Choosing a Trustee for Your Special Needs Trust: Part Three

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

Family Members

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.

Corporate Trustees

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.

Choosing a Trustee for Your Special Needs Trust: Part Two

In Part One of Choosing a Trustee for Your Special Needs Trust, I discussed all the different responsibilities and jobs a trustee must fulfill to properly administer the trust.  It is also important to really assess both the current and potential future needs of your child.

Considerations to Use in Choosing a Trustee

There are a variety of factors that must be weighed and balanced in order to make the best choice possible to manage the Supplemental Needs Trust’s assets while at the same time contribute to the well-being of your special needs child.

  • What is the nature of the disability?
  • How old is the trust beneficiary?
  • Where does the disabled person currently live, and where might that person live in the future?
  • What government benefits is the child with special needs now receiving and what might they become eligible to receive?
  • What is the life expectancy of the disabled person?
  • What is the source of funding of the Special Needs Trust?
  • What skills does the potential trustee have?
  • Are there sufficient funds for the  trustee to be able to hire competent advisers such as accountants, attorneys and caregivers?
  • How available is the trustee to manage both the financial and emotional needs of the special needs child?
  • Are family members a resource to manage either the trust or a trustee?
  • Are non-family members available such as a teacher, family religious leader, an attorney or accountant?  Perhaps you or your child belong to a national organization such as the National Alliance on Mental Illness (NAMI) or the Arc (ARC)?
  • Does the disabled person have a case manager provided by the state, or a care manager provided privately?

Solutions

In Part Three of Choosing a Trustee for Your Special Needs Trust I will offer a number of different solutions to the problem of finding a trustee to administer your trust who meets the qualifications and considerations that are important to both you and your special needs child.

Choosing a Trustee for Your Special Needs Trust: Part One

Choosing a trustee to manage your child’s Special or Supplemental Needs Trust is one of the most difficult decisions you will have to make.  That decision alone often stops parents from taking the next step of setting up an appointment with an attorney who has expertise with drafting Special Needs Trusts.

After all, how can we, as parents, choose who should be responsible for managing both your disabled child’s money and also be in charge of their welfare for what could arguably be the next 60 or 70 or 80 years?  I certainly struggled with this for years.  Both my parents were only children, as is my daughter and her father, and my brother has no children.  That translates into no siblings, cousins, aunts or uncles.  I’ve spent a lot of time worrying about the future, and who will be left to care for and about my daughter after I die.  And while I plan on living for a long time, my hope and expectation is that my child will live many years past my life expectancy.

We automatically look to family members, but I hope to show you that this is not necessarily the best idea or the most practical when choosing a trustee.

The Many Hats a Special Needs Trustee Must Wear

The trustee who administers your child’s Special Needs Trust has many responsibilities:

  • Fiduciary:  Your trustee must dispense funds to the beneficiary in accordance with the provisions in the Supplemental Needs Trust.  That trustee must also invest the trust’s assets wisely in accordance with a number of laws including the Prudent Investor Act.  The Trustee must be able to handle tax matters, to keep good accounts and understand the duties of loyalty and care.
  • Government benefit issues: In addition to the fiduciary responsibility every trust mandates, the trustee of a Special or Supplemental Needs Trust must also have a complete understanding of the rules that govern Social Security, Supplemental Security Income, Medicare and Medicaid.  The trustee may need to understand Section 8 entitlements and rules of the Office of Mental Health (OMH) and the Office of Mental Retardation and Developmental Disabilities (OMRDD).
  • Meeting the needs of your disabled loved one:  The trustee must be able to understand and respond to the needs of your child.  The trustee must be sensitive to your child’s needs and also have an understanding of the special services that are available to support, encourage independence if possible and improve the quality of the life of your child with special needs.
  • Standing in your place:  The trustee can never replace you, but should genuinely care for your child.  For example, if your child should need hospitalization or institutionalization,will there be someone who will visit and ensure your child is not being neglected or abused in any way?  If your child begins to use drugs, or stops taking prescription medication, or going to therapy, or any of a number of signs we as parents know are signs of deterioration, will your trustee also know to watch for these?
  • Immortality: Your trustee must be able to manage the trust for as long as your child needs care.

Clearly, there are many things to think about.  In Part Two of Choosing a Trustee for Your Special Needs Trust, we will examine some of the considerations used to make this extremely important decision.