One of the most important and difficult steps of setting up a special needs trust (SNT) for a loved one is choosing who will be the best person or entity to fulfill the role of the trustee. A trustee is responsible for the day-to-day operations of a trust, and it can quickly become an intensive and time-consuming job. The law only requires trustees to be over the age of 18 and capable of managing their own affairs, but it takes a lot more than that to be an effective trustee.
Can a Family Member Serve as a Trustee?
Yes, a family member can serve as a trustee, as long as this person will have the trust beneficiary’s best interest in mind at all times. All investments and spending decisions must be made to tend to the beneficiary’s needs and not to suit the trustee’s personal interests. This person should not have any conflicts of interest and act with honesty and integrity.
Besides acting with integrity, prospective trustees should have a full understanding of their job and of what is expected of them. They will need to develop a close relationship with the beneficiary to better communicate and negotiate distributions. Having a good knowledge of government benefit rules is also important. If the family member has good financial skills and knowledge and is willing to dedicate time and work to managing the trust, then there should not be any impediments to this person becoming a trustee.
Are There Advantages in Using a Professional Trustee?
Sometimes, the task of being an SNT trustee may prove to be too much to a family member or friend. This is when families may consider hiring a professional trustee for the job. An attorney, trust company, bank, or professional fiduciary may be a good choice for managing your loved one’s trust due to having more knowledge and financial experience than a non-professional trustee. Besides, using a professional trustee creates emotional distance that prevents a beneficiary from making distribution demands that may put a strain on family relationships.
On the other hand, professional trustees do come at a cost, so do your research and consult with different professionals before making your selection. If you are not completely comfortable delegating this responsibility to someone outside your family, you may still have a professional as a co-trustee and either yourself or a relative as a second co-trustee for your loved one’s SNT.
Is a Pooled Trust a Good Option?
If there is concern over the cost of hiring a professional trustee but the family cannot find a relative or acquaintance willing to step up to the task, some find it beneficial to enter a pooled trust. This type of trust is often run by a non-profit and usually results in lower administrative fees and offers better, more stable investment opportunities. It pools the resources of many other beneficiaries with special needs and can be a safe and less costly alternative to privately-managed trusts.
Regardless of who you choose to be the trustee of your loved one’s SNT, it is recommended that you take time and analyze your options carefully. Your trustee needs to be organized, ethical, and have good financial skills. If you need advice or have questions about special needs trusts, contact Oren Ross & Associates at (404) 436-1752. We look forward to assisting you.