Forbes’ recent article entitled “How To Be An Effective Trustee” provides some great best practices for those asked to be a trustee. Serving as the trustee of a special needs trust is a particularly difficult job, and from the onset, it is important to understand that running a trust is a huge responsibility, but if done right, it can be one of the best experiences. The work as trustee allows a person to have a tremendous impact on the beneficiary’s life and develop a special relationship with them.
- Make a team. No one person can have all the necessary skills and experience to be an effective trustee. We call this team a Circle of Care, which is a group of people who will serve as resources for both knowledge and support in your role as trustee. Work with an experienced estate planning attorney, an investment advisor and a tax accountant knowledgeable about the taxation of trusts. It’s a good practice for the trustee to have regular meetings with the team of advisors, both as a team and individually.
- Understand the key trust terms. Understand what the trust document says and what the key terms mean. When you are named as trustee, a best practice is to read the entire trust document and go through the document with an attorney and have them explain the key terms. Some of these key terms may involve the following:
- Distribution standards
- Special provisions for investing, particularly direction to sell or not to sell certain assets
- Provisions the trustee should act upon, like the power to appoint a successor; and
- Knowing whether the beneficiary’s age will trigger distributions or any other actions.
- Work productively with beneficiaries. The most important element of serving as trustee is working closely with the beneficiary. Dealing with beneficiaries, especially those who are disabled, is frequently the most challenging part of being a trustee. There can be differences of opinion over distribution amounts, investment strategy, or other matters relating to the management of the trust which can lead to disagreement not just with the beneficiary, but with other family members or those serving in a caregiving role or close relationship with the beneficiary such as the guardian. To avoid potential issues with beneficiaries and facilitate a productive relationship, trustees should try to practice following:
- Communication
- Transparency
- Education
- Clear Distributions; and
- Providing Required Information.
- Documentation is Crucial. Although trustees can’t guarantee perfect results, they must act with care, skill and impartiality. They must have rational reasons for their decisions and documenting them is critical because it substantiates the trustee’s decision-making. Some examples of decisions that should be thoroughly documented include:
- Distribution Decisions
- Decisions that Set Investment Policy
- Initiation or Termination of Investments and Hiring and Firing Investment Managers/Funds
- Principal and Income Allocations
- Verbal Communications with Beneficiaries
- Decisions to Hire Experts or Agents, like an attorney or an accountant.
The new Special Needs Trust Administration course created by Attorney and Advocate Annette M. Hines is the perfect way to learn more about the role of trustees. This course is designed for those who have been asked to be appointed in a family member’s or friends estate planning documents as a trustee and those who are new to serving as a professional trustee but may not have knowledge or experience in this role. And the course is also for parents, caregivers, and guardians who are drafting an estate plan and wondering whether to include a special needs trust and who to appoint as trustee. Check out the course here: https://enroll.specialneedsfamilyservices.com/p/trust-administration-masterclass