A Special Needs Trust (SNT) protects a disabled person’s financial future and keeps their Medicaid and Supplemental Security Income (SSI) benefits intact. The trustee managing the trust is expected to act in the best interest of the beneficiary.

What happens when the trustee misuses the money, makes bad investments, or fails to follow the rules? In some cases, if the trust is mismanaged, the beneficiary can lose critical public benefits, such as medical care or financial support.

How Does Trustee Mismanagement Cause Medicaid Disqualification?

Special needs trusts are supposed to supplement and not replace public benefits like Medicaid and SSI. Therefore, a trustee must handle the money carefully so the beneficiary doesn’t get disqualified from these programs. A trustee’s mistakes can include the following:

  • Giving the beneficiary direct cash payments. This can count as income and make them ineligible for Medicaid.
  • Spending trust money on the wrong things, like rent or groceries. Trustees should spend money only on approved expenses.
  • Using the funds for personal gain. They may pay themselves excessive fees or make unauthorized withdrawals.
  • Investing in risky stocks or business ventures, leading to major financial losses.

If a trustee’s actions cause Medicaid disqualification, the consequences can be severe. The beneficiary can lose medical coverage or housing assistance.

What Action Can You Take Against a Negligent Trustee?

Trustees are expected to act in the best interest of the beneficiary. If they mismanage the trust, you can hold them accountable in the following ways:

  • Request financial records to check for suspicious transactions.
  • File a lawsuit for breach of fiduciary duty to recover lost money.
  • Ask the court to remove the trustee and replace them with someone responsible.
  • Hold third parties accountable if they helped the trustee misuse funds.

Courts have ruled that trustees who cause Medicaid disqualification through improper spending can be held liable for financial damages. If a trustee’s mismanagement harmed the beneficiary, the latter can take legal action to recover lost funds.

If your Special Needs Trust was mismanaged, do not worry. Contact The Williams Litigation Group today to discuss how to hold a negligent trustee accountable and recover lost benefits.