Who to Designate as a Trustee?
Clients of mine who want to establish a special needs trust for someone with a mental illness frequently share a common challenge: who to designate as the trustee? It is a daunting problem since the trustee often is expected to try to fill the shoes of the person establishing the trust, a person who likely has long been dealing with the formidable job of caring for a person with mental illness. How is someone else going to do what we do, with our knowledge gained from experience, with our devotion forged by love, compassion, responsibility, and duty?
Clients ask me what I think, who do I recommend. There are numerous options – family members and friends, private fiduciaries, financial institutions, non-profit organizations, financial advisors, attorneys, and accountants. Depending on the situation, each has something to offer as a potential trustee. Each has drawbacks too.
I advise against attorneys and accountants due to the size of their fees – if they are affordable, then there is enough money to pay for an institutional trustee, which would have the added advantage of being an experienced investor. Attorneys and accountants, I think, can make good trust protectors – those who would appoint and remove trustees, who would receive financial and personal reports from trustees, who would serve as overseers but not day-to-day operators of the trust.
I advise against financial advisors due to potential conflicts of interest and perhaps lack of knowledge of the effects of mental illness and often advise against financial institutions for the same reason.
Family members and friends can be a good option, depending on their willingness, their interpersonal and financial skills, and whether their relationship with the trust beneficiary would be put in jeopardy by their control of assets and distributions.
Private fiduciaries – those persons who are licensed by the State to hold others’ assets, and who are recognized by the courts as professional trustees – can be an excellent choice. But they too can be expensive, and as individuals, they present the risk of not outliving the beneficiary.
The option with the best combination of advantages and slightest of disadvantages are non-profit organizations that specialize in special needs trusts. They know the subject matter and are set up for it. I tell my clients to investigate them, starting with an internet search. And then I tell them that they likely will not find a better one than PLAN (Planned Lifetime Assistance Network of California).
I wish I could say that PLAN pays me to say that, but to the contrary, PLAN obliges me to pay for my own travel expenses when I attend its board meetings in L.A., and about once a year it sends me a request for contributions. No, it is for a more virtuous reason that I say it, and why I serve without compensation on the PLAN Board of Directors: I believe in the organization.
PLAN is all about helping people who need help – those persons with mental illness and those persons who care for them. PLAN is not about making money. As PLAN is a non-profit organization, maybe that should be obvious, but we see plenty of non-profits who use an inordinate amount of their revenue to pay salaries and expenses of their principals. PLAN’s staff is modestly compensated; none are overcompensated.
PLAN’s rules require that a majority of board members be family members of persons with mental illness, and/or those persons. That is what qualifies me to be a board member, and it is what ensures that the organization’s focus will always be the care of people who need it, and not the monetary enrichment of people who possibly don’t.
Not only PLAN’s governing board, but its staff consists of people who care, people who have family members with mental illness, people who are running the show for the right reasons.
My endorsement is not unconditional. What happens in the future, after our deaths, what will be the quality of PLAN’s staff and services then? Take the Managing Director, Bruce Lewitt, whose personal attention to trust beneficiaries is the stuff of legend. He seems eternally youthful, yet presumably is mortal. Who does his job and the jobs of others in the future will be key in the continued excellence of the organization. Because of the way PLAN is set up, and because of its history and its present, we have good reason to expect smooth successions, and that continual skill and eminence of PLAN as a trustee will continue. As will my endorsement. There are other effective trustees of special needs trusts out there. But none in my opinion superior to PLAN.
*Baron L. Miller is an attorney in private practice in San Francisco who specializes in estate planning for California families of the mentally ill. He is a long-time NAMI family member, an advocate for the rights and interests of families of the mentally ill, and a board member of Proxy Parent Foundation. He does not charge for telephone or email communications concerning the propriety of making payments for the benefit of an SSI recipient. He can be reached at 415.522.0500 or baron@baronmillerlaw.com.