Trust Administration & Special Needs Trusts – Pitfalls, Fiduciary Duties, and Recent Developments

Lunch & Learn Highlights – Special Needs Trusts (SNTs)

Comparing Individual and Pooled Special Needs Trust Options

By: Family Heritage Trust (Breann Day and Jason Frank, CELA, CAP)
(Lunch & Learn Session)

This session focused on practical considerations when selecting and drafting Special Needs Trusts, with an
emphasis on choosing between an individually administered trust and a pooled trust structure. The discussion
highlighted how trustee selection, beneficiary age, asset size, and administrative flexibility affect outcomes
under SSI and Medicaid rules.

• Family Heritage Trust (FHT): a corporate fiduciary trustee administering individually drafted SNTs nationwide. FHT currently manages approximately $260 million across roughly 100 beneficiaries, offering institutional oversight and scalability for larger trusts.
• First Maryland Disability Trust (FMDT): more than a traditional pooled SNT. It can serve beneficiaries over age 65 and is often well suited for modest asset levels or situations where pooled administration provides practical advantages.
• When to Use FHT: best for families seeking a stand-alone trust with broad drafting flexibility, corporate fiduciary administration, and capacity for higher trust balances.
• When to Use FMDT: works well when beneficiaries are over 65, assets are smaller, or pooled resources and administration better meet the beneficiary’s needs.
• FHT Fee Structure: generally 1.25% annually, reduced to 1.0% for assets above $1 million and 0.75% for assets above $2 million.
• Core Drafting Principle: SNT provisions must remain fully discretionary to avoid creating countable resources for SSI or Medicaid purposes.
• Trustee Flexibility: recommended including the ability to appoint an independent trustee with broad discretion to preserve future decanting and modification options.
• Decanting Considerations: beneficiary consent creates risk; obtaining a court order provides a safer and more defensible path.
• First-Party (d4A) Trusts: Maryland requires court approval before funding. Trustees advised not to begin administration until approval is issued, typically within approximately 30 days.
• ABLE Accounts: effective when coordinated with SNTs. Paying rent through an ABLE account can avoid SSI in-kind support reductions, making ABLE accounts useful for recurring housing and food expenses.

The program provided clear, practice-oriented guidance on selecting the appropriate SNT structure and drafting
provisions that preserve public-benefit eligibility while maintaining long-term administrative flexibility.