What are CPT Institute’s Responsibilities as Trustee?
By Cameron Lindahl M.S. and Sara Toor M.A
Before addressing this topic, it is important to note that books have been dedicated to this sole topic, and those publications are still not entirely comprehensive. The purpose of this blog is to simply provide a general overview of what it means to be a Trustee of a Special Needs Trust (SNT). It is important to note that no rule is absolute when making decisions regarding the administration of an SNT. Every decision a Trustee makes is based on a multitude of variables such as: prudent investment rules, state Medicaid rules, Social Security Administration’s (SSA) Procedure Operating Manual System (POMS), labor laws, case law, probate codes, etc.
A Trustee is defined as an individual or entity that is responsible for administering a trust after it has been established. The first frame of thought used to guide the logic of an SNT Trustee is their fiduciary duty. In short, a fiduciary duty means that a Trustee acts in the best interest of the Trust Beneficiary first and foremost. As stated in Administering the California Special Needs Trust: A Guide for Trustees and Those Who Advise Them by Kevin Urbatsch and Michele Fuller, “A fiduciary duty is the highest duty one person can owe another under the law; it is much like the duty a parent owes to a child” (p. 9). Like a parent, a Trustee may be forced to make decisions against the wishes of the Trust Beneficiary if a disbursement is against his/her best interest. For example, a SNT Trustee may deny paying for an item or service that would jeopardize his/her Medicaid eligibility. If an area of expertise to make such decision is beyond the knowledge of a Trustee, it is their duty to seek advice from a qualified individual such as a specialized attorney or investment advisor before making that decision. However, even in these circumstances a Trustee can not delegate authority to this qualified individual. The Trustee has sole authority and displacing this authority, or making a mistake, can cause a penalty that ranges from paying back the Trust Beneficiary from their own assets all the way to imprisonment.
One of the significant job duties of a SNT Trustee that often goes unseen by Trust Beneficiaries is accurate record keeping. Trust Beneficiaries with CPT are required to submit adequate documentation for every disbursement made from his/her trust account (some exceptions apply in emergency situations). Though a court may require an annual accounting of a trust account, this is required for CPT as Trustee to ensure that SNT funds are used for the sole benefit of the Trust Beneficiary, that disbursements preserve eligibility for government benefits, can be used to provide evidence to defend actions against the trust or Trust Beneficiary, etc.
A common complaint of Trust Beneficiaries of SNT Trustees is a lack of communication. This duty goes hand-and-hand with accurate record keeping. An SNT Trustee is focused on enhancing the life of a Trust Beneficiary and CPT is constantly seeking new ways to raise the bar for Trustees across the nation. For example, CPT uses confirmation emails to update Trust Beneficiaries of the progress of their disbursement requests, maintains a live chat function on their website to allow Trust Beneficiaries to communicate directly with Trust Officers and Administrators, continually enhances their mobile applications, and maintains a live Beneficiary Support Team. Additionally, CPT publishes monthly newsletters to ensure Trust Beneficiaries are informed of changes in POMS, Medicaid manual rules, etc. that would impact the use of their SNT. CPT is consistently researching innovative ways to improve the lives of their Trust Beneficiaries by constantly evaluating and improving its currently policies and procedures, and integrating technology into its administration of SNTs.
Investing and Taxes
A SNT Trustee must comply with prudent investment rules, meaning that SNT funds must be invested appropriately to ensure growth when the market allows it. Furthermore, SNT Trustees have a duty to preserve the principal of an SNT to care for the Trust Beneficiary financially for as long as possible. Accounts that carry a balance each month are invested to ensure they receive adequate growth. Upon establishing and funding an SNT, a Trust Beneficiary with CPT fills out a risk assessment with their investment firm. That risk assessment is used by CPT as Trustee to select an investment portfolio that is appropriate for the Trust Beneficiary. It’s important to note that CPT is structure friendly because as a nonprofit and tax-exempt Trustee, CPT cannot make money from investments and hence, does not have a financial incentive to keep a certain amount of assets under management.
CPT’s Trust Programs are grantor-based trusts meaning the income made from investments are accountable to the Trust Beneficiary. At the end of the year, CPT provides Trust Beneficiaries/Advocates with appropriate tax form copies. Trust Beneficiaries/Advocates are encouraged to consult a Certified Public Accountant (CPA) if he/she must file or report on their investments.
A Trustee’s duties cannot be comprehensively addressed by any single text because it takes years of experience to administer a SNT appropriately. For this reason, it is important that a potential Trust Beneficiary selects an experienced Trustee that has years of familiarity of navigating the multitude of variables necessary to administer an SNT. CPT prides itself on being established in 1994 shortly after the federal statue, 42 U.S.C. §1396p(d)(4)(C), was signed into law in 1993, meaning CPT has over 24 years of experience establishing and administering SNTs.
DISCLAIMER: The information provided by CPT Institute is for informational purposes only and is intended to be used as a non-legal guide prior to consultation with an attorney familiar with your specific legal situation. CPT Institute is not engaged in the practice of law or in rendering legal advice or counsel. No such legal advice or counseling is either expressly or impliedly intended. This form is not a substitute for the advice or counsel of an attorney. If you require legal advice, you should seek the services of an attorney. © 2018 CPT Institute All rights reserved.
Urbatsch, K., & Fuller, M. (2016). Administering the California special needs trust: A guide for trustees and those who advise them (2nd ed.). Bloomington, IN: IUniverse.