Budgeting for Trustee Success

The government prepares a budget. Businesses and families prepare budgets. A special needs trust should be no different.

Unfortunately, many trustees of special needs trusts (especially family members of trust beneficiaries) have little or no experience handling financial matters for another person. Add to that the fact that special needs trusts are often funded with sums of money that greatly exceed a trustee’s own means and you have a recipe for mismanagement.

The smartest solution is to name a professional as a trustee of a special needs trust, either alone or in conjunction with a friend or family member of the person with special needs. If you work with a professional trustee, the first thing the trustee will want to do after getting to know the trust’s beneficiary and family is to establish a budget.
The trust’s budget does not need to be complicated. Some trust beneficiaries are independent and able to manage their own financial affairs. In this circumstance, the trustee may only have to establish a system of payments to the beneficiary that are guaranteed to last over time, while keeping funds in reserve for emergencies (provided it’s possible to pay the beneficiary directly without compromising government benefits — in many cases, it isn’t).

Other trust budgets are much more complex. The trustee must manage complicated investment portfolios that are specifically designed to provide for a trust beneficiary’s needs over time. Trustees may have to pay for daily living expenses, extraordinary medical care, and once-every-ten-year resources like specially equipped vans. A trustee without a well-considered budget will be flying blind when it comes to these expenditures–to the detriment of the beneficiary who is counting on the trust’s assistance.

Almost nothing can be more frustrating for a trust beneficiary than having money tied up in a special needs trust and not being able to access the funds on demand. Of course, there is an important reason for preventing a beneficiary from being able to withdraw trust funds at will — protecting valuable government benefits. But adult trust beneficiaries who are not used to having to ask other people for help can feel hurt or resentful about having to work through a trustee. A clearly-drawn-out trust budget can help the trustee avoid conflict with a beneficiary, and it provides the beneficiary with stability and assurance that the beneficiary’s needs will be met.

Sometimes a professional trustee will work with a financial advisor or other financial professional to establish a trust budget that will guarantee fiscal security well into the future. In many cases, the budgeting process will also call for a detailed professional evaluation of a beneficiary’s current and future needs. This is often undertaken by a professional care manager or by a team of medical professional and social workers.

Trust budgeting is an incredibly important trustee duty, and a trustee without a budget is like a traveler without a map — completely lost.

If your clients are serving as the trustee of a special needs trust, there is no time like the present to set up a trust budget. You, your client, and the trust’s beneficiary will be glad you did.