A special needs trust is established to provide for the financial needs of a special needs beneficiary — a disabled child who will never be able to work to support himself, for example. One of the unique concerns of a special needs trust is the need to provide trust assets to the beneficiary, while preserving his eligibility to receive need-based government benefits such as Medicaid and SSI. A Memorandum of Intent (MOI) is an optional supplement to a special needs trust.

The Limitations of a Special Needs Trust Document

A special needs trust is established by appointing a trustee to manage trust assets, by drafting and signing a trust document that tells the trustee what he can and cannot do with trust assets, and by funding the trust with assets. A trust document is a legally binding document, and it can be used to remove a trustee, sue him for misconduct or, in extreme cases, arrest him.

An MOI, by contrast, is a nonbinding document that provides the trustee with certain information that will help him administer the trust more effectively on behalf of the beneficiary. The reason why drafting an MOI might be a good idea arises from the inherent limitations of a trust document. Since the trust document is legally binding, its wording must be drafted carefully:

  • If the rules for administering the trust are too restrictive, it could hobble the trustee’s ability to administer the trust effectively;
  • If the rules for administering the trust are too permissive, they might fail to provide guidance to the trustee, or they might empower a rogue trustee (a future successor trustee appointed after you die, for example) to act in ways that do not reflect your intentions in setting up the trust.

How an MOI Can Help

One way out of this dilemma is to take the middle way — draft a trust document that avoids either of the two extremes mentioned above, and then add an MOI to clarify your intentions. This is especially important if you expect your beneficiary to outlive you by many years. Although the MOI would not be legally binding, if litigation ever arose, a court might look to it to determine the meaning of the trust document, which is legally binding.

Your MOI might include the following information about the beneficiary, especially if the beneficiary is unable to communicate effectively:

  • special abilities;
  • personality characteristics;
  • routines;
  • likes and dislikes;
  • hopes and dreams;
  • hobbies and interests;
  • family history;
  • medical history;
  • religious beliefs;
  • upbringing;
  • friends; and
  • important relationships.

You might also include your own wishes and hopes for the beneficiary’s future.

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