If you are in the process of setting up a special needs trust, you must appoint a trustee. This is one of the most important decisions you’ll make about the trust. The trustee must have the necessary expertise to manage the trust, including making proper investments, paying bills, keeping accounts, and preparing tax returns. Moreover, the trustee must have an understanding of how each distribution will affect the beneficiary's public benefits. Here are five questions to keep in mind when considering who will serve in this crucial role:
Is the trustee someone you know and trust? She does not have to be a close friend or relative, but she should be familiar with the needs and concerns of your special needs family member. And it’s important that this person is both ethical and reliable, and someone you can communicate with. The trustee will be coordinating payments for essential services like housing and medical care, and miscommunication can result in the loss of these sometimes life-saving benefits. She may also need to field different opinions between guardians, family members, service providers, and the beneficiary, so you want to choose someone who will be accessible and approachable in such situations.
Does the trustee have expertise? A trustee should grasp the legal and financial issues around special needs planning. He may not be actively involved in making investment decisions, but he is required to make sure that the trust funds are appropriately invested by qualified financial professionals. This involves oversight of the investment activity and monitoring and meeting with financial advisors and accountants to make sure that the trust's investment strategy is working properly. The trustee is also tasked with making sure that the level of risk is appropriate to provide steady growth while still generating some income for the trust.
How well does the trustee understand the financial issues around special needs support? To ensure that your beneficiary's eligibility is never compromised, a trustee's knowledge of public benefit programs, such as Social Security and Medicaid, is crucial. She will be making distributions from the trust, and these can have an impact on the beneficiary’s government benefits.
Is the trustee responsible? A trustee’s duties include keeping the trust records and providing accountings to the beneficiary and other parties. He must also file the trust's state and federal income tax returns, typically on April 15th. Since trust tax returns are complicated, it's best to leave this job to a professional accountant, but the trustee must still understand the basics of trust accounting and ensure that professionals are properly paid from the trust.
Is the trustee free of any conflicts of interest? A trustee is required to act in the interest of the beneficiary at all times, and all decisions about the trust should be made on this basis. Note that your trustee should never be the same person as the beneficiary’s guardian.
Your special needs planner can help you select an appropriate trustee for your special needs trust.