Many families consider establishing a trust for the future of their child or loved one with special needs. One extremely important consideration when establishing a trust is who to name as trustee.
Obligations of a Trustee
Trustees must uphold professional standards of impartiality and are responsible for providing many services. Some of a trustee’s knowledge areas and obligations include:
- Impartiality and no self-dealing
- Delegation when things are beyond their scope of understanding
- Selection of professionals
- Modern Portfolio Theory
- Restricted accounts
- Annual Accounting
- Reporting to SSA
- Reporting to Medicaid
- Reporting to courts
In addition to serving all of these roles, the trustee must also have a strong understanding of how public benefits work and be able to keep track of all regular payments (ex. property taxes, car payments, utilities, and grocery expenses).
Naming a Family Member as Trustee
A lot of the time, people look for the seemingly-obvious option in naming a sibling or other family member as the trustee. This is not always the best option and can create added stress and challenges in the future. The problem with naming a family member as trustee is that many individuals underestimate the responsibilities and time needed to care for an adult dependent and/or maintain their benefits, programs, and important decisions. Serving as trustee comes with great responsibility, which can be time consuming and overwhelming for some. It can also detract from the ability to serve as an advocate and ally for your loved one.
Instead of naming a family member as trustee, the position of “trust protector” may be a better fit. The role of trust protector is more of a guardian who oversees the trust. Serving in such a position, a trust protector can appoint a corporate trustee or a qualified attorney to serve as trustee instead of taking on that role themselves.
Appointing a Corporate or Professional Trustee
At Planning Across the Spectrum, we are in favor of appointing a corporate or professional trustee rather than having a family member in this role because of the additional stress and challenges it can place on an inexperienced individual, let alone the amount of time it takes to continuously fulfill the responsibilities.
For example, if a brother were serving as trustee for a sibling’s Special Needs Trust “SNT,” the brother will likely face additional constraints in trying to help support their sibling while also maintaining their own work/life balance and focusing on their own life goals. It may even be difficult to plan for a small vacation due to concerns of something happening while away. To really allow the family member to be a support and advocate, it is important to consider having the family member added as a trust protector or named as co-trustee instead of operating as the sole trustee.
Considerations when Selecting a Corporate Trustee
If you decide to appoint a corporate trustee, you still have to be careful with your selection. Many corporate trustees either do not specialize in special needs trusts, or they have higher minimums for doing so. If the trust is under half a million dollars, consider using an attorney as trustee or utilizing a pooled trust. While the fees are usually about 1%, it may be well worth the cost when you consider the time investment required to serve as trustee.
Keep in mind that many pooled trusts and professionals’ trustees have restrictions. For example, they may not offer management of real estate property. Smaller trust companies often don’t have a property manager who can ensure property is being maintained. Furthermore, they may not permit you to select an independent financial advisor. Many pooled trusts will have their own investment team or work strictly with their own selection of trusted finance professionals. If you already work with a financial advisor and want them to continue to support your loved one when you are gone, discuss whether that is possible with a prospective trust company or nonprofit managing a pooled trust.
Finally, remember that there is more to being a trustee than paying the bills. Consider working with a trust company that has social workers on staff instead of or in addition to trust officers, such as Hope Trust, who truly specialize in serving the unique needs of your loved ones. Some trust companies have higher investment minimums to ensure they are able to cover the costs of the services they provide.
If you are not sure where to start, our special needs advisors can help you to get started. At Planning Across the Spectrum, we are committed to helping you turn your goals into realities. Our financial advisors can also help you to analyze your assets and determine how your trust will be funded.
This post was written by Planning Across the Spectrum, a sponsor of the Autism Housing Network. They specialize in providing certified financial planning advice and services to those with special needs and disabilities, including autism. We are fortunate to have the opportunity to share their expertise with our readers. Watch the financial planning videos as they are released here.