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3 questions to ask when choosing a special needs trustee

| Jan 19, 2021 | Estate Planning |

Having a friend or relative with a disability may complicate your estate planning process. After all, if you give cash or other assets to your loved one, you may inadvertently make him or her ineligible for Supplemental Security Income, Medicaid and other means-tested government benefits.

A special needs trust is a common workaround for high-worth individuals. With this type of trust, you do not give assets to directly to your friend or relative. Rather, the special needs trust holds funds for your loved one to use on supplemental expenses that government benefits typically do not cover. When you form your trust, naming the right special needs trustee is critical.

1. Do you want a professional trustee?

With some exceptions, virtually anyone may act as a special needs trustee. This means you can do the job or choose a friend or relative to do it for you. You may want to consider using a professional trustee, though.

An attorney, accountant, financial advisor or another professional may have the technical knowledge to administer the trust in a way that benefits you and your loved one.

2. Does the trustee have enough time?

Overseeing a special needs trust requires approving disbursements, complying with record keeping requirements and investing trust funds. Consequently, the special needs trust you choose must have enough time to do the job effectively.

3. Does the trustee understand public benefits?

If your loved one uses disbursements from the special needs trust to pay for the same expenses his or her benefits cover, he or she may become ineligible for public benefits.

Ultimately, whether you use a professional trustee or an amateur one, the trustee must understand the rules and restrictions for every public program your loved one uses or may potentially use.