Q: What is the most important factor that will determine if my special needs trust will be successful over the long term?
A: The quality of the trust document as well as the selection of the trustee are equally important factors in determining if the trust will be successful or not.
A: If the trust is funded during the parent’s lifetime, they are frequently used as the best option to act as trustee.
If the parents become the trustees, they should declare who the successor trustee should be when and if they’re no longer able or willing to be the trustees. Perhaps either a corporate trustee or another family member like a sibling will be able to step into this role.
Q: Can Life’s Plan help me find a trustee?
A: A Most Estate or Elder Law Attorneys suggest the best option in the case that the parents can’t act as trustees is for an impartial corporate trustee to step into the role. Having an impartial corporate trustee can help avoid family conflicts. Corporate trustees are frequently unwilling to act as successor trustees for trusts under $500,000.
However, Life’s Plan, Inc. is a not-for-profit corporate trustee that is willing to serve as trustee of trusts starting with as little as $10,000.
A: While family members being trustees could be a good idea in some situations, it could also create conflicts in other situations. It depends on your personal circumstances and what you believe would be best.
Q: How does a pooled trust work?
A: A pooled trust is a trust that is operated by a not-for-profit organization, that anyone with a family member with a disability can apply to join. The money for each individual is accounted for separately. The trust is already established using a “Master” trust document and pre-approved as “non-countable” for government benefits such as SSI and Medicaid.
Q: How do I decide whether an individualized trust or a pooled trust is better?
A: A Deciding which type of trust is best for you depends on your specific family dynamics There are several factors that are essential in a successful long-term plan. You first must decide between using an individual stand-alone trust versus a pooled trust option.
The amount of money available for the individual with disabilities will correlate to the trustee and future trustee selection choices. The amount of control the family has over the trust will also depend on the amount of assets available, the age of the beneficiary, and finding an appropriate trustee and successor trustee.
Q: When would a pooled trust make more sense?
A: The more money that is going to be in the trust, the easier it is to get a bank or trust company to step in as trustee. Most banks will not act as a trustee for a trust with less than $500,000. For families with less than $500,000, the corporate trustee option will not work. In many guardianship cases involving self-settled monies, a judge may also not allow a parent or family member to act as guardian of the person.
The family member may be too close to the money to handle it with impartiality, as possible concerns of self-dealing or lack of money-handling skills are areas of concern. There may also be too much responsibility weighing on the guardian for the judge to ask them to become a trustee, especially if they have little knowledge of special needs trusts. A pooled trust may be the best option.
Families might not have a family member who has the time or ability to act as the trustee. For those families, a pooled trust would make a lot of sense. With expertise in managing special needs trusts, the family can have confidence knowing a quality trust is in place to ensure an improved quality of life for a loved one with a disability.
Q: What if I have created a supplemental needs trust and then my child inherits money and creates a “payback” trust?
A: All supplemental needs should be spent first using the funds in the “payback” trust. Any funds remaining after the beneficiary’s death will be paid back to the state for Medicaid costs before any distribution can be made to the family. Pooled trusts also retain a percentage prior to payback to the state.
It’s recommended that you first spend down from payback trust and use third party funds in the supplemental needs trust last, only after all of the funds in the payback trust have been exhausted.