The Role Of A Trustee Of A Special Needs Trust
by
Herbert D. Hinkle, Esq. and S. Paul Prior, Esq.
Herbert D. Hinkle
Law Office
2651 Main Street
Lawrenceville, New Jersey 08648
(609) 896-4200 or (215) 860-2100
Many families establish special trust arrangements for the benefit
of a son or daughter with a developmental disability. It is important
to understand the role of the trustee.
A trust is a legal document that contains a set of instructions
describing how assets placed into trust will be administered. The
person, persons, or organization that manage the trust are called the
trustees. There can be one or more trustees.
A trust can be established in a Will, or it can be a separate document
that is sometimes called a “living trust.” Usually it is a mistake to
establish the trust in a Will when the chief beneficiary is a person
with a disability. When the trust is funded, usually on the death of
both parents, the trustees’ responsibilities begin. Here are some
examples of a trustees’ duties starting at this point:
Suppose at the death of the last spouse to die, the trust is funded
with $200,000. Let’s also suppose that the name of this trust is the
“XYZ Trust.” The trustees’ first job is to obtain a tax identification
number from the IRS for this trust. This is like a social security
number. Next, the trustee must decide where to invest the assets. The
trustees may decide to put $50,000 in a money market account, $50,000
in Treasury Bills and $100,000 in a mutual fund.
Each account will be opened in the name of the XYZ Trust If the income
is high enough, each year the trustees will file a tax return for the
trust, and pay any taxes owing. The trustees will also draw a fee and
obtain reimbursement for expenses.
The trustees must review the beneficiary’s needs periodically. For
example, suppose Beth lives in a group home and receives social
security. The social security will be used before trust assets are
touched. Perhaps the group home is sponsoring a trip to Disneyland for
the residents. The trustees will review this with Beth and her
guardian; and if they agree, they will write a check to cover the cost
of the trip.
At Beth’ death, the trustees would pay funeral expenses, and then
distribute the funds remaining in trust according to the instructions
contained in the trust document. The funds might go to other family
members, to friends, or to charity. Basically, the trustees are to
invest the trust assets and see that Beth’s needs are met.
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Herbert D. Hinkle,
and his colleagues, Ira M. Fingles and S. Paul Prior, maintain a statewide
law practice with offices in Lawrenceville, Marlton, and Florham Park,
New Jersey, and Yardley, Pennsylvania. They lecture and write frequently
on topics of law, aging, disability and estate planning and are available
to speak to groups in New Jersey and Pennsylvania
at no charge.
Comments and suggestions
for future articles should be mailed to: The Law Offices of Herbert
D. Hinkle, 2651 Main Street, Suite A, Lawrenceville, New Jersey 08648-1012.
Copyright 2003
Herbert D. Hinkle. All rights reserved.
