Trusteeship Misconceptions in a Special Needs Trust

Special Needs Trusts have two primary objectives: Fiduciary management and government benefit eligibility.Special Needs Trusts provide fiduciary management and oversight for individuals who are unable to take direct custody of property, typically as a result of a cognitive limitation, lack of judgment, or susceptibility to financial manipulation. In this way, Special Needs Trusts are similar to other types of discretionary trusts, such as a trust established for a minor or a trust created for a spendthrift who lacks financial discipline. All of these trust arrangements serve to protect trust property through the appointment of someone who will exercise independent judgment in determining how trust property will be used for the beneficiary’s benefit.With regard to government benefit eligibility, preserving eligibility for Medicaid allows the beneficiary to access residential services, home health and personal care services, transportation, and other benefits. And for those who have no other source of income and whose disability leaves them unable to work, the Supplemental Security Income (SSI) program will continue to serve as a primary source of income. Both programs have stringent income and resource limitations.

#1: Friends and Family Will Do a Better Job

Most clients do not understand the distinction between guardianship and trusteeship. Without any practical experience or familiarity with professional trusteeship, clients often equate the financial responsibilities of trusteeship with the personal responsibilities of guardianship.Misconception

#2: Friends and Family are Less ExpensiveWithout an understanding the time and effort that is required to do the job right, many clients assume that a family member or friend will not accept compensation. And family members and friends (when consulted prior to the appointment) often promise to do the job for nothing more than love and consideration, also for lack of understanding of what they are about to take on.Misconception

#3: “It’s Not That Hard…..”

More commonly, the family member or friend who is being considered as trustee is far removed from the day to day affairs of the person with the disability. He or she may live out of the area and only see the person with the disability a few times a year. Siblings move on and raise their own families, maintain jobs and have lives to live.Some family members or close family friends have little or no personal experience with the time and effort required to be an effective trustee.

 #4: “My (family member/friend) is a (financial professional, accountant, lawyer, etc.), and will be a perfect choice for trustee….”

Special Needs Trusts are discretionary trusts, which mean that the trustee must take the time to understand the beneficiary’s needs, and then use the funds under management to meet those needs in a proactive and cost effective manner. A degree in forensic accounting does little to help a beneficiary if the trustee cannot take the time to review an Individualized Education Plan or have a conversation with a social worker to determine what items or services could help enhance the beneficiary’s quality of life.

Managing a Special Needs Trust requires attention to all of the traditional responsibilities of trusteeship – investment management, accounting responsibilities, and tax return preparation. But in many (and perhaps most) cases, there are other, more frustrating and time consuming challenges that lead to ‘trustee burnout.’ A trustee who expected to spend his or her time looking at investments and reconciling checkbooks may instead find herself involved in addressing the consequences of a beneficiary’s lack of executive functioning skills and poor judgment. There can be domestic disputes, financial abuse, and in some cases police involvement. In addition, a trustee may be faced with questions and continued criticism from remaining beneficiaries of the trust who continually second-guess the trustee’s distribution decisions, or a court-appointed guardian for the beneficiary who makes unreasonable demands for expenditures.