Corporate trustee for special needs trust

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Corporate trustee for special needs trust

Post by startabatha »

For those that have set up a third party special needs trust for a loved one and have selected a corporate trustee as a primary or backup trustee who have you selected, and why?

What questions did you ask the trustee to make your selection?

Is anyone here a co-trustee with a corporate trustee for a third party special needs trust? If so, do you have any feedback, good or bad, on the corporate trustee?

Thank you for your input.
fourwheelcycle
Posts: 1952
Joined: Sun May 25, 2014 5:55 pm

Re: Corporate trustee for special needs trust

Post by fourwheelcycle »

If your special needs beneficiary is in an institution which cares for them, and they are not out in the community, a corporate trustee may work for you. The trustee's main role would be to pay the institution's bills. We have friends whose beneficiary has a mental health issue that enables them to live on their own, but unable to hold a job, impossible to live with roommates or in a group home, and assures frequent run-ins with neighbors, merchants, health care providers, and the police. Their special needs trust is set up with their local trusted attorney as trustee. The trust contracts with a not-for-profit community-based support group that assigns a case worker to work with the beneficiary. The special needs trustee sets up additional needed service arrangements with other attorneys as needed.
bsteiner
Posts: 9061
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Corporate trustee for special needs trust

Post by bsteiner »

The key is whether the bank or trust company is familiar with administering these trusts. What they distribute for, and how, can affect the beneficiary's eligibility for means-tested government benefits.

The lawyer preparing your Will (or the trust agreement if you expect to have a taxable estate and are creating it now to shift wealth out of your estate) should be able to recommend some banks or trust companies that administer these trusts.
User avatar
celia
Posts: 16726
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Corporate trustee for special needs trust

Post by celia »

It depends on the special needs person and how they respond to life events, their court-acknowledged guardian who knows them well and the trustee. All of them have to work together for the benefit of the beneficiary, without wasting money on frivolous requests. Someone needs to know that beneficiary very well and needs to relay what that beneficiary really needs to the trustee.

If the beneficiary has a guardian acknowledged by the court and the guardian knows which things are true and which are not (or exaggerated), then the guardian might work as far as informing the trustee as to what is needed.

I have two special needs relatives for whom I am a trustee or successor trustee. I grew up knowing them and have witnessed their journey thru life. Often they don't know what they need, but I get it for them. (Examples are non-slip bathroom rug, books for hobbies they enjoy, a hard case for glasses so they stop breaking them.)

Other times they ask for things they shouldn't have, then I inform their guardian (money for an Uber ride with a stranger, excess hobby materials when they haven't used what they already have, rides to a doctor for services they were told they don't need).

OP, How will the corporate trustee be able to respond appropriately if s/he doesn't know the beneficiary, unless there is a guardian to speak on their behalf?
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

My special needs beneficiary is a young adult that lives in the community, works part time, drives, leads an active life and can make many of his own decisions but needs help with finances. He has an ABLE account. I'm teaching him to manage his checking account. No guardianship but we have POA and a supported decision making agreement. After my death, his sibling will be successor POA and successor trustee (or cotrustee if we should need corporate cotrustee).

I'm just wondering if others with a SNT have appointed a successor corporate cotrustee and if so who. If I name a successor corporate cotrustee I'm more interested in a national firm because we are likely to move out of state. Don't want to be saddled with a local bank.

The only benefit that will need to be maintained is Medicaid as loved one is going off SSI and onto SSDI DAC soon.
Last edited by startabatha on Mon Nov 06, 2023 6:49 pm, edited 1 time in total.
User avatar
beyou
Posts: 6801
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Corporate trustee for special needs trust

Post by beyou »

startabatha wrote: Mon Nov 06, 2023 4:56 pm My special needs beneficiary is a young adult that lives in the community, works part time, drives, and leads an active life and can make many of his own decisions but needs help with finances. He has an ABLE account. I'm teaching him to manage his checking account. No guardianship but we have POA and a supported decision making agreement. After my death, his sibling will be successor POA and successor trustee or cotrustee if we should need corporate cotrustee.

I'm just wondering if others with a SNT have appointed a successor corporate cotrustee and if so who. If I name a successor corporate cotrustee I'm more interested in a national firm because we are likely to move out of state. Don't want to be saddled with a local bank.

The only benefit that will need to be maintained is Medicaid as loved one is going off SSI and onto SSDI DAC soon.
I had looked into bank trustees and only found a few smaller regional banks that are willing to be a trustee for a SNT.
A big firm such as Vanguard Trust, simply wont take the business due to the extra responsibility involved (also have min sizes of 7 figures).
I left the names of a couple of these banks in our region for my family co-trustee to reach out should they need help in the future.
My suggestion to these co-trustees was that if one of them can't continue, and the burden is too much for the remaining trustee, one option
is to hire a bank as co-trustee with the remaining family member. This would leave a family member with some decision making authority but have the bank to manage the money, make payments, create tax returns.

I would ask some of the regional players if there is any geographic restriction. I mean many on this site invest with Vanguard and do not live
near any Vanguard office, why is national physical presence a requirement ?
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

Thanks. Good points.

A national physical office is not a requirement. But having a firm that could serve with my successor cotrustee anywhere in the US is. a requirement.

I wonder if Schwab would service a SNT as a cotrustee.
User avatar
Michael Patrick
Posts: 345
Joined: Wed Dec 19, 2018 9:25 am
Location: Madison, WI

Re: Corporate trustee for special needs trust

Post by Michael Patrick »

We went with a smaller local bank as the trustee for our daughter's SNT. Our attorney said she had worked with them and they were good. We met with them, and it felt right.

In the SNT documents, our other daughter is the trust protector, and has the power to fire (and hire) the trustee.
JBTX
Posts: 11175
Joined: Wed Jul 26, 2017 12:46 pm

Re: Corporate trustee for special needs trust

Post by JBTX »

beyou wrote: Mon Nov 06, 2023 6:03 pm
startabatha wrote: Mon Nov 06, 2023 4:56 pm My special needs beneficiary is a young adult that lives in the community, works part time, drives, and leads an active life and can make many of his own decisions but needs help with finances. He has an ABLE account. I'm teaching him to manage his checking account. No guardianship but we have POA and a supported decision making agreement. After my death, his sibling will be successor POA and successor trustee or cotrustee if we should need corporate cotrustee.

I'm just wondering if others with a SNT have appointed a successor corporate cotrustee and if so who. If I name a successor corporate cotrustee I'm more interested in a national firm because we are likely to move out of state. Don't want to be saddled with a local bank.

The only benefit that will need to be maintained is Medicaid as loved one is going off SSI and onto SSDI DAC soon.
I had looked into bank trustees and only found a few smaller regional banks that are willing to be a trustee for a SNT.
A big firm such as Vanguard Trust, simply wont take the business due to the extra responsibility involved (also have min sizes of 7 figures).
I left the names of a couple of these banks in our region for my family co-trustee to reach out should they need help in the future.
My suggestion to these co-trustees was that if one of them can't continue, and the burden is too much for the remaining trustee, one option
is to hire a bank as co-trustee with the remaining family member. This would leave a family member with some decision making authority but have the bank to manage the money, make payments, create tax returns.

I would ask some of the regional players if there is any geographic restriction. I mean many on this site invest with Vanguard and do not live
near any Vanguard office, why is national physical presence a requirement ?
I have a local/regional bank that does Trust work and SNTs, and they said they handle trusts for people that live all over the country. The trust committee members are in different states and our son could stay here or move to another state with extended family. None of that is an issue.
Michael Patrick wrote: Mon Nov 06, 2023 7:25 pm We went with a smaller local bank as the trustee for our daughter's SNT. Our attorney said she had worked with them and they were good. We met with them, and it felt right.

In the SNT documents, our other daughter is the trust protector, and has the power to fire (and hire) the trustee.
Same setup here.
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

Thanks. Will look at regional banks.

Has anyone selected Members Trust Company as a successor trustee?

https://memberstrust.com/
User avatar
beyou
Posts: 6801
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Corporate trustee for special needs trust

Post by beyou »

startabatha wrote: Mon Nov 06, 2023 10:35 pm Thanks. Will look at regional banks.

Has anyone selected Members Trust Company as a successor trustee?

https://memberstrust.com/
No idea but here are some more I found online that mention SNT support.

https://www.rocklandtrust.com/wealth-an ... s-services
https://www.orangebanktrust.com/trust-s ... eds-trust/
https://www.midlandtc.com/our-services/ ... nistration
https://www.wellsfargo.com/the-private- ... -services/

I have not contacted these places yet as I did not fund an SNT. Mine is created upon passing of my DW and I.
At that point 2 family members would be co-trustees, and if they so choose they can replace one of themselves
after they do the interview of the potential trustees. This is both because I prefer they DIY (with help from tax accountants
and lawyers but manage the cash themselves), and because the list of candidates, and their capabilities could change over the years.
Best if they find out what is best at the time they need help, vs what is best today.
forgeblast
Posts: 583
Joined: Fri Oct 13, 2017 8:45 am
Location: PA
Contact:

Re: Corporate trustee for special needs trust

Post by forgeblast »

startabatha wrote: Mon Nov 06, 2023 11:11 am For those that have set up a third party special needs trust for a loved one and have selected a corporate trustee as a primary or backup trustee who have you selected, and why?

What questions did you ask the trustee to make your selection?

Is anyone here a co-trustee with a corporate trustee for a third party special needs trust? If so, do you have any feedback, good or bad, on the corporate trustee?

Thank you for your input.
I went through this a year or year and 1/2 ago. my sister had money coming in but we needed to protect it and her. So I found a lawyer who specialized in trusts. He had a list of organizations that he worked with previously. I met with them and settled on https://www.theadvocacyalliance.org/
they have been awesome. we did a pooled trust as my sister did not want to leave any money to anyone when she is gone (yep, so glad I took days off work etc to help her but its her choice as there was never a power of attorney signed). then when we had the ok from AA we signed all the paperwork and it was done.
At first i was being quoted huge sums of money to set up a trust, but we have a lawyer friend who recommended this person to us.
If your in PA i can get their name. if you have any other questions please ask. glad to help.
bsteiner
Posts: 9061
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Corporate trustee for special needs trust

Post by bsteiner »

beyou wrote: Mon Nov 06, 2023 11:16 pm
startabatha wrote: Mon Nov 06, 2023 10:35 pm Thanks. Will look at regional banks.

Has anyone selected Members Trust Company as a successor trustee?
...
No idea but here are some more I found online that mention SNT support.

https://www.rocklandtrust.com/wealth-an ... s-services
https://www.orangebanktrust.com/trust-s ... eds-trust/
https://www.midlandtc.com/our-services/ ... nistration
https://www.wellsfargo.com/the-private- ... -services/

I have not contacted these places yet as I did not fund an SNT. Mine is created upon passing of my DW and I.
...
I have good relationships with Orange Bank & Trust, Midland and Wells Fargo. Your lawyer should have relationships with several.

Unless you expect to have a taxable estate, you would probably do this in your Will, to get the basis step-up at death.

The bank or trust company would probably be an initial trustee rather than a successor trustee.
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

bsteiner,

Thank you.

I need a standalone SNT because we are expecting a contribution to the SNT from a relative before my passing. Wouldn't my estate still get the step up in tax basis upon my death?

In my child's SNT a corporate trustee would be a successor trustee, because I have two competent family members that will serve first.
Last edited by startabatha on Tue Nov 07, 2023 8:09 am, edited 2 times in total.
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

forgeblast wrote: Tue Nov 07, 2023 7:44 am
startabatha wrote: Mon Nov 06, 2023 11:11 am For those that have set up a third party special needs trust for a loved one and have selected a corporate trustee as a primary or backup trustee who have you selected, and why?

What questions did you ask the trustee to make your selection?

Is anyone here a co-trustee with a corporate trustee for a third party special needs trust? If so, do you have any feedback, good or bad, on the corporate trustee?

Thank you for your input.
I went through this a year or year and 1/2 ago. my sister had money coming in but we needed to protect it and her. So I found a lawyer who specialized in trusts. He had a list of organizations that he worked with previously. I met with them and settled on https://www.theadvocacyalliance.org/
they have been awesome. we did a pooled trust as my sister did not want to leave any money to anyone when she is gone (yep, so glad I took days off work etc to help her but its her choice as there was never a power of attorney signed). then when we had the ok from AA we signed all the paperwork and it was done.
At first i was being quoted huge sums of money to set up a trust, but we have a lawyer friend who recommended this person to us.
If your in PA i can get their name. if you have any other questions please ask. glad to help.
Thank you. Does a pooled trust always prohibit successor beneficiaries? Or is this trust a first party payback trust?
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

Has anyone named a directed trustee as a successor trustee for a special needs trust?

I really like the idea of a corporate trustee NOT managing the investments nor paying them to do so. That a family member can easily do, Boglehead style.
bsteiner
Posts: 9061
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Corporate trustee for special needs trust

Post by bsteiner »

startabatha wrote: Tue Nov 07, 2023 8:01 am bsteiner,

Thank you.

I need a standalone SNT because we are expecting a contribution to the SNT from a relative before my passing. Wouldn't my estate still get the step up in tax basis upon my death?

In my child's SNT a corporate trustee would be a successor trustee, because I have two competent family members that will serve first.
There would be a basis step-up for assets passing upon death.

Be careful if you combine contributions from different persons into a single trust. There could be complexities with perpetuities periods, state income taxes, partial grantor trust status, different transferors for GST tax purposes. The effort to unscramble it could be substantially more than the cost of including trusts in each person's Will. If it turns out that there aren't any complexities, the trusts can be combined.
startabatha wrote: Tue Nov 07, 2023 8:13 am Has anyone named a directed trustee as a successor trustee for a special needs trust?

I really like the idea of a corporate trustee NOT managing the investments nor paying them to do so. That a family member can easily do, Boglehead style.
I've never done it. The issue is that there's much more work administering a trust for a special needs beneficiary, so even if a bank or trust company isn't managing the assets, they would probably charge more than a trustee would for a trust where they have much less to do. Your lawyer could ask some of the ones mentioned, as well as some of the trust companies that focus on trusts where they're not managing the assets, to see if there's one that can do this.
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

Will ask my estate attorney about it. The relative funding my child's SNT is leaving a modest life insurance policy to said trust, but things were changed for tax purposes so that the owner of the policy is now the SNT (as well as the beneficiary). There is no state income tax in my state.

I need to be sure there would be a legit reason to draft a second SNT. Hope not.

Regarded directed trustees, I'm looking at Cumberland Trust, Arden Trust, Zia Trust and Alliance Trust. But would welcome other names. They offer special needs trust administrative services but offer NO investment management which is appealing depending of course on the cost of their other trust services. I'd really prefer to leave the liquid SNT assets at a discount brokerage like Schwab or Fidelity in a set and forget targeted retirement ETF or fund.
Last edited by startabatha on Tue Nov 07, 2023 9:34 am, edited 1 time in total.
User avatar
beyou
Posts: 6801
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Corporate trustee for special needs trust

Post by beyou »

startabatha wrote: Tue Nov 07, 2023 9:06 am Will ask my estate attorney about it. The relative funding my child's SNT is leaving a modest life insurance policy to said trust, but things were changed for tax purposes so that the owner of the policy is now the SNT (as well as the beneficiary). There is no state income tax in my state.

I need to be sure there would be a legit reason to draft a second SNT. Hope not.

Regarded directed trustees, I'm looking at Cumberland Trust, Arden Trust, and Zia Trust but would welcome other names. They offer special needs trust administrative services but offer NO investment management which is appealing depending of course on the cost of their other trust services. I'd really prefer to leave the liquid SNT assets at a discount brokerage like Schwab or Fidelity in a set and forget targeted retirement ETF or fund.
Well it would be the relative leaving the assets to your child that would update their will to create a trust,
or create a trust sooner if they want to give the funds before their death. But point it is their task to do one or the other.

How would it work if the trust company does NOT manage the investments, how do they get access to funds to pay bills for the beneficiary ?
Would a co-trustee disburse funds to the bank trust so they can pay bills ? I was going to suggest family do the investments too, but have them
hire tax accountants to do the trust taxes, and maybe help them with SSA report preparation. Certainly a full service trustee is the cleanest solution, and I assume SOME of them would use low cost mutual funds (this could be a requirement of hiring the trustee).
User avatar
beyou
Posts: 6801
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Corporate trustee for special needs trust

Post by beyou »

startabatha wrote: Tue Nov 07, 2023 8:13 am Has anyone named a directed trustee as a successor trustee for a special needs trust?

I really like the idea of a corporate trustee NOT managing the investments nor paying them to do so. That a family member can easily do, Boglehead style.
You can name anyone you want, but that does not mean they will accept the role at the time of the death or resignation of the initial trustee(s).
If this is at some TBD time in the future, how can any bank tell you "yes I will accept this responsibility at any point in the future". And even if they would agree to this, they may change their cost structure, services offered and seems best to let the initial trustees do some homework if they are considering resigning from the task, and do what is best at the time.
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

This would be the case of any future corporate trustee. Which is why I'd probably name several potential corporate or directed trustees but let the family member know to do their own research.
Last edited by startabatha on Tue Nov 07, 2023 10:06 am, edited 1 time in total.
bsteiner
Posts: 9061
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Corporate trustee for special needs trust

Post by bsteiner »

beyou wrote: Tue Nov 07, 2023 9:23 am ...
How would it work if the trust company does NOT manage the investments, how do they get access to funds to pay bills for the beneficiary ?
Would a co-trustee disburse funds to the bank trust so they can pay bills? I was going to suggest family do the investments too, but have them
hire tax accountants to do the trust taxes, and maybe help them with SSA report preparation. Certainly a full service trustee is the cleanest solution, and I assume SOME of them would use low cost mutual funds (this could be a requirement of hiring the trustee).
The bank or trust company would hold the assets but would invest them pursuant to the direction of the person(s) having that responsibility.

If a bank or trust company manages the assets, they would probably invest similarly to how people here invest.
forgeblast
Posts: 583
Joined: Fri Oct 13, 2017 8:45 am
Location: PA
Contact:

Re: Corporate trustee for special needs trust

Post by forgeblast »

startabatha wrote: Tue Nov 07, 2023 8:03 am
forgeblast wrote: Tue Nov 07, 2023 7:44 am
startabatha wrote: Mon Nov 06, 2023 11:11 am For those that have set up a third party special needs trust for a loved one and have selected a corporate trustee as a primary or backup trustee who have you selected, and why?

What questions did you ask the trustee to make your selection?

Is anyone here a co-trustee with a corporate trustee for a third party special needs trust? If so, do you have any feedback, good or bad, on the corporate trustee?

Thank you for your input.
I went through this a year or year and 1/2 ago. my sister had money coming in but we needed to protect it and her. So I found a lawyer who specialized in trusts. He had a list of organizations that he worked with previously. I met with them and settled on https://www.theadvocacyalliance.org/
they have been awesome. we did a pooled trust as my sister did not want to leave any money to anyone when she is gone (yep, so glad I took days off work etc to help her but its her choice as there was never a power of attorney signed). then when we had the ok from AA we signed all the paperwork and it was done.
At first i was being quoted huge sums of money to set up a trust, but we have a lawyer friend who recommended this person to us.
If your in PA i can get their name. if you have any other questions please ask. glad to help.
Thank you. Does a pooled trust always prohibit successor beneficiaries? Or is this trust a first party payback trust?
sorry have been crazy busy. A pooled trust means that anything that is left goes to the pool. that way if someone runs out they can still get $. The other trust that we looked at would have had a successor basically like leaving it in a will, but my sister did not want to do that , so we went with a pooled trust. (my sister is extremely difficult to work with and this was a win just getting her to sign papers.)
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

Has anyone used Schwab Trust for a special needs trust?

Schwab will manage special needs trusts (at their usual .50% AUM fee) but for SNTs require a "boots on the ground" "distribution advisor", typically a family member to inform them of nonroutine needed distributions.

This actually sounds like an ideal arrangement. I'm thinking of the family distribution advisor also being the trust protector and the person living with or near my son (after my death).

This takes the administrative trust responsibilities (investing, taxes, recordkeeping) off the family member but puts the most important role of distribution decisions into the family member's hands. It also alleviates fears of a corporate trustee not wanting to make distributions for greed or liability reasons.

Thoughts or experiences with Schwab Trust?
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

An acquaintance of mine contacted Charles Schwab Trust regarding being trustee of a special needs trust and these were their notes:

Offers both administration (trustee) and investment advisory

$1mm min

Investment advisory can only invest in Schwab ETFs

Cannot invest in Annuity, LLC, LP or other complex products → Do not put Annuity/alternatives in the trust.

When CS assumes the trustee position, all positions are liquidated (at step up) and only Schwab ETFs are purchased (Red flag!)

Administration: Can file state/federal taxes, cannot know state-specific government benefits, Residential Home: Maintenance and upkeep (The language is included under Provisions for “Residential Real Property)

There must be a “distribution adviser” who will give instructions to CS on how much to distribute depending on the child’s needs.

A distribution advisor is a trusted person/co-trustee and has power over the trust regarding distributions.
bsteiner
Posts: 9061
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Corporate trustee for special needs trust

Post by bsteiner »

startabatha wrote: Sun Feb 11, 2024 8:55 am Has anyone used Schwab Trust for a special needs trust?

Schwab will manage special needs trusts (at their usual .50% AUM fee) but for SNTs require a "boots on the ground" "distribution advisor", typically a family member to inform them of nonroutine needed distributions.

This actually sounds like an ideal arrangement. I'm thinking of the family distribution advisor also being the trust protector and the person living with or near my son (after my death).

This takes the administrative trust responsibilities (investing, taxes, recordkeeping) off the family member but puts the most important role of distribution decisions into the family member's hands. It also alleviates fears of a corporate trustee not wanting to make distributions for greed or liability reasons.

Thoughts or experiences with Schwab Trust?
Banks and trust companies are usually good at dealing with distributions. They have procedures in place to deal with requests for distributions.

I've had several clients name Vanguard as a trustee in their Wills, but none of them has died yet so I don't know how it will work out. My guess is that Schwab would be similar to Vanguard.

If the beneficiary is receiving means-tested government benefits such as Medicaid, the trustees have to make sure not to inadvertently make any distributions that would jeopardize those benefits. In that case, you may want to consider a bank or trust company that deals with these situations on a regular basis, even though their commissions (fees) will be more than Vanguard's or Schwab's. It's often difficult for family members to act as trustees in these cases.
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

Thanks. I think that in my case a family member will be a better distribution advisor and know my son's needs better. So, the Schwab model is attractive. I am just wondering if anyone has utilized Schwab Trust for a special needs trust and any feedback.
User avatar
beyou
Posts: 6801
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Corporate trustee for special needs trust

Post by beyou »

startabatha wrote: Sun Feb 11, 2024 9:07 am An acquaintance of mine contacted Charles Schwab Trust regarding being trustee of a special needs trust and these were their notes:

Offers both administration (trustee) and investment advisory

$1mm min

Investment advisory can only invest in Schwab ETFs

Cannot invest in Annuity, LLC, LP or other complex products → Do not put Annuity/alternatives in the trust.

When CS assumes the trustee position, all positions are liquidated (at step up) and only Schwab ETFs are purchased (Red flag!)

Administration: Can file state/federal taxes, cannot know state-specific government benefits, Residential Home: Maintenance and upkeep (The language is included under Provisions for “Residential Real Property)

There must be a “distribution adviser” who will give instructions to CS on how much to distribute depending on the child’s needs.

A distribution advisor is a trusted person/co-trustee and has power over the trust regarding distributions.
Schwab has a small but cost effective set of funds such that the limitation is not onerous.

"Do not put Annuity/alternatives in the trust" is really no concern, trusts don't usually mandate any particular investment type,
more likely to restrict than mandate alternative investments. My attorney advised to leave permitted investments broad so as to have the broadest set of options of trustees in the years ahead.

Handling real estate and other non-marketable securities is a factor to consider (savings bonds for example).
These are things you may already own when you pass, and you need to consider how future trustees will deal with them.
In my case, I plan to liquidate all my savings bonds over the next 10 years, primarily for tax reasons, secondarily to ease issues for future trustees.
The savings bonds and my home are owned by my trust, so the personal trustees I have named will be able to take over management and maintenance, and should they ever want to hire a professional trustee, they can either liquidate such assets or name a bank/brokerage as a co-trustee and give them responsibility for the marketable securities (likely all but the house).
Last edited by beyou on Sun Feb 11, 2024 4:04 pm, edited 1 time in total.
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

Thanks. Does anyone know how Charles Schwab Trust manages trust assets, i.e. what is the asset allocation like?
User avatar
beyou
Posts: 6801
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Corporate trustee for special needs trust

Post by beyou »

startabatha wrote: Sun Feb 11, 2024 3:58 pm Thanks. Does anyone know how Charles Schwab Trust manages trust assets, i.e. what is the asset allocation like?
I imagine this is something custom tailored to the needs of the beneficiary.
The age of the beneficiary I would think is a significant input.
But they have all the major asset classes in decent low cost funds, and can construct a simple 3 fund portfolio or even more,
in any asset allocation that is appropriate for the beneficiary. I would think any co-trustee who hires them would be able to influence such a decision, so long as they do not suggest something that would be considered malpractice (like 100% equities for an 80 year old, or 100% bonds for a 20 year old).
User avatar
Michael Patrick
Posts: 345
Joined: Wed Dec 19, 2018 9:25 am
Location: Madison, WI

Re: Corporate trustee for special needs trust

Post by Michael Patrick »

startabatha wrote: Sun Feb 11, 2024 9:07 am cannot know state-specific government benefits,
This is the bit that would worry me. My daughter receives services through a state Medicaid waiver which has it's own rules. I'd hate to have that jeopardized by a mistake made by the trustee that isn't familiar with the state-specific rules. And that's one of the main reasons why we went with a local bank that has experience administering special needs trusts in our state.
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

Michael Patrick wrote: Sun Feb 18, 2024 5:01 am
startabatha wrote: Sun Feb 11, 2024 9:07 am cannot know state-specific government benefits,
This is the bit that would worry me. My daughter receives services through a state Medicaid waiver which has it's own rules. I'd hate to have that jeopardized by a mistake made by the trustee that isn't familiar with the state-specific rules. And that's one of the main reasons why we went with a local bank that has experience administering special needs trusts in our state.
Schwab requires an "distribution advisor " who is familiar with your beneficiary's needs and will take responsibility for knowing their state's government benefit rules. In one sense it makes sense. After talking in depth with several banks, and asking targeted questions, I now know they are not as familiar with the nuances of government benefits as they should be.
User avatar
Michael Patrick
Posts: 345
Joined: Wed Dec 19, 2018 9:25 am
Location: Madison, WI

Re: Corporate trustee for special needs trust

Post by Michael Patrick »

startabatha wrote: Sun Feb 18, 2024 9:51 am
Michael Patrick wrote: Sun Feb 18, 2024 5:01 am
startabatha wrote: Sun Feb 11, 2024 9:07 am cannot know state-specific government benefits,
This is the bit that would worry me. My daughter receives services through a state Medicaid waiver which has it's own rules. I'd hate to have that jeopardized by a mistake made by the trustee that isn't familiar with the state-specific rules. And that's one of the main reasons why we went with a local bank that has experience administering special needs trusts in our state.
Schwab requires an "distribution advisor " who is familiar with your beneficiary's needs and will take responsibility for knowing their state's government benefit rules. In one sense it makes sense. After talking in depth with several banks, and asking targeted questions, I now know they are not as familiar with the nuances of government benefits as they should be.
Our older, typically-developing daughter is what is termed in the trust documents as the "trust protector." Her role is to make sure our younger daughter's needs are being met, and to work with the trustee on funding those needs. Coordinating her sister's care is in itself a pretty big responsibility. I think it would be a lot to ask her to also keep on top of all of the laws and regulations, as well any changes in them, while also working full-time and presumably raising a family of her own.
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

I was going to go with that arrangement until I spoke with no fewer than 6 corporate trustees and determined otherwise. Feel free to pm me if you want the details of my findings.
User avatar
Lee_WSP
Posts: 10268
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Corporate trustee for special needs trust

Post by Lee_WSP »

Michael Patrick wrote: Sun Feb 18, 2024 5:01 am
startabatha wrote: Sun Feb 11, 2024 9:07 am cannot know state-specific government benefits,
This is the bit that would worry me. My daughter receives services through a state Medicaid waiver which has it's own rules. I'd hate to have that jeopardized by a mistake made by the trustee that isn't familiar with the state-specific rules. And that's one of the main reasons why we went with a local bank that has experience administering special needs trusts in our state.
You're looking for a smaller company which has a Medicaid or elder law attorney on staff and on the distribution panel. Or a relative willing to have ongoing consultations with an elder law or special needs attorney. Or someone who has familiarized themselves with the state's regs and understands them (they exist, but it's usually a lawyer).
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

You'd be quite surprised what I've found that these so called corporate trust experts have told me. I've decided to not hire them after far too much incorrect and contradictory information related to their knowledge or application of such knowledge re government benefits to their distribution decisions. The final straw was in speaking with an estate and trust lawyer in my area who used to be a corporate trustee for a regional bank. He confided things to me that validated and escalated my concerns. He told me I'd be far better off with a family member I can trust and who is willing to become an expert on the government benefits program my beneficiary is on.

The one trustee duty I'm not willing to delegate to a bank is distribution decisions. The Schwab model could potentially theoretically work for me because its the one duty they won't do.
Last edited by startabatha on Sun Feb 18, 2024 10:53 am, edited 1 time in total.
User avatar
Lee_WSP
Posts: 10268
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Corporate trustee for special needs trust

Post by Lee_WSP »

startabatha wrote: Sun Feb 18, 2024 10:16 am You'd be quite surprised what I've found that these so called corporate trust experts have told me. I've decided to not hire them after far too much incorrect and contradictory information related to their knowledge or application of such knowledge re government benefits to their distribution decisions. The final straw was in speaking with an estate and trust lawyer in my area who used to be a corporate trustee for a regional bank. He confided things to me that validated and escalated my concerns. He told me I'd be far better off with a family member I can trust and who is willing to become an expert on the government benefits program my beneficiary may require.

The one trustee duty I'm not willing to delegate to a bank is distribution decisions. The Schwab model could potentially theoretically work for me because its the one duty they won't do.
No, I don't think I would be surprised. I'm not even sure such a firm exists as it's a pretty niche area and any expert attorney is going to make a lot more money drafting and advising clients.

Most regs are pretty easy to work around and are typical, but the regs for a disabled young person are much trickier.
Topic Author
startabatha
Posts: 255
Joined: Sun Sep 05, 2021 9:07 am

Re: Corporate trustee for special needs trust

Post by startabatha »

Yes! Also maybe you arent surpised but I was surprised at the different answers I've gotten from different estate planning attorneys in my area on seemingly simple questions regarding special needs trusts distributions. I could give quite a few case examples of contradictory, confusing, and flat out incorrect attorney and corporate trustee answers regarding government benefits and their application to specific trust questions. In their defense, the government doesn't make it easy. For example my state alone has over 100 different Medicaid programs all with slightly different eligibility criteria and different rules on how income is counted. Thankfully I only need to know the rules for my son's particular benefit. That in of itself was a massive research project because the rules aren't in any one place.
Last edited by startabatha on Sun Feb 18, 2024 11:25 am, edited 1 time in total.
User avatar
beyou
Posts: 6801
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Corporate trustee for special needs trust

Post by beyou »

startabatha wrote: Sun Feb 18, 2024 10:51 am Yes! Also maybe you arent surpised but I was surprised at the different answers I've gotten from different estate planning attorneys in my area on seemingly simple questions regarding special needs trusts distributions. I could give quite a few case examples of contradictory, confusing, and flat out incorrect attorney and corporate trustee answers regarding government benefits and their application to specific trust questions. In their defense, the government doesn't make it easy. For example my state alone has over 100 different Medicaid programs all with slightly different eligibility criteria and different rules on how income is counted. Thankfully I only need to the rules for my son's particular benefit. That in of itself was a massive research project because the rules aren't in any one place.
The rules keep changing, and they changed drastically starting with COVID.
We hired an elder attorney to help my MIL get onto Medicaid. She told us of the asset limit as far as what you can leave in your name, and I told her "online it says the state is raising to 150% this year". She just kept repeating what the rule was the prior year, until I sent her a link to the state website showing that a final number for the new year was published and was indeed up about 150% vs prior year. Hard to believe there is such a large change and disappointing the elder care attorney didn't spend the time to find what I easily found myself.

That all said, does not mean my named trustees have the time or interest to look up the details the way I did.
I think to a certain extent, the gov benefits rules are complex and ever changing, and highly subject to interpretation of case workers, so it's a bit of luck to get things right, and a lot of hard work that few people other than the parent of the disabled, would ever take on. I am not sure there is any good solution as to trustees for special needs trusts as far as dealing with the govt. OTOH, there is a best solution to make sure the trustee cares about your child, close family and friends are the only solution there. They can ask attorney's and accountants for help, but can challenge bad advice just as I did with my attorney, if they have the time to make the effort.

As far as hiring a trustee with experience with SNT, while they may not be trustworthy to know all the rules, note that some bank trustees simply refuse to take on an SNT (such as Vanguard's Trustee business). There are a handful that will take on the business, and for those, as long as they will work with a co-trustee who would be more diligent about the specific state and child's needs, and the bank is cooperative, it could be helpful. For a trustee who has good intentions towards the child, but doesn't like doing taxes nor investments, a corporate trustee is a great solution. If they don't mind doing the investments, they can hire a tax prep person to help them once/year. Either way I would retain an estate attorney in the relevant state to get some guidance on gotchas to consider and to make sure the trust documents are understood and therefore complied with. Yeah this is alot to rest on the shoulders of a relative, but then again, nobody said it would be easy caring for the disabled, and someone who cares about them should at least coordinate the experts, if they don't have or want the expertise themselves.
User avatar
Michael Patrick
Posts: 345
Joined: Wed Dec 19, 2018 9:25 am
Location: Madison, WI

Re: Corporate trustee for special needs trust

Post by Michael Patrick »

I think we're in good shape. The attorney who drew up our SNT used to work for the largest pooled SNT in the state, and is still on their board of directors. So she's well versed in the law around both the trust and how it would interact with the state's disability programs.

Our attorney recommended the local bank we chose as a trustee, she had worked with them on a number of special needs trusts and thought they did a good job. We interviewed the head of the bank's trust department in person and came away with a good impression. He was very knowledgeable about SNTs.

Our older daughter has a good head on her shoulders and loves her sister. I'm sure she'll be a great advocate for her.

Not sure what else I can do, except make sure sufficient funds are available once we're gone. That's a work in progress...
User avatar
Lee_WSP
Posts: 10268
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Corporate trustee for special needs trust

Post by Lee_WSP »

Michael Patrick wrote: Sun Feb 18, 2024 2:26 pm
Not sure what else I can do, except make sure sufficient funds are available once we're gone. That's a work in progress...
Not much. Just review and keep it updated every so often. It’s your role to tell us what you’d like to accomplish and it’s our role to tell you how to do it. It’s also our role to make sure the document is flexible enough to meet anything that might happen short of the apocalypse.
Post Reply