Corporate trustees are a favorite choice for managing larger Special Needs Trusts or Supplemental Needs Trusts, but that isn’t always the best choice, as Mark C.H. discovered. Mark is an adult autistic man who in the court’s words is a “severely disabled, vulnerable, institutionalized young man”. His mother created a Supplemental Needs Trust* for him, and at her death, Mark’s trust was funded with approximately $2.7 million. After three years the trustees, a large national bank (J.P. Morgan Chase) and an attorney filed an accounting and requested a total of $52,000 in combined commissions, for managing the trust. The problem? In that three year span the trustees hadn’t visited the beneficiary, hadn’t inquired about his needs, or spent a single cent for his needs.
The court, in reviewing all of this denied any compensation to the trustees for the three years that they did nothing for Mark. The court stated that the Trustees had a fiduciary duty to be proactive "in keeping abreast of the beneficiary's condition, needs, and quality of life, and to utilize trust assets for his actual benefit." Due to the court’s intervention, Mark finally received the attention of a care manager who worked with Mark and was able to dramatically increase his quality of life.
This story has a happy ending because the court cared enough to pay attention to what was going on (or more accurately, what wasn’t going on). How many other people like Mark are out there who could benefit from just a little attention?
Picking the Right Trustee
The trustee of a Special Needs Trust, or Supplemental Needs Trust needs to be a person who can make decisions in the best interest of the beneficiary. This means that they should be someone who has the ability to be involved in the beneficiaries life and manage the resources available for the beneficiaries benefit. Sometimes those resources are other people who can offer professional services, such as education, or counseling, or physical therapy, or even managing the money in the trust.
Some trust drafters prefer to establish a committee of trustees, sometimes defining specific roles for the committee. My preference is to establish the trustee as the “general” who can make the important decisions, and bring in the experts to provide the assistance the trustee and the beneficiary may need.
If you do choose to use a professional trustee, or corporate trustee, find out a few things. What fees do they charge? Some corporate trustees require that the trust hold a certain amount before they will accept responsibility for managing the funds. What services will the corporate trustee provide? Some corporate trustees have a local representative that can work directly with the beneficiaries, but not all. Some corporate trustees are there strictly to handle the investments, like they would for any investor, and require that they work with someone else who will handle any distributions from the trust.
Being the trustee of a special needs trust is a serious job, and in choosing someone for that responsibility, you will want to select someone with compassion, and the ability to manage a multitude of resources available, both public, and private for the disabled beneficiary.
*Special Needs Trusts and Supplemental Needs Trusts are both established for the benefit of a disabled beneficiary. The difference is that a Special Needs Trust is established with the beneficiaries own money, while a Supplemental Needs Trust is established with money from a third party, the beneficiary’s mother, in this case.
Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net
Tags:Special Needs Trustee
Erik is the founder of Estate Plan Pros, a leading estate planning practice in Elk Grove. Erik’s practice focuses on Estate Planning Law. In Estate Planning, Erik works with clients to make the process simple, so clients can focus on more important things. He is a local authority for specialized estate planning instruments, like Special Needs Trust, Irrevocable Trusts, or other focused documents. Erik has litigated, negotiated, and mediated the gamut of family law cases. With this unique perspective as a family law and estate attorney he can often spot issues otherwise overlooked. Prior to graduating he worked as a legislative analyst for a non-profit organization, and volunteered as a youth counselor. Erik currently participates in local politics and is an active member of his local church. Erik is very happily married and has two young sons. Together, his family loves to get outdoors and enjoy the varied activities the Sacramento region has to offer.