A common question that arises concerning a Special Needs Trust is: “Should a family member be the trustee (or the successor trustee) for the trust”? This is a great question with a simple “yes” or “no” answer.
Although the answer should be fairly simple, I know many families will struggle with their own conclusion. Therefore, I wanted to provide you a quick run-down of some of the responsibilities a trustee has in administering a trust. This basic information should help you answer the question for your own family.
A trustee, regardless of whether he/she is a family member or a professional, is held to the same strict fiduciary standard and has certain responsibilities under the law. These include:
- Closely follow the instructions in the trust document.
- Keep trust assets separated from personal assets – do not mix.
- Trust assets should only be used for the trust beneficiary – cannot be used for the trustee’s personal benefit.
- Treat all beneficiaries the same (unless the instructions specify otherwise) – do not favor one over another if there are multiple beneficiaries.
- Keep accurate and detailed records.
- File timely tax returns.
- Provide reports to the beneficiaries as the trust requires.
- Invest trust assets in a prudent manner – reasonable growth with minimum risk.
A family member that is put into the position of acting as trustee and taking on these responsibilities must be educated on these fiduciary standards. Rarely is a family member adequately qualified to act as a sole trustee without the help of a professional.
In essence, if you believe the answer to the question is “yes”, please make sure you are willing to accept all of the responsibilities involved. If the answer is “no”, please seek the guidance of a qualified attorney to help you choose the right corporate fiduciary (trustee) to administer your Special Needs loved one’s trust.