Trust Advisory Committees – A Strong Team For Your Trustee
By Rob Wrubel, CFP®, AIF®
My last newsletter talked about Eli Manning and his pursuit of being considered an elite quarterback in the National Football League. Well, the Giants won, and all the naysayers have capitulated. Manning and his team beat the New England Patriots and their elite quarterback for the second time now in the Super Bowl. Eli Manning could not achieve this goal without a strong team – made up of coaches, team members, trainers and everyone else on board committed to winning.
As a parent, spouse or sibling of a special needs person, you also need a strong team. Your planning team should include an estate planning attorney, CPA and financial planner/investment adviser who are all passionate about special needs families. These team members must be professionals committed to lifetime learning about the issues facing special needs families and the journeys they take that are so different than those of typical families. You may need to round out this team with other key influencers in your life – personal coaches, mentors, friends and anyone else whose opinion you trust and is working in your best interests.
Funded special needs trusts represent additional challenges to the families that care about their family member with special needs. These trusts – called special needs trusts, supplemental needs trusts or disabilities trusts in most states – exist to provide additional funds to support a higher quality of life than government benefits will provide. Remember, government benefits are crucial to our special needs families in today’s world, but they are only meant to provide a basic level of living through access to health care, expenses for shelter and food.
Trusts in general have some unique features that may be difficult to understand and need some additional work to manage and maintain. Special needs trusts have even more complexity as the tax, reporting and investment decisions impacting the trust have such significant consequences on your special needs family member if not managed correctly.
We recommend building a trust advisory committee to help you manage the trust and in your role as a trustee. The trustee is the person with the legal authority to manage trust assets, make distributions and to follow compliance procedures of law and taxes. Most trusts we see have an individual acting as a trustee – a personal trustee. It might be your spouse, sister, child, Dad or cousin. This person was chosen as a good person – one who is honest and makes good decisions. Chances are, this person does not have the technical experience necessary to fulfill his or her obligations as a trustee.
The trust advisory committee can help the trustee navigate the complex issues involved in managing the trust. For instance, the trustee may have to straddle the requests or obligations written in the trust by the grantor (the person who funded the trust) with the needs and requests of the special needs person that the trust was designed to support. The small decisions may be handled by the trustee at his or her discretion – for instance, sending money to the guardian of the beneficiary to buy clothes for the beneficiary. A more difficult situation may require a call to one or more members of the trust advisory committee – such as committing trust capital to be used to purchase a condominium for the beneficiary to use for the next ten years. The trust advisory committee will usually help set up the framework of policies that the trust can and should use for managing the trust – like who will be hired to manage the trust assets and how that person will report, who will handle taxes, what legal assistance might be needed, what is the timeline for the trust assets to be used, and more.
The trust advisory committee members serve at the discretion of the trustee. He or she may want the committee to have some of the professionals involved serving the trust. The trustee may want a few outside advisers on the team, especially if those people have a close relationship with the special needs person. The trustee may ask the person most likely to be the successor to participate so that person can learn how decisions have been made and why actions of the trust have been taken. The guardian may also be on the committee as that person sees what happens day to day.
The special needs person may also be included on the trust advisory committee. In general, we like to see the special needs person involved to the extent he or she can be. Decisions made on his or her behalf are often better made when that person is in the room. One issue that arises has to do with the value of assets and potential income. Some people with special needs do not have the experience or ability to differentiate when looking at sums of money. Trustees I have met and worked with have reported to me that it is often best when the beneficiary does not know how much money is available. Like most of us, people who do have experience with money prefer to spend it sooner rather than later. The trust could allow for all the money to be spent in a short period of time although most trusts are funded with the expectation that assets and income will be used over the lifetime of the beneficiary.
Choose a trustee who you think has the ability to be elite, the best possible person to handle the job for your family. Do not just throw the person the job and say, “Good luck.” Let that person know that he or she can turn to others for help to build a team, get some help and be able to rely on experts to work towards the best possible outcomes in the management of your special needs trust.
Rob Wrubel, CFP,® AIF® is a Senior Investment Consultant with Cascade Investment Group, member FINRA & SIPC. Cascade Investment Group is not a tax or legal advisor. You should always consult with your tax advisor or attorney before taking any actions that may have tax consequences.
