Accounting for Arizona special needs trust funds

By May 25, 2011Uncategorized

Special needs trusts have unique rules that apply to them, so the accounting process for Arizona special needs trust funds is somewhat different than the accounting process that may be involved with other types of trusts.  What typically happens with a trust is that the trust beneficiaries are entitled to any income that the trust generates, while the remaindermen then get what remains in the trust (called the trust corpus) when the trust terminates.  This can be simple enough, but it oftentimes raises issues as to whether an increase to the value of the trust should be treated as income – to be paid to the beneficiaries, or as principal – to be left in trust for the remaindermen at the termination of the trust.

As to Arizona special needs trust funds, however, these types of accounting issues are typically not present.  The reason for this is that the rules governing Arizona special needs trust funds restrict what trust income may be spent on, and they also demand that the state Medicaid program (ALTCS) is the first in line as remainderman when the trust terminates.  Because Arizona special needs trusts are typically designed to supplement the care of an individual with special needs, and not as an investment vehicle, special needs trusts tend not to generate substantial income.  As such, issues involving whether to categorize Arizona special needs trust funds as trust income or principal rarely arise.

Just because these accounting issues rarely arise with Arizona special needs trust funds does not mean that administering such a trust is uncomplicated.  A web of complicated rules govern Arizona special needs trust funds that you must be aware of if you are a trust administrator.  For specific guidance on handling Arizona special needs trust funds, do not hesitate to contact JacksonWhite by calling (480) 818-6912, or by filling out a consultation form.