Who Should Manage a Special Needs Trust?

Deciding who should be the trustee for a special needs trust is a hard decision. Family members, most often a parent, may want to serve as trustee, but it is important that the family know of their other options.

Trust departments of banks, legal counsel, professional fiduciaries, non-profit corporations, and family or friends are all viable options. Due to the frequent changes in policies regarding allowable distributions and the variation from one state to the next, serving as a special needs trustee can be hard, time-consuming work. For this reason, willing but busy or inexperienced family member are often not the best choice for trustee. It is too risky to have a trustee who has potential to make mistakes without professional guidance or one who cannot dedicate the time necessary. Also, bond companies will decline applications to serve as trustee if the individual has poor credit scores. Without court supervision or a bond, the improperly distributed or mismanaged funds of the disabled beneficiary may not be recoverable if lost by the trustee.

Trust departments of banks may compete to serve as trustee if the trust is large, also possibly allowing the reduction of fiduciary fees an institution might charge to act as trustee. Life insurance companies and banks both tend to market their expertise as trustees to special needs planners, but banks are often better for providing customer service more regularly. A downside to having a bank oversee a trust is if differences of opinion arise between the bank trustee and the beneficiary, it may be difficult to transfer the trust to a different trustee. It is important to note that courts often favor local banks over national corporations because local banks are closer and more accessible.

Non-profit organizations that specialize in special needs trust administration can also serve as the professional fiduciary. Some non-profits offer services through grant programs and can either serve as trustee or direct the beneficiary and his or her family to other attorneys and organizations that specialize in this sort of administration. Sometimes full control of the nomination of trustee is relinquished to the guardian of the beneficiary, a trial court judge, or a probate court judge who can appoint another party that can better serve the needs of the beneficiary.

The highest priority in choosing a trustee is the needs of the beneficiary. The trustee must have the responsibility, professionalism and experience to act with and for these needs.

See more advice on Special Needs Trusts.