trustee.)

How Assets Get to the Trust

The person who creates a special needs trust often makes the initial transfer of assets into the trust -- usually, just a small amount of money. Then, commonly, a parent, grandparent, or other relative leaves property to the trust by:

• leaving it through a will or revocable living trust directly to the special needs trust, or
• naming the special needs trust as a beneficiary on a designation form that controls what happens to a deposit or brokerage account, retirement plan, or stocks and bonds.

More about this in Chapter 4.

How Trust Assets Can Be Used

To repeat, the sole purpose of a special needs trust is to provide money for expenses that SSI and Medicaid don't pay for. Those expenses are the beneficiary's "special needs." An SSI grant is intended to provide only food and shelter. That's it. So expenditures for anything else are supplementary and don't affect the beneficiary's eligibility for a full SSI payment.

Generally, trust funds are used for services (hiring a personal attendant, for example) or experiences (travel, for example) rather than to buy items of property. That's because a beneficiary who owns too much valuable property will go over the resource limit and become ineligible for SSI and Medicaid. A trustee who used trust funds for a vacation home wouldn't be doing your loved one a favor -- it would result in termination of public benefits. That's directly contrary to the express terms of the trust, so such a purchase is not authorized.

That's the relatively easy part. It's not so easy when a trustee wants to use trust funds for items classified as food and shelter. In some cases, buying these items with trust money is perfectly fine. For example, the SSI program does not pretend to provide adequate assistance for special dietary needs. So if a beneficiary needs unusually pricey food or nutritional supplements, this extra cost can often be met from the special needs trust without affecting the SSI grant.

Shelter is a special case. Special needs trusts commonly allow the person serving as trustee to pay for rent or any other basic need that the trustee deems necessary for the beneficiary's health and welfare under the circumstances if it isn't already being met by SSI or Medicaid, and if it doesn't make the beneficiary ineligible for those benefits altogether.

EXAMPLE: Eva, a 34-year-old woman with cystic fibrosis, lives in a studio apartment in a "low-rent" part of San Francisco, where she still must pay $800 a month. Eva's SSI grant -- her sole source of income -- is $700 a month. Obviously, Eva needs some help with her rent. Under SSI rules explained in Chapter 3, the trust can pay the entire $800 rent, and Eva will lose only about $228 from her grant.

Whether or not to use trust property for food and shelter is entirely up to the person serving as trustee. So in the example above, Eva couldn't force the trustee of her special needs trust to cough up the rent money. If the beneficiary did have that kind of power over the trustee, all the funds in the trust would be considered available resources for SSI and Medicaid eligibility purposes. So, although a special needs trust may give the trustee authority to make supplementary rent payments, the trust also prohibits such payments if they would interrupt the beneficiary's eligibility for SSI and Medicaid.

Chapter 3 explains the ins and outs of paying for shelter and associated services such as utilities. It also provides a long list of items that are typically considered supplementary to the SSI and Medicaid programs.

The Trustee's Role

It's almost a cliché that the operative word in the phrase special needs trust is "trust." The person you choose to succeed you as trustee will manage and spend, without court supervision, the property you leave for the beneficiary. You will need to pick one or more successor trustees to step in should you die or become incapacitated. Even if you pick someone else as the initial trustee, you should name successor trustees so that there is someone in line to take over management of the trust if the initial trustee can no longer serve.

When picking trustees and successor trustees, you want to pick someone you have complete faith in. In addition to being responsive and sensitive to the beneficiary's personal needs, the person serving as trustee has the absolutely crucial job of investing and spending trust assets.

You also need someone who will keep up on the law. Trustees are supposed to use trust funds only for goods and services that supplement -- but don't disqualify the beneficiary for -- benefits provided by SSI and Medicaid. For this the trustee needs a good working knowledge of how to spend trust money without affecting eligibility. This can be easy when the goods and services are obviously supplemental but more problematic where housing costs are involved. The person serving as trustee will learn about the rules from the SSI program administrators and their regulations, or from a qualified professional resource. (Chapter 10 has more on resources.)

In addition to dealing with the SSI and Medicaid programs, the person serving as trustee has a legal duty to invest the trust assets prudently. Trustees must obey state laws about trust management and must also obey the terms of the trust document itself.

Trustees must spend judiciously to make the trust's funds last as long as possible. This can be one of the hardest aspects of a trustee role, especially when the beneficiary's desires conflict with a trustee's duty to conserve trust funds.

EXAMPLE: Adrian, a 28-year-old with quadriplegia, rents a cheap apartment in a downscale Cleveland neighborhood. He receives SSI and Medicaid and is the beneficiary of a special needs trust containing roughly $200,000 left by his father. Adrian wants to live in a better neighborhood and asks the person serving as trustee of the special needs trust to buy him a house that's for sale. If the trustee buys the house, almost all of the trust property will be used up. Should the trustee comply with Adrian's wishes, or refuse so the trust funds will last longer? Because Adrian has no authority to direct the trustee's disbursements, he'll have to abide by the trustee's choice.

So how should Adrian's trustee go about making this decision? The purpose of the trust is to supplement the SSI and Medicaid benefits Adrian receives -- food, shelter, and basic medical services. Obviously, buying the house would conflict with that purpose, by depleting the trust of the funds necessary for that lifetime supplementation. The trustee's job is to fulfill the purpose of the trust, not just to please the beneficiary.

Unlike Adrian, some beneficiaries cannot coherently express their wishes because of their particular disability -- for example, severe autism can have this effect. In such cases, trustees must rely on their own knowledge of the beneficiary's needs and desires, or on information provided in the trust document or by the beneficiary's family in a written needs statement (explained in Chapter 5).

Trustees are also responsible for accounting for the trust income and disbursements and filing annual tax returns for the trust. Unless the trustees have tax and accounting expertise, this might be something that should be handled by an outside expert and paid for with trust funds. Of course, if the trustee only cuts a few checks a month out of the same checkbook, the accounting will already be done on the check stubs.

Fortunately, the special needs trust in this book provides that the trustee can be paid a reasonable amount from trust assets for doing trust-related work. Also, because a trustee's role can be demanding, you may want to name cotrustees to share the load. If the property in the trust has or will have a sufficient value -- roughly $250,000 or more -- you might also consider turning over the financial management of the assets to a corporate trustee.

The trust will be managed under a law called the Prudent Investor Act, which requires the person serving as trustee to use common sense under all circumstances. If necessary, however, the trust document authorizes the person serving as trustee to get expert help -- and to pay a reasonable amount for it with trust funds.

Chapter 5 helps you get a grasp on these and other trustee issues so you'll know what's in store for trustees and successor trustees you name to manage the trust. A sample letter to trustees, which outlines the information your trustees will need to competently manage the trust, is set out in Appendix B and is included on the CD-ROM that comes with this book.

Terminating the Trust

The special needs trust ends when it's no longer needed -- commonly, at the beneficiary's death. There are four reasons to end a special needs trust:

• Trust funds are depleted.
• The beneficiary no longer needs government benefits.
• The beneficiary is no longer eligible for government benefits.
• The beneficiary dies.

The first reason to terminate a trust is simply because the funds run out. This may happen if the trust wasn't adequately funded to begin with, or if the beneficiary lives much longer than originally anticipated. The person serving as trustee doesn't have to spend the last dime; when funds dwindle to a low level, it may no longer make sense to keep the trust going, given the cost of expenses such as record keeping and expert advice.

EXAMPLE: Eden, age 60, is the beneficiary of a special needs trust that went into effect when she was 20. Eden has outlived her original life expectancy by 20 years. The trust was originally funded with the proceeds of a $200,000 life insurance policy, but over the next 40 years the funds were slowly depleted. Now, only $3,000 is left in the trust, and the trustee can no longer justify keeping the trust in effect, given the expenses of administration.

The second reason to terminate a trust is if it appears that the beneficiary either doesn't need or doesn't qualify for SSI or Medicaid. This may happen because eligibility rules change or because the beneficiary's condition improves.

EXAMPLE: Robert, who suffers from chronic schizophrenia, is the beneficiary of a special needs trust established when he was 28. Now Robert is 55 and, thanks to a new class of antipsychotic drugs, no longer has symptoms of his illness as long as he takes his pills. Because Robert is now able and willing to work, he no longer needs to rely on SSI and Medicaid.

The third reason to terminate the trust would be because a change in program rules made the beneficiary ineligible for SSI, Medicaid, or similar programs if the trust continues in effect.

EXAMPLE: Clara is the beneficiary of a special needs trust created when she was 21. At that time, the laws allowed a special needs trust to pay a beneficiary's rent without disqualifying the beneficiary for SSI. Fifteen years later, the SSI rules have changed to treat any rent payments from an outside source as a disqualifying factor, and to consider any trust that allows trustees to make such payments as a disqualifying resource. Because Clara absolutely needs her Medicaid and SSI benefits, the person serving as trustee must avoid their cessation by terminating the trust.

In any of these three situations, after all taxes and debts legally owed by the trust have been paid, the trust document directs the person serving as trustee to distribute as much of the property to the beneficiary as possible without interfering with his or her eligibility for benefits. If the beneficiary has a legal guardian or conservator, or a person who has been designated to receive benefits on his or her behalf (representative payee), the trustee distributes the property to that person.

EXAMPLE: The person serving as trustee of Emma's special needs trust decides to terminate the trust because federal law changes will make Emma ineligible for benefits if the trust stays in existence, and Emma really needs the benefits. There's about $10,000 in the trust.

The trustee distributes $1,999 to Emma, which keeps her under the $2,000 resource limit (she doesn't have any other nonexempt assets) so she can continue to receive SSI and Medicaid. The trustee gives the rest of the money to Emma's sister, who is named as the remainder beneficiary in the trust document.

If the beneficiary won't lose any needed benefits as a result, the trustee gives all of the trust funds to the beneficiary.

EXAMPLE: Eli no longer needs government benefits, so the trustee of his special needs trusts ends the trust and gives all of the funds directly to Eli.

The last reason to terminate the trust is when the beneficiary dies. In this case, the person serving as trustee is directed to distribute any remaining trust funds to the person you named in the special needs trust to inherit them. This person is called the "remainder beneficiary" of the trust. (Chapter 5 discusses remainder beneficiaries.)