How to Select a Corporate Trustee for a Special Needs Trust

The complex and frequently changing requirements of Special Needs Trust administration makes the selection of a corporate trustee especially challenging. A corporate trustee must possess considerable experience in the maintenance and operation of Special Needs Trusts.

The Social Security Act, which recognizes Special Needs Trusts, is silent on the type of trustee which may be selected. However, the Rules of Civil Procedure in Pennsylvania require that where an injured party is a minor or incompetent, a corporate fiduciary must be used (Pa. R.C.P, Rules 2039 and 2264). For-profit corporate fiduciaries, such as trust companies and banks, will generally accept accounts valued in excess of $250,000. For accounts less than $250,000, there are non-profit organizations, such as The ARC and PLAN New Jersey, that will accept smaller trust accounts.

The selection of a corporate fiduciary does not in and of itself guarantee that the Special Needs Trust will be properly managed. There are corporate fiduciaries that are excellent in their administration of Special Needs Trusts, while others have little or no experience. Substantial mistakes can be made if the corporate trustee does not possess the qualifications of administering a Special Needs Trust. These mistakes can result in the loss of Medicaid and Social Security benefits. These mistakes can be expensive and time consuming to correct.

A corporate trustee must be well versed in consulting with attorneys, the courts, and the disabled individuals and their families. The trust officer is perhaps the most vital component of the trust relationship.  The trust officer must fully comprehend the trust document, local rules and tax strategy. Additionally, the trust officer should be diligent about the maintenance of trust records, bill payment, investment of assets and trust inventory. The trust officer will be required to make critical decisions relating to the needs of the individual while balancing the preservation and distribution of the assets. The trust officer must often weigh the needs of the beneficiary with both affordability and common sense from an independent perspective.

The right corporate fiduciary will provide both peace of mind and financial security. Family dynamics and the stability of the life of the beneficiary are prominent aspects in the administration of a Special Needs Trust. As a result, the trust officer’s abilities and experience are especially important. First and foremost, the trustee should take the time to introduce themselves to the beneficiary and the family. They should get to know the needs of the beneficiary, the financial situation, and the future goals of the trust. These considerations are all influential in the long term administration of the Special Needs Trust.

Families and individuals should have a high level of comfort when deciding on both the corporate trustee and the trust officer. The individual and family should question the firms experience specifically in administering Special Needs Trusts. The trust officer’s individual education and experience should also be examined. Because of the nuances of Special Needs Trust administration, trust officers should be dedicated and committed to the practice. The trust officer will follow the trials and tribulations of the beneficiary and their family through many ups and downs.

The professional management of assets is another important component in the selection of a corporate trustee. Every professional investment manager must follow the Prudent Investor Act statute. Each state has its own Prudent Investor Act statute. This statute requires investment and portfolio managers to consider a variety of factors when choosing the appropriate investment strategy. These factors include inflation and deflation, taxes, liquidity, and diversification. The overall financial goals of the portfolio should be a primary consideration of the investment professional.  These financial goals should be long term. The investment strategy should stretch for the beneficiary’s lifetime. This might mean 10, 20, or even 50 years. Every effort should be made to preserve and even grow the assets held in the Special Needs Trust.

When speaking with the portfolio manager, it is important to ask for their overall money management strategy, as well as how that might compare to the money management strategy of the particular Special Needs Trust account. The corporate fiduciary should provide track records of investment performance. They should also understand liquidity needs and be aware of potential large purchases, such as handicap accessible vehicles and real estate.

The selection of a corporate trustee can be difficult, but it is important to do your homework and choose wisely. Above all, the beneficiary and the family should feel entirely comfortable with both the company and the trust officer charged with handling a Special Needs Trust.