You've Been Appointed Trustee: What Now?

Posted by Patty Manko on Fri, Oct 11, 2013 @ 01:18 PM

trust resized 600Whether it's an honor or a burden (or both), you have been appointed trustee of a trust. What responsibilities have been thrust upon you? How can you successfully carry them out?

Here are some dos and don'ts to get you started:

1.  Do read the trust document. It sets out the rules under which you will operate. So you need to understand it completely.

2.  Do create a checking account for the trust. All income and expenses should go through this account. While you can and should invest the money, a checking account will enable you to make distributions and payments and keep track of them.

3.  Do keep the best interests of the beneficiaries in mind at all times. You have what's called a "fiduciary" duty to them, which is an extremely high standard.

4.  Don't have any personal financial dealings with the trust. For instance, you cannot borrow money from the trust or lend the trust money to anyone.

5.  Do provide the beneficiaries and anyone else indicated in the trust with an annual account of trust activity. This can be a copy of the checking and investment account statements or a more formal trust account prepared by an accountant or attorney.

6.  Do invest the trust funds prudently and productively. It is wise to get professional investment advice.

7.  Do keep in regular contact with the beneficiaries to understand their needs.

8.  Do be aware of any public benefits the beneficiaries may be receiving and make sure you do not jeopardize the beneficiaries' eligibility.

9.  Do file annual income tax returns for the trust.

10.  Don't fly solo. Get professional advice to make sure you are correctly fulfilling your role. Click on the image below to access the Fall 2013 calendar of upcoming free workshops.

Blog Source: Margolis & Bloom Law

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Contact us for further information.


 

 

 


Tags: Special Needs Trusts, Trustee Services

The Letter of Intent and Your Child

Posted by Patricia Manko on Thu, Jun 20, 2013 @ 03:42 PM

guardianshipThe most important asset your child has is YOU.

Think for a moment about the specific instructions or guidelines you give to your child or his or her caregiver when you leave for just an evening out or a weekend away.Imagine if you never came back. 

Many families need a catalyst to encourage them to begin the planning process. A Letter of Intent simplifies the planning process by initially asking basic biographic information and progresses to more thoughtful and provoking questions. Since developing the Five Factors of comprehensive special needs planning, we have reorganized the content based upon these key elements in planning for your child’s future. By completing a Letter of Intent for your family member, you will begin to develop goals and objectives to assist you in the overall planning process. Ultimately, it will provide the details required for future caregivers to fulfill their expected roles based upon your desires and concerns.

No matter who you have entrusted to care for your child when you are gone—sibling, friend, relative, trustee, guardian, or organization—you can help guide that person by providing them the knowledge that only you, as a parent, possess. This is not a legally binding document, but it is still perhaps one of the most important documents you can prepare for the future well-being of your child. This is an opportunity to leave a legacy of all that you have accomplished with your child.

You need to periodically review and revise this Letter of Intent, perhaps on your child’s birthday, making certain to provide your child’s future caregiver with an updated copy. As every child is unique, so should this document be unique. Feel free to expand where needed and omit areas that are not applicable. Be flexible, be clear, and feel free to make it as personal as you wish.

To download a blank sample Letter of Intent, click on the image below.

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Tags: Special Needs Financial Planning, Letter of Intent, Trustee Services, guardianship, special needs Letter of Intent

Special Needs Trust Distributions and Trustee Fees

Posted by Patricia Manko on Thu, Jun 13, 2013 @ 01:19 PM


trustee distributions resized 600Distributions

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. 

 Download a Trustee Time Log

Tags: Special Needs Financial Planning, Special Needs Trusts, Trustee Services

Financial Factors in Special Needs Planning

Posted by Patricia Manko on Thu, Feb 28, 2013 @ 03:09 PM

financial factors Starting at a very young age we are taught about the value of money. Throughout our lives we associate the value of money to our life experiences such as paying for our own college education, purchasing a car, buying a house, saving for our own children’s college and our ultimate retirement – in addition to the daily expenses of our desired lifestyle.

Your Family's Financial Values or Standards

It is important to talk about the value of money and what it means to you because you can pass these values on to future caretakers and other family members. How you feel about money can also have an impact upon what you can achieve for your child's future. It does not do any good if you do not share your values of money with others. If parents do not articulate their vision, their financial capacity to achieve their goals and their financial intentions, their vision for their child may not happen. It is important to express your values to your financial advisors, trustees, guardians, and legal advisors, but also to your other family members. These individuals most likely will be the ones to follow through on implementing the plan that you have for your child.

SNP PLANNING POINTER:

Take a moment to ask yourself – What does money mean to me? Then take time to share those values with your family –this can be expressed in your Letter of Intent.

 Download a template for your Letter of Intent

Bringing Family Members into Your Discussions

There are many ways to discuss your vision and your finances. It is often easiest to begin this process in a gradual manner and in an informal environment. Although it is important to have all family members in agreement, scheduling initial discussions in a formal meeting or large family setting is not always the best. We recommend speaking to one child at a time, to get their feelings about their willingness to help. This will give them the opportunity ti share ideas with you rather than you telling them what you hope will happen. Remember, caring for a family member with disabilities is a lifetime commitment that you do not want to force on anyone, yet it is important for them to know your intentions.

After everyone has had an opportunity ti discuss tghuer feelings and ideas un and informal way, you may wish to plan a discussion wuth everyone at once.  Since every family’s dynamics are unique, you will find the best way to communicate with your family. The following steps should help to move the communication process along smoothly:

  • Share your vision
  • Talk about the amount of money you plan to have available to support your vision. You do not have to reveal all of your financial matters. You can choose to only mention the financial aspects that pertain to the needs of the family member with a disability.
  • Determine the best person to take on each role. For example, who is the best with finances? That person may be a good trustee or trust advisor of a Special Needs Trust. Who is most involved in the day to day life of the child? That person may be a good guardian.
  • Ask family members if they feel able to perform their roles independently. If not,design your plan to give them resources to work with. For example, let them know that they could hire an investment advisor to help with the trust management or a social worker to help oversee supports.

In our combined 30-plus years of planning, one of the biggest obstacles that we have encountered is that people do not feel comfortable talking about how much money they have. Even professionals in the field of providing services to families, including government agency employees that serve families, do not feel comfortable talking about money or the specific costs of providing services to individuals with disabilities. 

SNP STORY:

Although Charles is receiving all the benefits that he is eligible for and living independently, we feel that it is not enough for him to simply have what the government provides. We supplement his expenses by about $1,000 a month. This gives him the sense of self-worth and control to be able to do what he likes rather than do what someone else wants him to do. He has schizophrenia and his sense of self-worth is most important to his ability to function in life. In working with our financial planner and our attorney, we made arrangements for our other son to provide this supplement to support Charles’ needs without jeopardizing his government benefits when we are no longer able to. 

-- Charles’ father

Sometimes parents feel that they must treat all of their children equally. They feel that their children expect it. However, in many cases children without disabilities are more than willing to forego any type of inheritance to guarantee security for their brother or sister with  a disability. They understand the financial realities and would rather make sure their brother or sister is taken care of and would not expect that everything is shared equally.

One of the first steps that is required for you to be able to achieve financial security for your child is to overcome the reluctance to discuss the issues of money. We all know it takes money to provide services, staff, housing expenses, employment supports, transportation, education, health care services and the like. We also know that the government does not have an endless supply of money to funed these services.

Maximize Eligibility for Government Benefits

With this in mind, families should plan to maximize eligibility for governmenaboutof what funds are available to your family member– both personally and publicly –how to secure them and how to allocate them. We will be posting a blog about public resources, which we call government factors,  within the next few weeks.

Understand Where You Are and Where You Would Like to Be

In order to maximize your own personal resources, you must first understand where you are financially. Do you have the money to do the things you and your family like to do today? Are you happy where you are financially? If not, what can you do to change things?

The next step is to know where you want to be. What lifestyle do you envision for you and your family, today and in the future? What do you consider retirement – is it when you stop working full time, when you stop working the hours that you currently work, or when you begin to work part time or pursue a hobby for income?  What do you want to do for your vacations, travel time, fun time, and the like?  How philanthropic do you want to be? Where do you envision living when you retire?  In what type of environment do you envision your child living ?  Do you envision him or her living totally independent from you or do you intend to always be involved in the daily activities of your child's life for as long as you are able to?

Create a Plan

The next step is to prepare an action plan to get you where you want to be financially. This is where having qualified advisors to guide you through the planning process can be most beneficial.

The key issue to consider in the financial factors is maximizing personal resources. This includes maximizing tax planning strategies – both income tax and estate tax planning. The proper use of financial products can also be a key factor to financial success. You should also incorporate your group employee benefits in the planning process.  These would include your group health, life and disability insurance coverage,retirement plans, stock option plans, stock purchase plans, flexible spending plans, etc..  Determine those that are currently available to you and your family as well as those available to your family upon your death and /or retirement.  You should also determine which employee benefits are transferable and/or portable upon  termination of your employment.  Adequately protecting your income and assets in the event of a premature death and/or disability of a parent is critical.

Any type of planning process, from planning a vacation to building a house, has a defined beginning and ending point. The traditional financial planning process involves identifying resources and listing specific goals that can be quantified. Some common examples of quantifiable goals might include paying cash for your next automobile, saving for four years of college tuition payments ,purchasing a second home for retirement, or generating a retirement income equal to 65%-75% of your pre-retirement income.

Planning for a family member with disabilities can be a much more challenging process. There is no defined beginning or ending point. Needs and abilities of the individual can change rapidly and will vary significantly over time. It is only natural for the family of a young child to want to have a concrete plan in place that provides adequate assets and resources for their child’s lifetime needs. Families must realize, however, that it may not be possible to predict accurately the long-term costs involved in providing supports for an individual over his/her lifetime.

Assumptions can be made of future expenses. We can fairly accurately determine the costs of a physical residence – a house or a condo – in a geographic area based on current market values. We can also estimate the costs of maintaining the physical residence. Often, however, we cannot always accurately determine the costs of supports until the needs are identified. Once the needs are somewhat identified, we can develop a range of the probable expenses necessary to provide these supports today and in the future. Before implementing a residential plan it is highly recommended that you work with an independent consultant to determine the level of supports required. You then need to develop a model that meets both your personal preferences and your financial abilities to maintain the model, both during your lifetime and upon your death.

So how do we determine how much money is needed? And how much is too much? Just as the educational needs of every child are unique, so are the long-term planning needs of every individual with special needs. Even two individuals with a similar medical and/or cognitive diagnosis, can have significantly different support requirements. With these varying requirements, costs will also vary. There is no clear answer; the bestwe can do is to maximize all resources and coordinate all of the Five Factors.That is why it is so important to have a comprehensive plan and to reevaluate it periodically.

Tags: Special Needs Financial Planning, Retirement Planning, Special Needs Trusts, five factors of financial planning, Letter of Intent, Trustee Services, guardianship, financial planning, wealth management, special needs Letter of Intent

Special Needs Trust Distributions and Trustee Fees

Posted by Patty Manko on Tue, Sep 18, 2012 @ 03:09 PM

trustee fees resized 600Distributions

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:

ü  the amount of assets in the trust

ü  the complexity of the investments

ü  the beneficiary’s needs

ü  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 here to view an example of a  trustee log and to download a blank log. 

 

Tags: Special Needs Financial Planning, 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. 

 Read about our services for trustees.

Tags: Special Needs Trusts, Trustee Services

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