Avoid These Mistakes When Choosing a Trustee for a Special Needs Trust
Special Needs Trusts are set up for individuals who are unable to manage their own finances due to a disability. They are similar to trusts for minors or ‘spendthrift’ adults.
Special Needs Trusts have two primary objectives:
- Manage the property and assets which fund the trust properly and to the benefit of the person who benefits from the trust.
- Make sure the person who benefits from the trust remains eligible for government benefits like Medicaid and Supplemental Security Income (SSI) that provide access to a variety of services including health care, transportation, help with daily living and an income for those on SSI.
Because the rules around eligibility for benefits are stringent, it is important to select a trustee for the SNT wisely. Here are some common mistakes:
Mistake #1: Believing Friends and Family Will Do a Better Job. Family and friends often don’t have the financial savvy to manage this type of trust which can result in a loss of benefits. Many confuse the trustee role with the role of a guardian.
Mistake #2: Assuming Friends and Family are Less Expensive. It’s not unusual for a family member to take on the role of trustee and then become frustrated and overwhelmed with the responsibility and the time involved in managing the trust. If they take the task on without compensation due to a lack of understanding and are not up to the task, the beneficiary is the one to suffer – in some cases, they lose access to benefits.
Mistake #3: “It’s Not That Hard…..” Even siblings often don’t appreciate the time and effort required to be an effective trustee because they have moved out of the house and have their own lives. They simply are not aware of what their parents do every day for their brother or sister.
Misconception #4: Appoint Cousin Bud Because He is a Financial Advisor (or accountant, lawyer, etc.), and He’s Family!” This approach ignores the responsibilities beyond financial – meetings with social workers or benefits manager, for example.
The trustee of a SNT must be able to meet the traditional responsibilities of trusteeship – investment management, accounting responsibilities, and tax return preparation AND be prepared to manage the consequences of bad decisions the beneficiary may make due to poor decision-making abilities regarding not only money but actions. Sometimes trustees must deal with domestic disputes -- even police issues – and unreasonable demands for spending by the beneficiary or guardian. In addition, a trustee’s decisions may be challenged by other family members.
An experienced estate and elder law attorney, like those on staff here, can help you choose the right trustee for your loved one. Give us a call to get started today.