Time Log and Trustee Fees for a Special Needs Trust

Posted by Patty Manko on Thu, Apr 16, 2015 @ 05:31 PM

time_log

Trust Distributions

Most special needs trusts give the trustee sole discretion to make distributions from the trust funds. There are specific guidelines to be followed in making distributions.  A general rule is that distributions should not be made directly to the beneficiary.  Instead checks should be made payable directly to the vendors when goods are purchased or to the providers when services are rendered.

Charging a trustee fee

Even if the trust does not contain any specific language about fees, the trustee has a right to be paid.  The trustee fee is a tax deduction for the trust and is taxable income to the trustee.  The following are some factors to consider in determining an appropriate fee:

  •   the amount of assets in the trust
  •   the complexity of the investments
  •   the beneficiary’s needs
  •   the services being performed 

There are two considerations used in determining a fee; the first is the number of hours worked, the second is the type of service provided. Activities such as paying bills and balancing the checkbook will be charged at one rate. More complicated tasks such as working on legal, investment, and tax matters would probably command a higher figure. This is especially important if the trustee has a financial or legal background. 

Time and billing records

The trustee should keep a written record of all the time spent on trust activities. Some trustees maintain a log book in which they write down the date, time spent, and nature of each service. If any personal funds are used for the trust, the trustee should keep receipts for reimbursement from the trust assets. Reimbursements should be made promptly. Plan to keep these records at least until the beneficiaries have approved your account. Click below to view an example of a  trustee log and to download a blank log. 

Download a Trustee Time Log

Tags: Trustee Services

FAQs : Funding a Special Needs Trust

Posted by Patty Manko on Thu, Feb 13, 2014 @ 11:41 AM

moneyThe establishment of a special needs trust can provide a false sense of security that you are all set. It is
the money that funds the trust that will secure the resources for your loved one to be cared for.

What is a special needs trust?

A Special Needs Trust (SNT) is a legal document and a very important part of your child's long-term financial plan.

The trust may be used to hold money:

  • that you save that others give your child as gifts
  • that you receive from an insurance settlement
  • Funds in the SNT will not interfere with your child's eligibility for federal benefits like Medicaid and Supplemental Security Income (SSI).


Who are the parties involved?
The individual who funds the trust is the Donor. The individual who benefits from the trust is the Beneficiary. The individual who oversees the trust is the Trustee. 


When should families fund the SNT ?
 In most circumstances the SNT is funded at the death of the parent(s) or primary care giver, rather than during their lifetime. The term used for a trust that is funded at the death of an individual is a Testamentary Trust.


Reasons for not funding the trust during a donor’s lifetime include:

  • Once a trust is funded, the money can only be used to meet the  beneficiary’s supplemental needs. 
  • A separate tax return must be filed.
  • Taxes on any earnings must be paid by the trust. Income earned in  the trust is usually taxed at a higher tax rate than an individual rate.
  • Once a trust is funded, it becomes irrevocable. This prevents you  from making any changes to the terms of the trust.
  • Overall, there is no flexibility in your plan. 

Although funding the trust may reduce flexibility, the following are some of the reasons why one may consider funding a SNT during the lifetime of the donor as a planning strategy: 

  • If an individual has more than enough money to meet his/her  personal needs and will not jeopardize their personal financial  security.
  • Provides the donor with the comfort of knowing that there will be a  certain amount of money available for the beneficiary.
  • Parents who have taxable estates and are implementing strategies to  reduce their estate tax liability.
  • Grandparents or others are trying to reduce their taxable estate by  gifting to your child – the SNT protects the child’s eligibility for  government benefits.

•  Money in the trust can provide some protection from creditors. 

  •  Money directly received by the child either through an inheritance  and/or a legal       settlement which would otherwise disqualify them for  benefits. This would be a “payback” SNT.


Regardless of the timing decision for funding the trust, it is important to do whatever you can to makes sure there will be adequate money in the trust to provide for your child’s security. There are two steps:

•  identify what the anticipated needs will be
•  assess what steps you can realistically take to provide what is  necessary in light of your other financial requirements and goals.

 

View the ways we help a Trustee  in their fiduciary role.

Tags: Special Needs Trusts, Trustee Services

Special Needs Trust Distributions and Trustee Fees

Posted by Patty Manko on Fri, Nov 15, 2013 @ 12:22 PM


describe the imageTrust Distributions

Most special needs trusts give the trustee sole discretion to make distributions from the trust funds. There are specific guidelines to be followed in making distributions.  A general rule is that distributions should not be made directly to the beneficiary.  Instead checks should be made payable directly to the vendors when goods are purchased or to the providers when services are rendered.

Charging a trustee fee

Even if the trust does not contain any specific language about fees, the trustee has a right to be paid.  The trustee fee is a tax deduction for the trust and is taxable income to the trustee.  The following are some factors to consider in determining an appropriate fee:

  •   the amount of assets in the trust
  •   the complexity of the investments
  •   the beneficiary’s needs
  •   the services being performed 

There are two considerations used in determining a fee; the first is the number of hours worked, the second is the type of service provided. Activities such as paying bills and balancing the checkbook will be charged at one rate. More complicated tasks such as working on legal, investment, and tax matters would probably command a higher figure. This is especially important if the trustee has a financial or legal background. 

Time and billing records

The trustee should keep a written record of all the time spent on trust activities. Some trustees maintain a log book in which they write down the date, time spent, and nature of each service. If any personal funds are used for the trust, the trustee should keep receipts for reimbursement from the trust assets. Reimbursements should be made promptly. Plan to keep these records at least until the beneficiaries have approved your account. Click below to view an example of a  trustee log and to download a blank log. 

 Download a Trustee Time Log

Tags: Special Needs Trusts, Trustee Services

How Trustees Can Protect Themselves

Posted by Patricia Manko on Tue, Sep 11, 2012 @ 04:18 PM

hardhat resized 600To protect themselves' from any given potential liability, trustees' best defense is to always act in the best interest of the beneficiary.

  • They should read the trust thoroughly and understand their responsibilities.
  • Trustees need to make sure that all of the trust property that is supposed to be part of the trust is actually registered to the trust.
  • All assets—real estate, automobiles, and investment accounts—should be properly insured.
  • Income taxes must be paid in a timely manner.
  • Trustees should send periodic accounts—annually if not quarterly—to the beneficiary or his or her legal representative. Keeping the beneficiary informed is important.
  • If a trustee has any questions about procedures or requirements, it is recommended that a qualified professional be hired to assist with the specific aspects of the trust and the needs of the beneficiary.

The Surety bond
A surety bond is insurance that protects the beneficiary if the trustee mismanages or misappropriates the trust property. Whether the trustee must post a bond, and if so, what type, is usually stated in the trust instrument. Some Special Needs Trusts excuse a trustee who is a relative of the beneficiary from giving bond, but require a professional or corporate trustee to post a bond.

Trustee's Personal Liability
When an individual agrees to be a trustee, they accept some degree of personal risk. If, as a result of their actions, the trust suffers a financial loss, the trustee may have to repay that loss out of their personal assets. Whether this will occur depends on the kind of action that caused the loss, the laws in each particular state, and any provisions in the trust that govern the trustee’s liability.

Legal Standards
In general, a trustee is liable for any intentional act on his/her part that caused the trust to lose money. 
Some trusts contain a so-called exculpatory clause. A common exculpatory clause will exempt a trustee from personal liability if he or she acts in good faith. A trustee would only be personally responsible for a loss if he or she acted in bad faith or was grossly negligent.

Investment losses
It is not uncommon for one or more of the trust’s investments to decline in value in any particular year. Sometimes the trust’s entire portfolio will lose money. If that occurs, the trustee in most cases does not have to make up the loss personally. Most states have a prudent investor rule that will insulate the trustee from losses as long as he or she adheres to that state’s requirements. 

Most states' prudent investor rules require the trustee to invest and manage the trust property as a prudent investor would. This means that the trustee should not exercise extreme risk or extreme caution. Instead, they should consider the size, terms, and purpose of the trust, and use reasonable care, skill, and caution. Also, a typical prudent investor law requires the trustee to reasonably diversify the assets in the portfolio to meet the long term goals as well as current cash flow needs of the beneficiary. 

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Tags: Special Needs Trusts, Trustee Services