Parents or other family members establishing a special needs trust for their disabled family member often want to name a professional — usually a bank, trust company, attorney, certified public accountant or non-profit — as one of the trustees of the trust in order to take advantage of that individual’s experience with investments, money management, and tax planning. The professional trustee can also be a great option for families looking for a “disinterested party” to provide a counterweight to a family trustee who may be much more familiar, and much more emotionally invested, in the beneficiary’s day-to-day life. If your family member is about to receive a large cash settlement, hiring a professional trustee may even be essential in order to preserve and manage the trust’s assets for the long-term, especially if you have little investment experience.
But not every trustee recommended by a personal injury attorney, or that advertises trustee services, provides the best services for trusts designed for people with special needs. Here are some questions to ask while searching for the right professional trustee for your new trust.
How much experience do you have working with special needs trusts?
Special needs trusts have very complicated rules regarding distributions to and for a beneficiary with a disability. Not every bank trust department or attorney understands these rules, so it pays to look for a trustee who works with other special needs trusts and who can give you concrete examples of their expertise in this area. Remember: one mistake by a trustee could significantly compromise your family member’s benefits for a long time.
What kinds of specific services do you provide for special needs trusts?
Unlike some trusts that merely require the trustee to pay income checks at quarterly intervals to a group of beneficiaries, special needs trusts often require a great deal of coordination and support from a trustee. Since most beneficiaries are not allowed to receive significant cash payments, the trustee often has to pay numerous bills directly to service providers, and will often have to arrange for services and care for a beneficiary who is incapable of making the proper requests himself or herself. A good professional trustee will have a support staff or structure in place to handle these matters quickly and efficiently.
Do you provide tax planning and do you prepare tax returns in-house?
Large special needs trusts usually have large tax returns. Some trustees would rather not deal with the sophisticated tax planning that goes into a well-run special needs trust. Make sure to ask how a trustee handles tax planning and annual tax filings, and what makes her/him qualified to do so. Just because a trustee may know everything about special needs law does not mean he/she is able to get the taxes right, too.
What do you charge and what other requirements must the trust meet in order to retain your services?
Professional trustees will typically charge a set percentage of the trust’s assets in order to manage the trust. But this may not be the only fee. Trustees often charge extra for tax planning, other time-consuming projects, and brokerage services. Sometimes, large integrated banks will require the trust to allow them to hire their own subsidiaries at market rates to perform tasks that the trustee should be doing on his/her own. Make sure to see a list of all fees and changes to the actual trust that a professional trustee wants to make before making a decision.
This list is by no means exhaustive; to receive a list of 34 questions that family members hiring a private professional trustee should ask, contact Attorney Patricia Bloom-McDonald. Attorney Patricia Bloom-McDonald, a special needs planner, can help you select an appropriate professional trustee, and she may even have the names of certain companies or people who have performed this work well for other clients in your situation.