Special Needs Trustees beware! It's vitally important for you to become familiar with the type of government benefit(s) your special needs beneficiary is receiving, particularly if they are the types of programs that have income limitations, such as Supplemental Security Income (SSI) and subsidized housing.
The income generated by the special needs trust may be taxable, but it is not considered as "countable" income for the special needs beneficiary. But if you start making "regular" distributions to the beneficiary then you will have an income problem that will reduce government benefits or eliminate them altogether if the distributions are large enough.
The word, "regular" income, in the world of government benefits, is defined as distributions that are received on a periodic basis, at least two or more times per quarter or in consecutive months. In contrast, "irregular" distributions are not periodic or predictable and should not cause a problem with benefits.
This type of income would reduce the SSI benefits dollar-for-dollar, less the $20 disregard (a topic for another post). There would also be a problem if the special need beneficiary is living in federally subsidized housing since those programs have income limits.