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Naming a Trustee for a Special Needs Trust

Naming a Trustee for a Special Needs Trust - Consider a Professional Fiduciary

By Don Drake, Connelly Law Offices, Ltd.

Special Needs Trust Rhode Island
Attorney RJ Connelly III

When a special needs trust (SNT) is established for a family member with a disability, the person who sets up the trust, also known as the trust's creator, is generally the one who assumes the role of trustee. However, certain situations may exist where the creator cannot continue serving as a trustee. In such cases, it becomes crucial to identify a successor trustee who can effectively manage the SNT to benefit the special needs individual. This is because the trustee of an SNT holds a fiduciary responsibility to manage the trust's assets in the beneficiary's best interest and to ensure that the trust terms are followed. In today's blog, we will discuss the importance of naming a trustee for a special needs trust and why a professional fiduciary should be considered for this role.

"There may be instances where the grantor is not suitable to manage the trust, particularly when the beneficiary is grappling with a serious physical condition, mental illness, or even a substance use disorder, as highlighted in a previous blog we posted on the SNT for a substance user," stated professional fiduciary and certified elder law Attorney RJ Connelly III. "Trusts usually operate on the honor system unless a serious problem requires court intervention. Therefore, choosing a reliable, honest, capable successor trustee is critical. It involves evaluating numerous factors, such as the trustee's financial acumen, ability to navigate complex legal and financial matters, and willingness to prioritize the beneficiary's well-being over their personal interests."

The Role of a Special Needs Trustee

Being appointed as a trustee for a Special Needs Trust (SNT) is a significant responsibility that requires a high performance standard. The trustee is held to a much higher level of accountability than they would be for their financial affairs. The role of an SNT trustee encompasses a wide range of duties and responsibilities that must be handled with great care and attention to detail.

Special Needs Trust Massachusetts
The trustee is held to a high standard

First, the trustee must know how to invest in the trust and manage the assets appropriately. They must also maintain accurate and up-to-date accounting and bookkeeping records of all trust activities. Communication among trust beneficiaries is another critical aspect of the trustee's role. The trustee must ensure that all beneficiaries are informed of any changes to the trust and that their needs are considered.

The trustee is also responsible for filing taxes for the trust and adequately distributing trust assets to the beneficiaries while considering their current and future needs. The trustee must understand and stay current on the needs and welfare of the trust beneficiary, ensuring they retain eligibility for public benefits programs. Reporting to the agencies that administer benefits programs is also a key responsibility.

The trustee must partner with family members, guardians, social workers, teachers, medical providers, and others who support the trust beneficiary. They must manage and distribute trust property after the trust's termination or the beneficiary's death, ensuring that all legal requirements are fulfilled.

"Being an SNT trustee encompasses a wide range of responsibilities that demand a meticulous comprehension of the trust's legal and financial obligations, coupled with an unwavering commitment to the welfare of the trust's beneficiary," stated Attorney Connelly. "It is a significant responsibility that mandates a high level of dedication, attention to detail, and expertise in fiduciary and elder law, as well as a wealth of experience. Additionally, the trustee must establish and maintain a strong relationship with the beneficiary, ensuring that their needs are met and their rights are protected."

How to Select the Right Trustee

During a recent presentation on Special Needs Trusts at a workshop, Attorney Connelly discussed the many responsibilities of serving as a trustee. "The duties listed in the trust document are just the beginning, as ethical responsibilities must be upheld. For example, a trustee must be able to say no when the beneficiary requests money for something that may not be in their best interest. This can be challenging, so finding a trustee willing to serve can be difficult," he told those in attendance.

Attorney Connelly recommends that families hire a professional fiduciary to oversee the SNT. These professionals are well-versed in handling the responsibilities of an SNT and can provide valuable expertise and guidance.

Mistakes Made with SNTs

Attorney Connelly explained that establishing a special needs trust (SNT) is a complex process that requires a deep understanding of the applicable guidelines. Unfortunately, mistakes can easily be made by those unfamiliar with these rules. Such errors could jeopardize the government benefits that are essential for individuals with disabilities.

Special Needs Trust Connecticut
SNTs have primary objectives that must be followed

"The primary objective of an SNT is to provide financial support to these individuals, and it covers a wide range of expenses that can significantly improve their quality of life," said Attorney Connelly. "However, it's critical to recognize that there are certain limitations to what expenses can be paid using this trust. Notably, an SNT cannot be used to cover expenses that SSI and/or Medicaid already covers. For instance, if a client receives SSI benefits, these funds are intended to cover basic needs such as food and shelter expenses, including water, sewer, electricity, and gas.

Therefore, it's essential to use the SNT funds for additional items that can enhance the recipient's quality of life, such as education, medical expenses, travel expenses, and other personal needs."

Consider an Attorney or Professional Fiduciary

Attorney Connelly advises that once an individual has decided to take the next step towards creating a Special Needs Trust (SNT) and has selected a capable and willing trustee, it is crucial to have a detailed discussion to address some critical issues. The proposed trustee should thoroughly read and comprehend every aspect of the trust document, including managing the trust's assets, responsibilities, and the beneficiary's needs. However, this task might seem daunting to the trustee, and a special needs attorney or professional fiduciary can help address any specific questions and amend the trust sections if necessary.

Special Needs Trust Martha's Vineyard
Trustees must understand the trust document

In the case of co-trustees, the grantor must outline specific duties to avoid any conflicts. For example, a bank or trust company usually manages investments, tax, and accounting issues, while another trustee manages the beneficiary's personal needs. A lack of clarity on these responsibilities could create problems if all parties involved do not understand the beneficiary's best interests.

If there is only one successor trustee, they may seek professional consulting assistance or speak to a special needs planning attorney or professional fiduciary to ensure the grantor's objectives are met. It is essential to note that the SNT should cover the costs incurred by any advisor or attorney related to the trust. The trust document should state that a single successor trustee is not accountable unless there is gross negligence or an intentional violation of their responsibilities. Professional trustees are typically held to higher standards than family member trustees, and liability issues are less problematic with a professional co-trustee.

Supporting the Beneficiary

"When it comes to special needs trusts (SNTs), the role of the trustee is to manage the assets in a way that benefits the beneficiary. However, this task is not simple and requires much more than fiscal management skills," said Attorney Connelly. "A special needs beneficiary typically has a large support group, including a guardian, family members, counselors, teachers, and other professional support people around them. Therefore, apart from the specific responsibilities of the trustee, the select successor must maintain frequent contact with these support groups to understand better the beneficiary's changing conditions and needs."

Special Needs Trust Providence
The trustee must serve the beneficiary's best interests

In addition to understanding the beneficiary's needs, the trustee must also be compassionate, competent, and willing to dedicate the necessary time to serve the beneficiary's interests. They must have an intimate understanding of the beneficiary's needs, which requires them to be in touch with the beneficiary's daily routines, the unique services they receive, and how they are paid. This information is critical as the trustee can tailor the benefits management based on this information.

Although family members and friends often serve as trustees without compensation, it depends on the recipient's needs. If the duties are especially formidable, compensation may be appropriate to incentivize a potential trustee to accept the role. A special needs planning attorney can help structure the SNT to address compensation issues for non-professional trustees. Alternatively, if a professional trustee is suitable for a specific case, remember that they have varying billing rates to consider.

It is worth noting that the code of good faith conduct inherent to the trustee will have them seek additional help should the job become overwhelming or out of the scope of their experience or expertise. Therefore, working with an attorney or professional fiduciary upfront to structure an SNT and identify the right individuals to act as trustees will provide the most advantageous circumstances for a loved one's future well-being.

A Final Word

"If you have a family member of any age with a disability, they may benefit from a special needs trust," said Attorney Connelly. "Our team can provide you with the necessary information about the distribution guidelines of a special needs trust and help you determine whether it's a good fit for your family member's situation. We'll take the time to educate you on the advantages and disadvantages of setting up a special needs trust and answer any questions you may have. Contact us today to learn more about how we can help you and secure your loved one's future."

Special Needs Trust Newport Rhode Island

Please note that the information provided in this blog is not intended and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise that you consult your attorney, professional fiduciary advisor, or medical provider for advice.

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