Who Should Be Your Special Needs Child's Trustee?

New York legal experts often recommend professionals over family members

For a parent of a child with special needs, one of the biggest decisions they will have to make when they are proactively planning for their future is who to select as trustee. Take it from Tara Anne Pleat and Ed Wilcenski, who have had to navigate it on their own for their son and brother, respectively. They also help guide families through it as estate planning attorneys in Clifton Park.

“Estate planning is a mystery to most who don't have a background in it, so when families come in, they’re already often intimidated by the process. When you layer on top of that the concern about having a child who is not self-sufficient continue after the parents have gone, that is a very scary prospect for most families,” says Wilcenski.

When it comes to establishing a special needs trust, often families want to know: “What do they do? What’s the purpose? And how do you make decisions about trustee selection? That's often one of the most difficult decisions,” Pleat adds.

What is a Special Needs Trust?

A trust is established by a grantor (say, a parent) to hold assets for a beneficiary (say, their child) and administered by a third-party trustee. Another important role for this kind of estate planning is a guardian. The practical difference between a guardian and trustee is that a guardian will make medical and living situation decisions, while trustees manage investments and finances.

Pleat says their approach with clients is to have an open and frank conversation about how to make decisions when they set up a trust.

“When we're planning with families, we're always asking about what the nature of the disability is, and what the public benefits are. We weigh those in the decision-making and certainly in our recommendation,” she says.

“For example, if the family member has a mental health diagnosis, you can create tremendous animosity between siblings if you name a brother, for example, as the decisionmaker on how to spend a sister's money,” Wilcenski adds.

The economic reality of your situation is another consideration. The smaller the dollar amount, the fewer options you may have for professional assistance. The size, location and willingness of family members can likewise limit your options.

“After you are in this type of practice for a period of time, and you see the spectrum of disabilities—physical, cognitive, and everything in between—there are certain recommendations that we make that I think are consistent across different disabilities. But you really do have to approach it differently based on all of those factors: nature of the disability, family composition, and financial resources,” Wilcenski adds.

Should I Name a Professional or Family Member as Trustee?

In most circumstances, Pleat and Wilcenski recommend families name a professional as trustee—which, in New York, is typically corporate fiduciaries, banks or trust companies. But families are hesitant.

“The kneejerk reaction is to name another family member,” Pleat says. “Families initially are reluctant to name a professional trustee because they feel like maybe it's going to be too sterile of a relationship, or because they're concerned about costs.”

In New York, trustee fee schedules and commissions are billed quite similarly to individual ones. “The cost difference between the two is minimal,” Wilcenski says. “When you consider that individual trustees often have to rely more on paid professionals like attorneys, financial planners and accountants to make decisions that are often in the wheelhouse of a corporate trustee, it can often be more expensive to name a family member.”

The other significant factor, he adds, is the limited number of people in the family bullpen.

“When you're thinking about downloading the responsibility of advocacy and oversight to somebody, it's not just management of the money. There are other significantly time-consuming tasks that have to be done. Most family members can give you a couple hours a week because they typically have their own lives to live. I'd prefer to have that family member talking to my son or daughter’s doctor or their social worker about a diagnosis rather than having them decide whether it's time to sell GE and buy Microsoft,” Wilcenski says. “Professional trustees are insured, and they're good at what they do, especially those who have an aptitude and interest in this area of fiduciary practice.”

Ultimately, people’s fears about these professionals are misguided, Pleat says. “In many circumstances, the sell is not that difficult once people can get over their initial thought that banks are big and bad and are going to do nothing except take funds.”

Added Protection, If You’re Still Concerned

If you’re still skeptical of a professional, Pleat says they often add provisions in their plans for a trustee monitor or trust protector. “We will typically recommend families fill that role with the family member they were contemplating as trustee. It gives that family member the ability to remove or replace a bank or trust company or professional fiduciary that may not be paying enough attention or as proactive as we want them to be,” she says.

This can come in handy in other instances, too, such as when an institution is bought out or the representative you developed a relationship with moves to another company. “There are provisions that are really safeguards to ensure that there is a mechanism simply without court interaction that will allow for the removal and replacement of any trustee that the family initially appoints,” Pleat says.

That person doesn’t have to balance the checkbook or file the tax returns, but always knows what’s going on, Wilcenski says. And they have the capability of changing the situation with or without cause.

“When you're drafting these things, you have a lot of flexibility,” Pleat adds.

If you have any interest in setting up a special needs trust, or have other questions about it, don’t hesitate to reach out to an estate planning attorney. They will review your case, and what it may cost, in their initial consultation with you.

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