General Duties of the Trustee of a Special Needs Trust
State law and the trust document itself define the exact duties of the trustee of a specific special needs trust. The general duties are:
A duty of loyalty. The trustee has a duty of loyalty to administer the trust solely in the interest of the beneficiary and never in the interest of the trustee individually. There must be no “self-dealing” or commingling of trust property with the trustee’s personal property.
A duty to administer the trust, including investment. The trustee must administer the trust in good faith. The responsibility of prudent administration means that a non-professional trustee (an individual and not an institution such as a bank) must exercise the same care and skill as a prudent person would in handling and investing his or her own property, considering the purposes, terms, distribution requirements, and any other circumstances of the trust.
A duty to receive and distribute trust property. The trustee must carefully consider the needs of the beneficiary, the purpose and terms of the trust, and the potential impact on the beneficiary’s eligibility for public benefits when receiving and distributing trust property.
A duty to control costs. The trustee has an obligation to incur only costs that are reasonable considering the value of the trust property and the purposes of the trust. Most trusts provide for reasonable compensation to the trustee. The trustee may seek the advice of attorneys, accountants, financial planners, and other such professionals, and may delegate the performance of acts that he or she could not reasonably be required to perform personally.
A duty to identify, control, and protect trust property, keep records, and report. The trustee must title trust property as such,keep clear accounting records of the property, and keep the property separate from the trustee’s own property. The trustee must give to the beneficiary or the beneficiary’s legal representative, at reasonable times, complete and accurate information as to the nature and amount of the trust property and administration of the trust, and permit him or her to inspect the subject matter of the trust. When necessary, the trustee must prepare, or have an appropriate professional prepare, tax returns.
A duty to enforce and defend any claims against the trust. The trustee must defend against actions that may result in a loss to the trust, unless under the particular circumstances of an action, it is reasonable not to make a defense.
A duty to distribute trust property upon the termination of the trust. Upon the death of thebeneficiary, all debts must be paid and the trust property, if any, distributed to the designated successor beneficiary(ies) of the trust.
Importantly, the trustee of a special needs trust must be an individual or professional trustee who is sensitive and responsive to the needs of the beneficiary and his or her special needs.
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Daniel L. Blauw, PLC
Attorneys and Counselors at Law
2020 Raybrook SE, #204A
Grand Rapids, MI 49546
Daniel L. Blauw
Sarah L. Kirkpatrick
(616) 336-5098; (616) 459-6792 (fax)