The Role Of The Trustee
by
Herbert D. Hinkle, Esq. and S. Paul Prior, Esq.
Hinkle & Fingles, Attorneys at Law
2651 Main Street
Lawrenceville, New Jersey 08648
(609) 896-4200 or (215) 860-2100
Most parents want to leave assets to their children when they die.
However, if a person with a disability receives assets directly, the
results can be disastrous. The person will lose Medicaid and SSI, and
the assets may also be subject to recoupment by state and federal
programs.
Parents are sometimes inclined to disinherit the child with a
disability, leaving everything to the non-disabled children with
verbal instructions to use part of the inheritance for the benefit of
the disabled sibling. This can be equally disastrous. The non-disabled
child or their spouse may not use the inheritance on the disabled
sibling, and is under no legal obligation to do so. The assets can be
claimed by his or her creditors, can have negative tax consequences on
the non-disabled sibling, can be subject to equitable distribution in
the event of divorce, and will go to the sibling’s heirs if he or she
predeceases the disabled sibling.
The only effective way to shelter assets and make them available to
protect and enrich the life of a person with a disability, without
jeopardizing benefits available from the government, is to establish a
special needs trust (“SNT”).
When the trust is funded, usually on the death of both parents, the
trustee’s responsibility begins. It is important, therefore, to
understand the role of the trustee. The trustee decides where to
invest the assets. All accounts will be opened in the name of the
trust. Each year the trustee will file a tax return for the trust, and
pay any taxes owing. The trustee will also draw a fee and obtain
reimbursement for expenses.
The trustee must review the beneficiary’s needs periodically. The
trustee can use the assets to purchase other items such as, special
therapies, dental care, personal items, vacations, and the like. The
trustee can also use the trust assets to pay for time and travel
expenses associated with visiting the beneficiary in order to make
sure that he or she is being well cared for.
At the beneficiary’s death, the trustee would pay funeral expenses,
and then distribute the funds remaining according to the instructions
contained in the trust agreement. The funds might go to other family
members, to friends, and/or to charity.
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Herbert D. Hinkle, his partner, Ira M. Fingles, and their colleagues,
S. Paul Prior and Valerie A. Powers Smith, maintain a statewide law
practice with offices in Lawrenceville, Marlton, and Florham Park, New
Jersey, and Yardley and Plymouth Meeting, Pennsylvania. They lecture
and write frequently on topics of law, aging, disability and estate
planning and are available
to speak to groups in New Jersey and Pennsylvania
at no charge.
Comments and suggestions
for future articles should be mailed to: Hinkle & Fingles, 2651 Main Street, Suite A, Lawrenceville, New Jersey 08648-1012.
Copyright 2004
Herbert D. Hinkle. All rights reserved.
