As part of Cumberland Trust's development team, Jaclyn Berry partners with families and their advisors to navigate the complexities of planning for and administering Special Needs Trusts and special purpose trusts. This installment of the Trusted Ideas blog, written by Jaclyn, addresses the challenging and rewarding nature of serving as trustee in a special needs case.
As health care expenses rise in the U.S., so do the challenges faced by individuals with disabilities and their families. Managing uncertainties that come with caring for a loved one with a disability can be financially burdensome.
When a person with a disability receives an inheritance or a settlement from a lawsuit or divorce, he or she may become ineligible for needs-based federal funding. This could make it nearly impossible for that individual to live comfortably while also getting the care he or she needs. Luckily, there is a solution for these cases: Special Needs Trusts (SNT). Special Needs Trusts are a specialized type of trust that are used in order to maintain a beneficiary’s important public benefits such as SSI or Medicaid.
As 20 million American families raise children with intellectual, developmental and physical disabilities, these trusts have become incredibly important in today’s realm of wealth management and financial planning. Unfortunately, many trust companies and banks tend to shy away from management of these trusts as they require a high level of service and attention. These services, however, are very important in an industry where the goal is to create peace of mind and ensure a legacy.
By adhering to a few simple tips, an educated trustee can conserve and cultivate funds for future needs of the beneficiary while also providing him or her with the tools necessary for a happy life.
Help clients navigate public benefits
In order to properly aid a client and navigate personal public benefits, it is vital to understand common misconceptions of SNTs. It is important to remember that funds cannot be directly left to a beneficiary or he or she will likely lose public funding. In order to avoid this, it is prudent to instead allocate the funds to a trust to provide for anything that government aid is not providing, such as quality of life expenses like caregiving and schooling.
Another important distinction to understand is the two different types of Special Needs Trusts: First-Party and Third-Party. The drafting attorney should make sure to correctly pick the type of trust that is best for the client and their family. In understanding misconceptions and classifications, the trustee can properly aid the client in navigating the complexities of SNTs.
Coordinate the trust’s team of professionals
Because of the nature of SNTs, it is important to have an experienced team to aid in the planning and execution of the trust. For example, one important component is working with an estate planning attorney on the creation of a specialized trust document tailored to the specific needs of the family and their loved ones. The document is meant to be broad to attain a wide range of benefits, while also being specific enough to work with the family’s situation. The right estate planning team (e.g., attorney, financial advisor, accountant and/or trust company) can make sure that all necessary legal and fundamental components for the SNT are being met.
Plan for future goals and needs
To plan for the future needs of a family, it is important to fully understand the duties as trustee. The upkeep of the trust for the beneficiary includes, but is not limited to, paying taxes, keeping clear records, maintaining nonconforming assets, educating beneficiaries, and handling all distributions.
It is also vital to have a clear understanding of the needs of the beneficiary. These conversations will aid in planning for future expenses involving the trust and in making sure all personal needs of the beneficiary are met.
Serve as the first point of contact
The trustee should always be the first point of contact for the beneficiary. They should stay aware of changing needs of the beneficiary and understand the beneficiary’s daily routine. This is important so that the trustee can send funds to the beneficiary in a timely manner in order to avoid any unnecessary interruptions to the beneficiary’s life.
They should also serve as the liaison for the family. The trustee should create positive dialogue with the family and keep them up to date on the activities of the trust.
Special Needs Trusts are a valuable resource for many families who want to supplement and provide more specialized care for a loved one. These trusts are beneficial for many families’ peace of mind, reassuring them that their money is going to the quality care of their loved one.
Special care services are not only valued, but a necessity in today's reality. In an industry where the goal is the betterment and legacy of families, we should be prepared to answer the call of clients who need it most.
This article was originally published on WealthManagement.com.
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