Legal arrangements such as guardianships and conservatorships are available to individuals with developmental disabilities who…
Selecting a Special Needs Trustee
Grantors (the individuals who create and fund a trust) generally become trustees when they create a special needs trust (SNT) for a loved one with a disability. However, it is crucial to choose a successor trustee who will continue properly managing the SNT to benefit the special needs individual. When selecting a reliable, honest, and capable successor trustee, there is much to consider since trusts often operate on the honor system unless there are egregious circumstances that the courts must address.
The Role of a Special Needs Trustee
- Appropriate trust property investment
- Accounting and bookkeeping of trust activities
- Communication among trust beneficiaries
- Tax filing for the trust
- Proper distribution of trust assets to the beneficiary while considering current and future needs
- Understanding and staying current as to the needs and welfare of the trust beneficiary
- Ensuring the beneficiary retains eligibility for public benefits programs
- Reporting to the agencies who administer benefits programs
- Working in partnership with family members, guardians, social workers, teachers, and others who provide support for the trust beneficiary
- Management and distribution of trust property after the trust’s termination or the beneficiary’s death
How to Select the Right Trustee
Because of these demands, identifying a trustee willing to serve can be challenging, particularly because an ideal successor trustee’s life expectancy should extend beyond the beneficiary’s life expectancy. If your ideal trustee is not in the right age group, the trust document can give authority to the trustee or the trust protector to appoint a successor. Many families opt to hire a professional trustee through a bank, trust company, or attorney group as they are well-versed in handling the responsibilities of a special needs trust. A family member may remain a co-trustee to the SNT. Yet, some professional groups will only handle larger trusts.
A more modestly funded SNT trust can become part of a special needs pooled trust run by nonprofit groups to efficiently and expertly administer a master special needs trust on behalf of multiple individual beneficiaries with disabilities. A special needs pooled trust has positive and negative attributes. It may reduce administrative fees and increase investment funds creating access to more wealth-creation opportunities. However, a pooled trust is generally inflexible and limits the ability to own real estate or other non-traditional investments. The SNT pooled trust may act as a trustee or co-trustee. A special needs planning attorney can assess your situation and the needs of your loved one to determine if this trust type is the right choice.
Bring Your Questions to a Special Needs Attorney
If you identify someone you believe is willing and capable of becoming an SNT trustee, there are talking points to address. First and foremost, the proposed successor trustee needs to read and understand the trust document. Appreciating the full scope of the trust’s assets and responsibilities regarding its management and beneficiary’s needs may be more daunting than the potential trustee realized. A special needs attorney can address specific questions and potentially amend certain trust sections if all agree. The grantor must outline specific duties if there are co-trustees. For instance, a bank or trust company will likely take charge of investments, tax, and accounting issues, while another trustee will spend time managing the beneficiary’s personal needs.
If there is one successor trustee, they may seek professional consulting assistance or speak to a special needs planning attorney to successfully manage the trust and achieve the grantor’s goals. The SNT should pay for any advisor or attorney related to the trust. The trust should state that a single successor trustee is not liable unless there is gross negligence or an intentional violation of their responsibilities. Because professional trustees tend to be held to higher standards than a family member trustee, liability issues are generally less problematic with a professional co-trustee.
Seeking Additional Support and Guidance
A special needs beneficiary typically has a large support group, including a guardian, family members, counselors, teachers, and more. In addition to the specific responsibilities of a trustee, the select successor must frequently contact these support groups to understand the beneficiary’s changing conditions and needs. The beneficiary’s daily routines, the particular services they receive, and how they are paid give much-needed information to the trustee, who can tailor the benefits management based on this data.
Serving as a trustee to a special needs trust requires compassion, competence, hard work, and a willingness to dedicate much personal time. Even with many demanding tasks, family members and friends often serve as trustees without compensation. However, if the duties are especially formidable, compensation may be appropriate and incentivize a potential trustee to accept the role. A special needs planning attorney can help you structure the SNT to address compensation issues for a non-professional trustee. Professional trustees have varying billing rates to take into account.
Above all, the most important consideration when choosing a special needs trustee is to find a candidate who will act honestly. An honest trustee will fulfill their legal obligations and act in the beneficiary’s best interests to the best of their ability. The code of good faith conduct inherent to the trustee will have them seek additional help should the job become overwhelming or out of the scope of their experience or expertise. There is no way to manage the future, only systems to put in place and competent people assigned to manage the process. Working with a special needs planning attorney to structure a special needs trust and identify the right trustee(s) will provide the most advantageous circumstances for a loved one’s future well-being.
This article offers a summary of aspects of estate planning law. It is not legal advice and does not create an attorney-client relationship. We would love to help – contact our offices in Midway, Erie, and Franklin PA.