Should a Parent Serve as Trustee of a Special Needs Trust?
It is common for a parent to want to be named as trustee of a special needs trust benefitting her child, especially when the parent is the one creating or funding the trust. There are many reasons why this makes sense. It positions the parent to have complete control over trust distributions. It is also very unlikely that anyone else can match the loyalty and dedication that comes from the strong filial bond between a parent and child. The parent is almost always the individual most familiar with the child’s specific, unique needs that the trust must seek to fulfill in its administration. Another advantage is that the parent will usually work without compensation.
Despite all this, a parent serving as trustee can also confront many daunting problems involving trust laws and public benefits regulations that affect the administration of a special needs trust. The laws governing trusts vary from state to state, and public benefits rules can also vary in different parts of the country. The federal regulations are complex, highly technical, and subject to change. Even tax laws can cause headaches.
The alternative for most families is a corporate trustee, which brings with it objectivity and knowledge in areas such as investments, accounting, tax and trust laws, and public benefits, that a parent often lacks. Corporate trustees are trained to review on a regular basis the trust documents under their administration. They also usually have systems in place to keep current with changes in trust and tax law, as well as public benefit programs rules. But it is not unusual for a parent to feel uncomfortable ceding so much responsibility over their child’s welfare to a seemingly impersonal professional trustee.
One solution is for the parent and professional trustee to serve together as co-trustees. The parent has a clear understanding of the family’s objectives and the needs of their child with a disability, while the professional trustee usually has expertise in financial matters and public benefits law. This is often a good combination for a trust of substantial size. In trusts involving smaller sums of money, the combination of a parent and a nonprofit organization as co-trustees might make more sense.
Perhaps an even better alternative is to consider the use of a trust protector to oversee the corporate trustee. A trust protector is an independent third party, either an individual or an institution, whose role is to “look over the shoulder” of the trustee to ensure that the trust is properly serving the purpose for which it was intended. The trust agreement typically details the trust protector’s responsibilities and areas of authority. One power often given a trust protector is the ability to remove and replace a corporate trustee. Naming a parent as trust protector allows the parent to have formal authority in the oversight of the trust. The corporate trustee, who is more knowledgeable on the technical and legal trust issues, can then serve with the benefit of a parent’s insight into the particular needs of the child with disabilities.
A parent who wants to be involved in the operation of a special needs trust benefitting his child is commendable and encouraged. But deciding whom to name as trustee, co-trustee or trust protector should involve a careful review of the talents the parent has, and perhaps more importantly, the talents the parent lacks. It is often the combination of a parent and a professional trustee in these roles that forms the best team to provide the most versatile support to the child with special needs.
The Most Significant Legal Developments in 2016 for Special Needs and Elder Law
Happy New Year to All! As I looked back over the past year, I realized that there was a tremendous amount of change to talk about with all of you.
From housing, to special education, to the proposal of sweeping Medicaid (MassHealth) reform, we have gathered for you what we see as the most significant legal developments of 2016, and some thoughts about 2017 as well! It has been an interesting year in our courts and in our legislatures, particularly as our Federal and State agencies are looking at budgets that are widely believed to be unsustainable. This is certainly true of special education in our country. However, the United States Supreme Court is hearing arguments about what IDEA means for students with disabilities, hopefully in an effort to clarify the Federal educational standard for all students with disabilities. It has been many years since the Supreme Court has reviewed IDEA, so I am very excited about this.
There has been some very positive results of our advocacy as a whole, including newly available ABLE Accounts in numerous states (not ours), the SNT Fairness Act, the Disabled Military Child Protection Act and the Decambre case. There is a definite movement away from institutional bias and self-determination for adults and children with special needs in our country!However, not all the news is positive. MassHealth, in an effort to curb costs of an escalating budget, has proposed numerous new regulations that will greatly inhibit our seniors and people with disabilities to remain in the community, as well as support themselves in institutional settings. Many of these are focused around the use of trusts.
If you wish to discuss these, or any other important family matters with us, please call us on 508.861.3453 to schedule a consultation. Click below to read the full report.
What are ABLE accounts (“Achieving a Better Life Experience” accounts)?
Some public benefit programs (ie SSI, Medicaid etc) have asset limits. So if a disabled person is in need of benefits but is over the asset limit he/she is deemed not eligible. The (d)(4)(A) trusts were meant to address this situation but with them came a large number of complications and expense. On June 1st 2016 the first ABLE account was launched in Ohio. To learn all about ABLE Accounts, click on link below: