Sometimes a parent or relative of a person with special needs will establish a special needs trust for their family member and decide to serve as the sole trustee of the trust. In other cases, a parent won't want to serve as trustee, but will ask a close friend or family member to serve without explaining what the job entails. These are very common scenarios, and they are often followed -- months after the trust has been created, when tax returns are due and it's time to file financial statements with various government agencies -- by the discovery that the trustee is in over his or her head.
Does this sound like you? If so, it may be time to enlist the services of a professional trustee. While hiring a professional trustee may not always be the best solution, it is almost always better to have a professional with experience managing special needs trusts serve in place of an unqualified or overwhelmed non-professional trustee. Here are some warning signs that may indicate that a change is in order:
The Trustee Doesn't Have Enough Time
Every special needs trust is different, but in most cases serving as the trustee of an active special needs trust can seem like a full-time job. Depending on a beneficiary's needs, the trustee of a special needs trust could spend a good deal of time paying bills, monitoring government benefits, helping to secure housing, paying for medical care and serving as a link between the beneficiary and a variety of service providers. If a trustee finds that she can't perform all of these tasks when needed, or if she is sacrificing her family life or other professional obligations in order to work as a trustee, then it may be time to look for a professional trustee.
Trouble Keeping Track of Government Benefit Rules
A special needs trust is a wonderful tool because it allows a beneficiary to maintain access to potentially life-saving government benefits while still providing supplemental assistance where needed. However, like many useful tools, a special needs trust only works when it is used correctly, and it can sometimes be dangerous if operated improperly. Many government benefits, like Supplemental Security Income (SSI) and Section 8 housing, have very complicated and sometimes contradictory rules governing special needs trusts. The trustee of a special needs trust must know these rules well, or, at the very least, work very closely with a special needs planner who can explain the ramifications of his actions as trustee. A professional trustee with experience already knows the rules and will make decisions with them in mind, saving you the hassle of having to consult with your planner before every trust distribution.
The Beneficiary Is Making Life Complicated
When the beneficiary of a special needs trust is aware of its existence and is mentally capable of interacting with the trustee (as opposed to a beneficiary whose disability limits his cognitive functions to the point where he either doesn't understand the trust or is not conscious at all), he can sometimes make the trustee's life very difficult, especially if the beneficiary feels entitled to the money in the trust. This often happens when an otherwise capable beneficiary receives a settlement from a personal injury lawsuit that must be managed in a trust in order to preserve health insurance benefits. Sometimes, the strains of a beneficiary's demands can cause significant problems for family members and can pit relatives against each other. These intrafamily complications can be avoided through the use of a professional trustee.
If you feel that any of these scenarios applies to you, then you should immediately discuss the matter with your special needs planner. You may be able to work with your planner to devise a plan that allows you to remain as the trustee of the trust with added support from a professional, or you may decide that a professional trustee is needed now. In many cases, your special needs planner may be able to fill the role of trustee. Remember: the worst thing a trustee can do is recognize a problem but do nothing to solve it, so if you're thinking about hiring a professional, get started today.
For more on hiring a professional trustee, click here.
This information is not intended to be a substitute for specific individualized tax, legal or estate planning advice as individual situations will vary. Neither Royal Alliance Associates, Inc., nor its registered representatives or employees, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.
Securities and investment advisory services offered through Royal Alliance Associates, Inc. member FINRA/SIPC. Royal Alliance Associates, Inc. is separately owned and other entities and/or marketing names, products or services referenced here are independent of Royal Alliance Associates, Inc. Special needs consulting services are not offered through Royal Alliance Associates, Inc.
Content provided by the Academy of Special Needs Planners, Copyright 2022