The Top Responsibilities of a Special Needs Trust Trustee

Written by Connor Kavanaugh, CTFA, ChSNC

Updated December 4th, 2025

Serving as a trustee of a special needs trust is an important commitment. Trustees play a central role in protecting the long-term financial stability and quality of life of a person with a disability. If you are considering taking on this role, you may be wondering what exactly the job entails. While every trust is unique, the following responsibilities are among the most important for any special needs trust trustee.

1. Making Informed, Appropriate Distributions

Before spending any trust funds, the trustee must confirm two things:

• The distribution is permitted under the terms of the trust; and

• The distribution will not unintentionally harm the beneficiary’s eligibility for needs-based benefits such as SSI or Medicaid.

Every special needs trust contains guidance on how funds may be used, and trustees are legally obligated to follow those terms. Even if a trust technically allows a purchase, it may still be unwise if it reduces or suspends the beneficiary’s government benefits. Trustees must understand how distributions affect food, housing, income rules, and in-kind support calculations.

In other words, a trustee must not only ask “Can I spend this money?” but “Should I spend this money?”

2. Overseeing Investments and Protecting the Trust’s Assets

Trustees must ensure that trust funds are invested responsibly. This doesn’t mean picking stocks or acting as the investment manager. Instead, it means:

• Hiring qualified financial professionals

• Maintaining a prudent, diversified investment strategy

• Monitoring performance and documentation

• Ensuring the trust’s risk level matches its long-term purpose and expected duration

Special needs trusts often need to support a beneficiary over many decades. Trustees must balance growth, income generation, and preservation of assets.

3. Maintaining Accurate Records and Bookkeeping

Trustees are responsible for keeping thorough financial records and producing regular accountings for the beneficiary, courts (when required), and other interested parties. While many trustees hire a bookkeeper or accountant, the trustee remains ultimately responsible for:

• Tracking all income and expenses

• Retaining receipts and documentation

• Ensuring reports are accurate and available for audit

• Distributing accountings in a timely manner

Clear bookkeeping protects the trustee, maintains transparency, and ensures the trust remains compliant.

4. Managing Tax Reporting

Most trusts must file annual federal and state income tax returns. Although trustees typically rely on tax professionals to prepare these filings, the trustee must still understand the basics of trust taxation, including:

• What income is taxable to the trust

• When distributions may shift tax responsibility to the beneficiary

• How to avoid unexpected tax consequences

A trustee who is unaware of these rules may unintentionally create a tax liability for the beneficiary or the trust.

5. Communicating Clearly and Consistently

Communication is one of the most important responsibilities of a trustee—yet it’s often overlooked. Trustees should stay in regular contact with:

• The beneficiary

• Caregivers and support teams

• Family members

• Case managers or service coordinators

A breakdown in communication can lead to unpaid bills, loss of services, unnecessary conflict, or even legal disputes. Trustees must listen, explain decisions clearly, and set appropriate expectations. Saying “no” is sometimes necessary to protect the trust for long-term needs, but that message is always easier when communication is proactive and transparent.

Final Thoughts

Serving as a trustee of a special needs trust is a meaningful and impactful role. With thoughtful decision-making, strong communication and professional guidance, trustees can help ensure that the trust truly enhances the beneficiary’s quality of life for years to come.

If you or your family are navigating trustee responsibilities or considering appointing a trustee, Palladio Consulting LLC can help you understand the role, structure the trust correctly, and support long-term planning.