Special Needs Trust Distributions and Trustee Fees

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

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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

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