Reprinted from The Elder Law Advocate, Fall 2021 issue, The Florida Bar Elder Law Section
by Howard S. Krooks on behalf of the Special Needs Trust Committee
A core requirement of any supplemental needs trust is that the beneficiary may not serve as trustee of the trust, whether it be a d4A, a third party trust, or a pooled trust. One of the greatest challenges our clients face when establishing a supplemental needs trust is determining who will serve as trustee. While many parents are appointed initially to serve as trustees of a d4A or third party trust, the question eventually arises about who will serve when the parents are no longer in a position to do so. As practitioners, we must be able to counsel our clients through this difficult decision.
At the outset, we must recognize that serving as trustee of a supplemental needs trust is not the same as serving as trustee of a revocable living trust or an irrevocable Medicaid asset protection trust. In addition to the ordinary duties associated with serving as a trustee of a trust, the trustee of a supplemental needs trust must be able to address the caregiving needs of the beneficiary, fiscal analysis and life plans involving the investing of trust assets and utilization of those funds over the course of the beneficiary’s lifetime, and government benefits rules, including SSI, Medicaid, and Section 8 housing, among others.
Because of the additional knowledge and commitment required of a supplemental needs trust trustee, one cannot simply make the appointment in the trust itself without first discussing the appointment in advance with the person to be named and getting a commitment from that person that s/he is willing to serve when the time comes. Another issue to consider is who will be named as remainder beneficiary of the trust. Even in a d4A scenario, there may be assets left over once the Medicaid agency has been reimbursed. In some cases, the named successor trustee may also be named as a remainder beneficiary of the trust. Can this person be trusted to use trust assets in the best interest of the disabled beneficiary? Or will that trustee/remainder beneficiary “conserve” assets (i.e., not spend the assets although the beneficiary has a real need that could be met) so as to increase the remainder interest that may eventually go to the trustee/ beneficiary?
Does the trustee have the time to devote to serving as trustee of a supplemental needs trust? Serving as trustee of a typical trust is one thing, but a trustee of a supplemental needs trust also must take into account the additional responsibilities that go along with providing for an individual who is disabled. Time may have to be spent looking for housing arrangements, dealing with medical issues, addressing government program eligibility and processing requirements, dealing with a care manager, quarterbacking adult day care arrangements, etc.
Age is also a consideration. If the named successor is closer in age to the parents than the beneficiary, what has been accomplished by making such an appointment? A better choice may be to select an individual who is close in age to the named beneficiary. Or, the named successor can be given the authority to name another successor. Such authority can also be provided to a trust protector.
It is also helpful to select a person who knows the beneficiary well and has developed a good relationship with the beneficiary. While this may be a sibling of the beneficiary, often siblings may have ulterior motives or come with resentment developed over a lifetime of the disabled beneficiary getting more attention from the parents for no other reason than the needs of the beneficiary dictating that result.
Ultimately, if no individual presents as a logical choice to serve as a successor trustee of a supplemental needs trust, one may look to a corporate trustee. If you are considering a corporate trustee, it is best to select and work with one that has a dedicated supplemental needs trust department due to the specialized expertise needed to serve in this capacity. Alternatively, you may choose to work with a pooled trust that offers trustee services for non-pooled trust accounts given their breadth of knowledge and expertise acting as trustee of the pooled trust.
Or, if a family member is a good choice to serve as a successor trustee, but lacks some of the skills required, such as fiscal knowledge, organizational skills, government benefits knowledge, etc., it may be a good idea to pair this family member with a corporate trustee so that you can get the best of both worlds – someone who cares for and is empathetic to the beneficiary and an entity that has experience in serving as the trustee of a supplemental needs trust. Another approach would be to appoint a trust advisory committee (comprising people in the medical field, financial services industry, care management, etc.) that can counsel the lay family member trustee in making decisions.
Regardless of which direction you choose to go in selecting a suitable trustee of a supplemental needs trust, it is vital to the overall success of your special needs planning to invest a great deal of time in making this decision. Your loved one’s care and well-being depend on it. Good luck!
Howard S. Krooks, CELA, CAP, Member, Cozen O’Connor, practices elder law and special needs planning in New York and Florida. He is a past president of NAELA, a past chair of the New York State Bar Association Elder Law Section, and currently serves as chair-elect of The Florida Bar Elder Law Section. He is a member of and submitted the above article on behalf of the Special Needs Trust Committee of The Florida Bar Elder Law Section.