Special Needs Trusts are a specific type of trust generally designed to provide special protection for a vulnerable beneficiary and ensure that the beneficiary does not lose public benefits due to receipt of income or other distributions from the trust.  Thus, Special Needs Trusts can be fraught with peril for trustees, even trustees experienced in trust administration.

The most common scenario requiring the creation of a Special Needs Trust happens when the recipient of public benefits receives income from a legal settlement – perhaps in a personal injury/medical malpractice case, workers compensation case, or divorce case.  In such situations, a Special Needs Trust might be created if the recipient might be unable to handle, for whatever reason, large sums of money or be vulnerable to exploitation.

If you find yourself serving as a Trustee of a Special Needs Trust, your duties will include the following: 1) protecting and securing trust assets; 2) the duties of loyalty and impartiality to the trust and its beneficiaries; 3) compliance with the intent and terms of the trust; 4) providing accountings to the beneficiaries and/or their representatives; 5) making discretionary distributions in accordance with the terms of the trust; 6) prudently investing the trust corpus; 7) ensuring the productivity of trust property; 8) paying trust taxes appropriately and timely; and last but not least 9) ensuring compliance with all federal, state, and local law to prevent the beneficiary from losing public benefits.

No doubt you’ll agree that these duties are significant in number and scope, as it is nearly impossible for the trustee to wear all these hats at once.  Thus, it will be necessary, even for the experienced trustee, to retain as needed: 1) legal counsel for the beneficiary (particularly regarding public benefits), 2) a financial advisor (preferably a fiduciary), 3) a mediator or someone with the ability to mediate and manage relations between family members of the beneficiary, and depending upon the situation, 4) psychological services for the beneficiary.  In addition, the Trustee of a Special Needs Trust often will have to work hand in hand, or deal with, as the case may be, other fiduciaries that have the best interests of the beneficiary in mind.  These include guardians, parents, guardians ad litem, conservators, and perhaps individuals holding power-of-attorneys on behalf of the beneficiary.  While these individuals technically have no relationship to the trust, as Trustee you will need to work with them to assess the needs of the beneficiary and determine when distributions should be made.  They will hopefully help, and not hinder, you to focus on the beneficiary’s specific needs, such as housing, transportation, monthly budgeting, etc.  All the while, you as Trustee might find yourself holding at bay public benefits agencies, the Settlor of the trust, and keeping compliant with relevant state statutes and common law.

How can you as a Trustee fulfill your duties as Trustee for a Special Needs Trust and avoid liability, particulary in the event a special needs beneficiary loses public benefits?  By educating yourself about your duties as Trustee and seeking independent legal counsel separate and different from other attorneys that might represent the beneficiary or settlor of the trust in other matters (such as, for example, the personal injury case which gave rise to the beneficiary’s disability).

An easy way to get trustee education is by joining the Private Trust Consortium (PTC), which is a membership organization dedicated to educating and assisting trustees on their journey through trust administration.  As members of PTC, trustees have the ability to purchase trustee professional liability insurance through Brown & Brown and underwritten by Chubb, at a discount, which protects trustees against liability for damages, attorney fees, and costs, arising out of defending claims of breach of duty and negligence.

In addition, PTC provides its trustees with specialized Onboarding Reports, which assess the unique strengths and weaknesses of each trust, weighing specific risk factors present in each trust, and suggesting best practices for trustees to mitigate such risks.  With a PTC Onboarding Report and trustee professional liability insurance, Trustees of Special Needs Trusts will be educated about  the risks they face serving as Special Needs Trustees and protected from liability should things go wrong.  Don’t delay – join PTC today and get the insurance protection and onboarding knowledge you need to arm yourself with to effectively serve as a Special Needs Trustee in today’s litigious environment.