In Part One and Part Two of Choosing a Trustee for Your Special Needs Trust, I described the numerous duties of a Special Needs trustee and the different factors that must be considered in choosing the trustee. In this final post, I offer some suggestions as to how to make that choice in order to fully accomplish the goals you had in establishing the trust to take care of your special needs child both financially and emotionally.
One helpful suggestion is to divide the duties of the trustee into three major categories: financial, personal and administrative. Think about if the trustee you plan to choose is capable of managing all three of these areas successfully. If not, there are several strategies a good estate planner can use in order to ensure your child’s SNT is successfully implemented.
Selecting the Right Trustee for Your Special Needs Trust
One possible choice of trustee for the Supplemental Needs Trust is a family member. You may be thinking of choosing one of your child’s siblings or one of your own. It is, after all, comforting to know that the disabled individual will always have someone loving looking after him/her.
The biggest problem with placing a sibling (or any other family member) in position as trustee of the disabled person’s financial affairs is the burden it places on both the sibling and the relationship the sibling has with the disabled family member. One of the most difficult provisions of administering an SNT for a beneficiary who needs to keep their eligibility for government benefits is that for every dollar over $20 the beneficiary receives in cash, the SSI recipient will receive one dollar less. Should the cash outlay exceed the SSI, the beneficiary is in danger of losing all public benefits. When a sibling or other family member must be the person to have to deny his brother/sister’s request, this places everyone involved in an awkward and uncomfortable position.
Additionally, many family members will not understand all the different rules that must be followed, and will have to employ financial advisors to help manage the SNT.
Another possibility is a corporate trustee. In New York, a bank or brokerage house can serve that purpose. Many clients will balk at this idea, believing a bank to be cold and disinterested. Many financial institutions have special departments to serve the needs of disabled beneficiaries. If you would like to learn more about corporate trustees that handle Special Needs Trusts, please contact me for more information.
One valid concern about a corporate trustee is monitoring and oversight. A second is concern over the rapid mergers and recent dissolution of even the largest players in the financial services industry.
Also, many corporate trustees will not accept smaller accounts and take a percentage off the top for administrative services.
Co-Trustees and The Trust Protector
In order to handle all aspects of managing an SNT, you can choose co-trustees, wherein a family member and the corporate trustee manage the trust together. The SNT should establish what happens in case of a conflict between a corporate and a family member trustee.
Another solution is to name a trust protector in the Special Needs Trust to monitor the corporate trustee. That person might be a family member, accountant, or a member of a local chapter of NAMI or ARC. This relieves the family member of the many duties associated with properly administering and investing the assets in the SNT, but allows for replacing the corporate trustee should the corporate trustee be neglecting the trust, investing improperly or merging its existence with another institution that might not meet the needs of the beneficiary. This also gives the family member an “out” so that they are not seen as the “bad guy” to the disabled beneficiary.
T-E-A-M spells Trustee
The best solution, if practical financially, is to have a team in place. This team could consist of investment managers, family members, care or case managers, long-term caregivers and most importantly the beneficiary themselves. Part of the goal, if possible, is to promote independence for the beneficiary and while any direct management of the SNT might cause the beneficiary to lose government benefits, the beneficiary should, if able, certainly be included in the decision making process.