GTrust Financial Partners
2010 Chair, Financial Planning Association

As I write my first blog for WealthCounsel, I wanted to provide context for these and future thoughts that I plan to share with this audience.  My name is Richard C. Salmen and I my have an MBA from the University of Kansas, and I also hold several key financial designations including: Certified Financial Planner (CFP®); Chartered Financial Analyst (CFA); and Enrolled Agent (EA), which is an IRS tax preparation and representation designation.  My career to date has consisted of a commission only model, a fee and commission model and a fee-only model using retainer fees for financial planning and asset management fees for investment management.

What makes this unique for purposes of participating in this blog forum for estate planning attorneys and other professionals is the fact that I am operating a fee-only financial planning practice inside of a trust company business model.  This brings the discipline and structure of the financial planning process to my work with trust clients

So, what does all of this background mean as it relates to special needs trusts?  Based on the expertise of this audience, I am not spending any of your valuable time explaining what a special needs trust is or how it works from a technical perspective.  I want to focus on the dynamics of managing beneficiary expectations and delivering on potential benefits of the trust within the context of a team approach.

Let me start with a case study.  A financial planner brought us a potential special needs trust situation that was being created based on a proposed settlement from an auto accident.  The potential beneficiary of the special needs trust was about 50 years old.  The financial planner knew the potential beneficiary's sister, who was being suggested as an appropriate trustee for the special needs trust.  The financial planner knew us and suggested it might be a good idea to bring a corporate trustee into this discussion.  Coincidentally, we also knew and had worked with the attorney who was being contracted to write the special needs trust.  The financial planner was going to stay involved in the trust as an outside investment manager, and we would serve as "friendly" trustee in this scenario.

During the first meeting with all of the parties in our conference room it became apparent to me that if this money was not put into a special needs trust that there would be no money left for the beneficiary inside of a year (settlement was about $650,000).  The family dynamics were very dysfunctional between the beneficiary and her daughters and extended family.  This brings us to the first important teaching point.  While many if not most special needs trusts are set up to preserve government benefits the real, tangible value of the trust may well be protecting the beneficiary from themselves.  The family was vehemently opposed to the beneficiary putting this money into trust.  She was actually fearful of what they might do once they found out.  This is where the attorney took the heat, so to speak, and helped the family understand that the beneficiary needed to preserve her government benefits.

The second teaching point involves the sister who was going to serve as trustee.  As we talked about the duties of the trustee, especially as they related to understanding the mine field of navigating the need to stay within the legal guidelines of a special needs trust when making distributions to the beneficiary, she started to get uncomfortable.  This was why the financial planner had brought us into the picture and we ultimately agreed to serve as co-trustee with the responsible sister.  While this was the reason we were appointed at the beginning, within weeks of the trust being established she began to understand the valuable role a corporate trustee can play in dealing with the beneficiary.  The beneficiary started asking her for money almost immediately that would not qualify as an appropriate distribution under the special needs standards.  As professionals, we were able to minimize this, thus enabling the co-trustee to effectively fill the dual roles of sister and the one who was trusted to look out for her sister's best interest.

As financial planners know, the number of financial decisions made with logic as the primary consideration is a very small number.  When wearing our trustee "hat" we know and understand this dynamic and in turn, work with the entire team to meet as many of the objectives of the beneficiary as we can within the limits of the law.  Many times this means we are protecting them from themselves in a way that would be very difficult for a family member to deal with on their own.  This was an example of a team of professionals and one caring family member who will make a positive difference in the life of this woman for years to come.  I encourage those of you who have worked through these family dynamics to share your experiences for the benefit of the larger audience.