Should I Use My Investment Advisor to Manage My Special Needs Trust?

Firstly, a trustee must have a genuine willingness to serve and a deep sense of empathy and familiarity with the child with a disability. Equally important, they need to possess a fair degree of financial competence. This includes professionalism in financial reporting and management of the investments in the special needs trust.

Balancing these qualities—empathy and financial acumen—can be difficult. It’s not uncommon for someone who is close to the child and understands their needs to lack the necessary financial skills. Conversely, professional trustees who typically manage the SNTs, trusts or banks may not be familiar with the child’s specific needs. The downside of relying solely on a professional trustee is that many times they lack intimate knowledge of the individual and the potentially high costs involved.

One practical solution to this dilemma is to have the trust appoint a financial advisor who has worked with the special needs family to serve alongside the professional trustees of the trust.  The financial advisor would directly manage the investments of the trust while the professional trustee would include:

1. Administrative and fiduciary duties

2. Recordkeeping and accounting

3. Safekeeping of assets

4. Any appropriate trust tax reporting.  

Having a financial advisor who has worked with the family can provide continuity of planning for the child with a disability. Each of these roles would need to be specified in the trust document.

Having an appointed advisor can lower the overall costs of managing the trust; however not all trusts or banks will allow advisors to manage investments within the special needs trust.  The family will need to shop ahead a time to determine which banks or trusts will work with financial advisors before having the estate planning attorney draft trust language that appoints the advisor to manage investments of the trusts.  It is important to include both the costs of the trust management company and the advisor in computing the total cost of having the special needs trust professionally managed. 

One big impediment for families in establishing a special needs trust is knowing who to name as a trustee.  Using a professional trustee will lessen the responsibility and time on the family member or neighbor who is designated to look after the child with a disability after the death of the parents.  Using the family’s advisor in addition to the professional trustee will provide continuity to the family’s plan for the child with a disability.