The trustee of your special needs trust will manage the trust for the benefit of your loved one. Whether the trustee is you, a relative, a friend, or a professional, the trustee has a critical job as the manager and guardian of the trust. Not only must the trustee spend trust funds in the best interest of the beneficiary (your loved one with a disability), the trustee must also keep up to date on SSI and Medicaid laws, invest trust funds, file taxes, maintain records, and more.
This article briefly describes the duties of the trustee. For more information read, Special Needs Trusts, by Steven Elias and Kevin Urbatsch (Nolo). And for an in depth information about properly administering a special needs trust, read read Administering the California Special Needs Trust, by Kevin Urbatsch.
Most Important Job: Act Honestly
A trustee’s most fundamental legal duty is to always act honestly and put the interests of the trust beneficiary first. This is commonly called the trustee’s fiduciary duty.
The trustee may, however, take actions that indirectly benefit other parties, as long as the sole purpose of the action itself is to help the beneficiary. For example, it’s all right to use trust money to buy a home for a beneficiary even if a relative may also live in the home and so also benefit.
Trustees who act in good faith generally won’t be personally liable for losses caused by their actions. Trustees could be held personally liable for acts that are judged (after the fact) to be unreasonably careless or, to use the legal term, negligent. Negligence is generally defined as the failure to take the proper care that a prudent person would take in similar circumstances.
For instance, if the beneficiary lost several months of SSI and Medicaid eligibility because the trustee forgot to prepare a report required by those programs, the trustee might be considered to have been negligent. The beneficiary, or the beneficiary’s guardian, could sue the trustee.
The Trustee’s Basic Duties
Here is a brief list of the duties and responsibilities of a trustee of a special needs trust:
- Avoid any activity that conflicts with the purpose of the trust—which is to enhance the quality of life of the beneficiary.
- Spend money to enhance the beneficiary’s life, while making the trust funds last as long as possible.
- Respond to the beneficiary’s personal needs for goods and services that aren’t covered by SSI or Medicaid.
- Keep up with SSI and Medicaid income and resource rules so that the trustee’s spending doesn’t affect the beneficiary’s eligibility for SSI and Medicaid.
- Invest and manage trust property following the terms of the trust and state law, in the beneficiary’s best interests.
- Keep the beneficiary and other interested persons up to date on trust activity.
- Work together with the beneficiary’s guardian or conservator, if the court has appointed one.
- Keep accurate records, prepare reports that the SSI and Medicaid programs require, and file necessary federal and state tax returns.
- Go to court, if necessary and financially reasonable, to uphold the trust and require the SSI and Medicaid programs to comply with applicable law.
- Terminate the trust, if circumstances warrant doing so.
- Manage or distribute trust property after the beneficiary dies or the trust is terminated.
As you can see, there is a lot on a trustee’s plate. You don’t have to choose one person to handle everything; these tasks can be shared by two or more cotrustees, handled by experts hired by an individual trustee as needed, or carried out by a trustee working for a pooled trust. Learn more about Choosing a Trustee for a Special Needs Trust and Special Needs Pooled Trusts on Nolo.com.
The Trustee’s Duties Letter
To help the people you expect to serve as trustees of the special needs trust, you may want to leave information about how to administer the trust. For example, you could explain the purpose of special needs trusts and how they work. And you could also describe how successor trustees can prove their authority under the trust, resign as trustee, or appoint a successor trustee if all named successors are unavailable. You can draft this letter yourself, or start with the Trustee’s Duties Letter provided in Special Needs Trusts, by Steven Elias and Kevin Urbatsch (Nolo).
Beneficiary Information Letter
In addition to a trustee’s duties letter, you might want to provide your successor trustee with information about the beneficiary.
For a special needs trust to benefit your loved one in the way you want it to, the people who succeed you as trustee need to understand and respond to the beneficiary’s needs. This won’t be a problem if the beneficiary can communicate them clearly. But if the beneficiary’s disability impairs his or her ability to think or communicate, then the more background information a trustee has about the beneficiary, the better. It is up to you to make sure that your successor trustees will be adequately informed.
A good way to start is to keep a diary of your loved one’s needs or write a “beneficiary information letter.” The diary or letter should cover, among other things, your loved one’s family and medical history, education, employment, living situation, social life, routines, and religion. You can purchase a guide to writing a Letter to Caretaker of a Special Needs Child on Nolo.com. Or you can find this information in, Special Needs Trusts, by Steven Elias and Kevin Urbatsch (Nolo).
More About Special Needs Trusts
To learn more about special needs trust, go to the Special Needs Trusts section of Nolo.com.
This article is excerpted from Special Needs Trusts, by Steven Elias and Kevin Urbatsch (Nolo).