Previously, I discussed the types and applications of various Special Needs Trusts (SNTs). I highly encourage you to review the previous article for comprehensive information on the subject. However, here is a brief synopsis of my previous article for your reference:

  • A Special Needs Trust is a type of trust created to address the long-term financial needs of a family member with disabilities who is under the age of 65.
  • There are various types of SNTs. A General Support/Discretionary SNT serves as a disabled beneficiary’s primary source of income and provides the beneficiary with periodic distributions for general care, education, hobbies, and activities. A Supplemental SNT acts as a supplemental resource to government benefits; and because trust funds are not directly accessible by the beneficiary, continued eligibility for various government benefits is ensured
  • A First-Party (Self-Settled) SNT is funded with assets belonging to the special needs beneficiary, and this type of trust is subject to estate recovery upon the beneficiary’s death. A Third-Party SNT is established with assets from someone other than the special needs beneficiary and is not subject to estate recovery.Once a determination has been made regarding the proper type of SNT best suited to the particular situation of your loved one, it is necessary to determine who will administer the trust on their behalf. Below are some critical questions to consider when making this important decision:
  • Does the trustee have the time, ability, and willingness to perform the required duties? Serving as trustee of a SNT may involve duties such as paying bills, managing medical care, providing transportation, securing housing, and monitoring government benefits. Performing said tasks (and potentially many others) can feel like a second job. Thus, it is crucial to select a competent, patient, available trustee capable of performing these various activities in effective and timely manner.
  • Does the trustee understand the various rules about various government assistance programs? It is essential that the potential trustee understand the various government assistance programs available/being provided to the beneficiary. Improper distribution of funds to the beneficiary may interrupt or terminate eligibility for benefits integral to their long-term well-being. Thus, to prevent such an occurrence, a trustee candidate must be familiar with all applicable rules and provisions.
  • Would appointing the trustee strain a relationship or create a conflict of interest? Frequently, a parent may designate a child’s sibling as the successor trustee of a SNT. On its face, this choice makes logical sense as the sibling—likely similar in age—will be available to care for the special needs beneficiary long after the death of their parents. Additionally, while a sibling trustee will be entitled to compensation for their work, such compensation may be significantly less than that of a professional fiduciary—thus potentially preserving the trust estate. However, a once cordial relationship may sour when a child is required to request distributions from a sibling trustee. Furthermore, if the sibling trustee is also a residuary beneficiary of the trust, the sibling trustee may be incentivized to minimize distributions to the special needs beneficiary to maximize the sibling trustee’s inheritance upon the special needs beneficiary’s death.
  • What about a professional fiduciary? The appointment of a neutral, professional fiduciary may help ensure that the SNT is managed with precision, in compliance with all government directives, and solely for the benefit of the special needs beneficiary. However, such a decision also means that the trustee will not have a direct personal relationship with the special needs beneficiary, rendering administration technical and impersonal. Furthermore, a professional fiduciary will be compensated for their work by the trust estate. Thus, it is necessary to consider whether the trust estate contains funds sufficient to cover the cost of administration by a professional fiduciary.While the above is by no means an exhaustive list, I am hopeful that the foregoing has provided you with a enough information to begin putting together a short list of potential candidates for this vital role in the long-term care of your loved one.