When selecting who should take on this important role, there are several factors you should consider.
When establishing a special needs trust (SNT), selecting a credible and reliable trustee is extremely important. The purpose of an SNT is to supplement a disabled person’s government benefits by paying for non-covered medical services or equipment. SNTs are commonly used to pay for personal care attendants, education, home furnishings, out-of-pocket medical and dental expenses, recreation, vehicles, and physical rehabilitation, as well as common necessities such as a cellphone. Most importantly, a special needs trust helps to enrich the beneficiary’s life and make it more enjoyable.
Therefore, a trustee should be adept at managing accounts, bills, taxes, and other financial matters, as well as allocating money to these needs in an efficient manner. Additionally, it’s often wise to work with someone who has a personal connection and commitment to the beneficiary and his or her interests and needs.
When evaluating trustee candidates, consider the four key factors below.
Competence, Knowledge, and Experience
Often, proceeds from a disability settlement are not enough to cover ongoing medical expenses related to the injury. Missteps can cause a beneficiary to lose needs-based benefits such as Medicaid, Medicare, and Supplemental Security Income. The trustee must thoroughly understand these programs and how to satisfy the qualification requirements.
Conflicts of Interest
The trustee should never act in her or her own interest when making decisions regarding the allocation of funds. These decisions should be based solely on the best interest of the beneficiary. Additionally, SNTs contain Trust Protector Language that allows a professional trustee to be removed with no questions asked. The trustee should be comfortable with this language, which keeps the family as the client.
Having a good trustee-beneficiary relationship is critical, as communication regarding changing needs should be frequent. A close connection is also important as the trustee is expected to serve the needs of the beneficiary for the duration of the trust.
Individual vs. Corporate Trustees
Given the complexity and longevity of administering a special needs trust, it’s important to weigh whether to select the best-qualified individual or a corporate trustee.
Properly managing a special needs trust means understanding the disabilities of the beneficiary and being able to effectively communicate with a parent, caregiver, or guardian, which can require a significant time commitment on the part of the trustee.
A trustee must be able to prudently manage the assets held for the beneficiary’s benefit and understand the governmental regulations and how to work about them. The trustee, whether an individual or corporate institution, should be knowledgeable about what can be paid for through the trust and what shouldn’t, as well as be able to prepare and retain records of earnings and disbursements for tax purposes. A corporate trustee is often better positioned than an individual trustee to effectively administer a special needs trust in a way that is compliant with state and federal laws.
Raymond James financial advisers do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.
Article provided by Bill Martin, CFP®, 1845 Capital of Raymond James, 1400 N McColl, Suite 101, McAllen, TX 78501. For more information, please contact Bill Martin, CFP® at 956-331-2777.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”
© Raymond James & Associates, Inc. member New York Stock Exchange / SIPC