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Who Should Be the Trustee of a Third-Party Special Needs Trust?

When establishing a third-party special needs trust, one of the most critical decisions you'll make is choosing the trustee. The trustee will manage the trust assets, ensure that the beneficiary's needs are met, and navigate the complex regulations surrounding government aid. In this article, we will explore the key responsibilities of a trustee, the pros and cons of professional versus family trustees, the legal considerations involved, and the long-term impact of this decision.

Understanding Trustee Responsibilities

Managing Trust Assets

The trustee is responsible for managing the assets held in the trust. This includes investing the assets wisely, ensuring they grow and are preserved for the future. A trustee must be knowledgeable about financial management or have access to professional advice to make informed decisions.

Making Distributions

Another crucial responsibility is making distributions to the beneficiary. The trustee must ensure that distributions align with the terms of the trust and do not jeopardize the beneficiary's eligibility for government aid programs such as Supplemental Security Income (SSI) and Medicaid. This requires a thorough understanding of the rules governing these programs.

Special Needs Trust

Ensuring Beneficiary's Needs Are Met

The trustee must balance the need to preserve trust assets with the need to provide for the beneficiary's current and future needs. This includes paying for medical expenses, education, housing, and other necessities that enhance the beneficiary's quality of life.

Professional vs Family Trustee

Family Trustee

Appointing a family member as the trustee has several advantages. Family members are often more familiar with the beneficiary's needs and preferences, which can make them more compassionate and understanding trustees. They may also be more willing to serve without compensation, which can preserve trust assets.

However, there are downsides to consider. Family members may lack the financial and legal expertise required to manage the trust effectively. They may also face conflicts of interest or emotional stress from managing the trust, especially if they are already involved in caregiving.

Professional Trustee

A professional trustee, such as a lawyer, bank, or trust company, brings expertise in managing trust assets and navigating legal requirements. Professional trustees can provide a high level of impartiality and are less likely to face conflicts of interest. They also offer continuity, ensuring the trust is managed consistently over time.

The main drawback of professional trustees is cost. They typically charge fees for their services, which can be a percentage of the trust assets or a flat fee. Additionally, they may not have the same personal connection to the beneficiary as a family member would.

Legal Considerations

Legal Responsibilities

Trustees have a fiduciary duty to act in the best interests of the beneficiary. This means they must manage the trust assets prudently, avoid conflicts of interest, and comply with the terms of the trust. Trustees can be held legally liable for any breach of these duties.

Potential Liabilities

Serving as a trustee involves potential legal liabilities. If the trustee mismanages the trust assets or fails to comply with legal requirements, they can be sued by the beneficiaries or other interested parties. It is crucial for trustees to understand these risks and seek professional advice if necessary.

Long-Term Impact

Beneficiary's Welfare

The choice of trustee has a profound impact on the long-term welfare of the beneficiary. A well-chosen trustee can ensure that the beneficiary's needs are met without jeopardizing their eligibility for government aid. They can also provide stability and continuity, which are essential for the beneficiary's peace of mind.

Trust's Ability to Meet Its Purpose

A trustee's ability to manage the trust effectively will determine whether the trust can meet its intended purpose. This includes preserving assets for the beneficiary's lifetime, making appropriate distributions, and adapting to changes in the beneficiary's needs and circumstances.

Choosing the right trustee for a third-party special needs trust is a decision that requires careful consideration. It involves balancing the need for expertise and impartiality with the personal connection and understanding that a family member can provide. At Anderson, Dorn & Rader Ltd., we are here to help you navigate this complex process and ensure that your loved one's future is secure. Contact us to schedule a consultation and discuss how to set up a special needs trust with the appropriate trustee.

If you have a person in your life who has a disability, your plans for the future must include making sure your loved one is cared for.  Unfortunately, many people make mistakes when they make a well-meaning attempt to provide for a loved one with special needs. The actions that you take could impact a disabled person’s access to important benefits, so it is vitally important that you work with a special needs planning lawyer if you have a loved one in your life with a disabling condition.

Anderson, Dorn & Rader, Ltd.  can provide comprehensive assistance with special needs planning. Our legal team helps parents with special needs children and other friends and relatives of individuals with disabilities. Give us a call at 775-823-9455 to talk with a Reno special needs planning lawyer about the services we can provide to you and to get answers to questions you have about special needs planning including:

Why is Special Needs Planning Important?

Special needs planning is important to ensure that you can help a relative or friend with a disability to have the highest possible quality of life.  For parents of a disabled child, this can mean making sure that a child is cared for and has a loving place to live after parents are no longer alive to provide a home.  For parents, relatives, and friends, it can mean providing a financial gift to someone with a disability so that person can have a better standard of living.

Because people with disabilities often rely heavily on government programs such as Supplemental Security Income to provide income or Medicaid to pay for costs of care, you cannot just give a financial gift to a person with special needs. If you make a gift during your lifetime or leave money in your will to a disabled person, you could cause a loss of access to means-tested benefits. Both SSI and Medicaid limit the amount of resources a person can have and still qualify for coverage, and the loss of these benefits could be devastating to someone with a disability.

There are ways you can ensure that a gift does not result in a loss of benefits, and there are steps you can take to ensure your disabled child, relative, or friend is provided for after you are gone. Anderson, Dorn & Rader, Ltd.  can help you to explore the legal tools you need to use to make a smart special needs plan.

What is Involved in Special Needs Planning?

In most cases, special needs planning involves the creation of a specific type of trust. A special needs trust is designed to allow a disabled person to receive a financial gift to enhance quality of life, without causing a loss of benefits.

Anderson, Dorn & Rader, Ltd.  can help you to create and fund this trust, which can be used to provide for extras that Medicaid, Supplemental Security Income, and other government programs will not cover.  We also provide assistance to trustees who have been placed in charge of managing a special needs trust and who want to make sure they comply with the rules so they don’t put benefits in jeopardy.

Our Reno special needs planning lawyers can also provide help to parents in making arrangements for a disabled child to have a safe living situation and a loving guardian after the parents pass away.

Whatever your goals are for the person in your life who has special needs, we can help you to identify the types of legal tools that can allow you to achieve those plans.

How can a Special Needs Planning Lawyer Help You?

Ensuring that a disabled loved one is cared for and has the highest possible quality of life is a noble goal. You do not want your efforts to improve life for someone with special needs to actually cause a loss of benefits or other problems. You need to make sure your gifts you give and efforts you make to help have a beneficial impact now and in the future. Anderson, Dorn & Rader, Ltd. can help you.

To find out about the personalized assistance our legal team can provide with the special needs planning process, give us a call at 775-823-9455 or contact us online today. An experienced and compassionate Reno special needs planning lawyer will offer the type of personalized solutions you and your family need to ensure that a disabled person is always cared for no mater what the future brings.

estate planningMost people will be best served by the creation of a revocable living trust as a primary estate planning vehicle. This being stated, there are advanced techniques that can be utilized to address more complicated scenarios. In this blog post, we will take a look at three of them, and we will examine others in future articles.

Special Needs Planning

Many people with disabilities rely on Medicaid, which is a government health insurance program that is available to people with very limited financial resources. Clearly, people with special needs are going to accumulate significant health care expenses, so this coverage is a lifeline.

Another need-based benefit that a lot of individuals with special needs rely upon is Supplemental Security Income. The name is self-explanatory: this program provides a modest but steady stream of income to people that can qualify.

If someone that was enrolled in these programs was to receive an inheritance, benefit eligibility could be lost. However, this does not mean that you cannot include a loved one with special needs in your estate plan. There is a legal device called a supplemental needs trust that can be utilized to make your family member more comfortable.

You fund the trust, and you name a trustee to handle the administration tasks. It can be someone that you know personally, but many people use a fiduciary like a bank or a trust company. This can be a good idea for a number of different reasons, not the least of which is the fact that the fiduciary would fully understand the legal intricacies.

The government benefits do not necessarily meet all of the needs of the recipient. These are called supplemental needs, and the trustee can use assets in the trust to satisfy these needs. There are certain things that can and cannot be paid for, and this is why it is wise to empower a trustee that has a thorough understanding of the parameters.

Under ordinary circumstances, the Medicaid program is required to seek reimbursement from the estates of recipients after they pass away. When you establish a trust for the benefit of someone else with your own money, it is a third-party special needs trust. The Medicaid program would not be able to attach assets that are remaining in the trust after the passing of the beneficiary. In the trust declaration, you name a successor beneficiary, and this individual would assume ownership of the remainder.

Small Business Partners

To explain this second scenario, we will utilize a simple example. Let’s say that you run a business with a single partner named Bill. You both have equal shares in the business. If Bill becomes incapacitated, who will vote Bill’s interest in the business? If Bill dies before you do, what happens to his share in the business?

This question can be answered through the utilization of an estate planning device called a buy-sell agreement. For purposes of incapacity, you can restrict the class of persons who can vote Bill’s interest in the business.   For death planning, you and Bill get together to determine the value of a share in the business. Next, each of you would take out insurance policies on one another equal with payouts that are equal to this amount. After one partner dies, the other party would receive the proceeds from the insurance policy. The money would be used to buy the share that was owned by the deceased partner from his or her family. This is commonly referred to as cross-purchase buy-sell arrangement.

Incentive Trusts

It is possible to positively influence the behavior of someone on your inheritance list through the creation of an incentive trust. To provide another example, let’s say that you have a grandson that has struggled with a substance abuse problem for years. He has had success for extended periods of time, but there have been relapses on a number of different occasions.

You are concerned that he may utilize his inheritance to indulge in his excesses. Under these circumstances, you could convey assets into an incentive trust. The trustee would follow instructions with regard to the conditions that must be met before income or principal will be distributed to the beneficiary. Using this example, you could allow for distributions so long as the beneficiary remains clean.

These are a handful of the different situations that can be interested through the utilization of advanced estate planning techniques, but there are many others.

Attend a Free Estate Planning Webinar!

If you would like to build on your knowledge, you have some great opportunities coming up in the near future. Our estate planning attorneys are very passionate about education, and they go the extra mile to share information with community members through our free Webinars.

There are some dates on the schedule right now, and there will be more added on an ongoing basis. You can really learn a lot if you attend one of these sessions, so we urge you to attend the one that fits into your schedule. To see the dates and obtain registration information, visit our Webinar schedule page and click on the session that interests you.

While no one likes to think about a time when they're no longer around, we all secretly wonder the same things: Will my spouse have enough to live on when I'm not there? Will I be able to leave a legacy for my children? Will the family home stay in the family, or will it have to be sold to pay off creditors and taxes? This is why estate planning is important and necessary.

Estate Planning

Estate planning is simply a way to protect your assets and your loved ones by creating legally valid documents that address a variety of concerns. Do you have a child that has special needs? Then a special needs trust might be the solution for you. This type of trust allows you to provide for a disabled or incapacitated dependent without affecting their eligibility for government-assistance programs. This trust can also be a component of a larger family trust, often called a Living Trust, that shields your assets from probate, minimizes taxes and even provides a way to give your heirs incentives for going to college, getting a job and similar personal growth accomplishments.

Set Up an Estate Plan

A good estate plan will also include a Powers of Attorney which are documents designed to designate someone to step in and speak on your behalf in financial and medical matters. In addition, you should have Advance Directives (a living will and health care power of attorney) that tells your healthcare providers how to handle life support and resuscitation matters.

In a nutshell, your estate plan is something you really can't do without and it's important that you have all of the key essentials. Hire an estate planning attorney! Anderson, Dorn & Rader, Ltd. has experienced estate planning lawyers that you can trust.

Wealth Counsel
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