by: Thomas D. Begley, Jr.

Family members often want to be the trustee of their children’s special needs trusts established to hold litigation proceeds.  This almost inevitably ends in disaster, because the trustee must be familiar with SSI Rules, Medicaid Laws and Regulations, Tax Law, must have investment management expertise, must have only the interest of the disabled beneficiary at heart, have no conflict of interest, and must be able to navigate the disability system.  A much better solution is a professional trustee.  However, family members are often reluctant to give up control.  They see a professional trustee as someone between them and their money, even though the money is the money of the injured child and not the other family member’s.

The next request that family members often have is to be named as co-trustee.  Most professional trustees will not agree to serve as co-trustee with a family member, because family members do not understand the fiduciary responsibilities of the trustee and often simply seek to invade trust assets for themselves, rather than the trust beneficiary.  The solution to the problem of  naming a professional trustee but giving the family some comfort that the trust will be administered satisfactorily is to give family members the right to fire the trustee and replace with the trustee with another trustee if they are dissatisfied with the trustee’s performance.  The right of the Trust Protector to remove or replace the trustee can be conditioned on court approval or not, or if the family members appear to be reasonable, there is no need for court involvement.  This can be accomplished by naming a family member as a Trust Protector in the trust document.  If a court is retaining supervision over the trust, the right to remove and replace must be conditioned upon court approval.  Where the court is not retaining jurisdiction, consideration might be given to requiring court approval, if the Trust Protector does not appear to be reliable.

There should be a restriction in the trust document prohibiting the beneficiary of the trust from ever serving as Trust Protector or successor Trust Protector.  The beneficiary of a special needs trust must have no control.  The right to remove and replace the trustee could be viewed by the Social Security Administration or the State Medicaid Agency has too much control, thereby disqualifying the trust as a special needs trust.