Caring for a disabled child can exhaust parents and the whole family, both financially and emotionally. If assets are secured in litigation, the money may seem to be a welcome relief — until the responsibility and finality of it all sinks in.
Moms and dads instinctively know that costs and taxes are going to be a major factor in the longevity of their child’s trust. However, having never down this road, the research “newness” of it is overwhelming for most.
Starting with a lack of credible information on these trusts online and reading blogs from lawyers can make your coffee turn bitter. We hope this post puts into light some of the basics.
Coming from an architect who has setting up hundreds of trusts for families through the years, the process is simple — you just have to cut through the B.S.
It starts by working with someone who has your family’s and child’s best interest in mind. Many families assume going to their local bank or a big national institution is the safest. It is hands-down the most expensive route. Trustee fees and expense ratios can run as high as 3 percent, quite possibly eliminating any warnings on the assets.
A properly designed special needs trust should cost no more than 1.25 percent per year. The best choice is to hire an professional and independent trustee. Their fees will be approximately 0.5 to 0.6 percent. You will want to hire an independent investment trustee or adviser. Our wealth management firm Monolith Advisors serves in this capacity at .65 percent.
What does all that mean? On a trust with a balance of 400,000, the annual total fees would be approximately $5,000. There will be some nominal accountings fees annually, perhaps $500 that your CPA will charge for the annual return.
Many parents are eligible to be their own trustees, but few courts will allow it. Partnering with a special needs team guarantees the continued benefits eligibility, such as in-home nursing. Our benefits experts often save our clients money every year that alone justifies any fees.
The hardest part of the process is trusting someone early in the process to explain simply. That’s what we do. Please feel free to call for a free consultation on how to set up a special needs trust or to evaluate whether you need one, no matter what state you are in.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).