Typically, a special needs trust can be established without a specified expiration date. This means that it is going to last until the beneficiary passes away.
Exactly what happens at that point depends on what type of special needs trust has been established. For instance, with a first-party special needs trust, some reimbursement may be due to the government. Remaining funds can then be distributed according to the terms of the trust. With a third-party special needs trust, this distribution can happen without first making any reimbursement to the government. There is no payback requirement.
But either way, the trustee is in charge of the funds and uses them to assist the beneficiary until that person’s passing, when the trustee takes steps to redistribute the remaining funds and close the trust.
Could it end sooner?
Yes, a special needs trust could end before the person passes away. The most common reason for this is simply that the trust has been depleted and has run out of funds.
In some cases, a wealthy individual will leave such a significant amount of money that it can help the individual with special needs for the rest of their life. This is when redistribution of the remaining funds is necessary.
But in other cases, the trust may be much more limited, and it is just being used as a vehicle to pass an inheritance to the beneficiary without affecting their access to benefits. They could be left $10,000, for example, which may be depleted long before they pass away.
Establishing a trust
Special needs trusts can be very useful, and it is important to understand how to set them up, when they expire and what legal roles and responsibilities all involved parties have, from the grantor to the trustee to the beneficiary.