Beneficiaries with special needs and disabilities -5 key differences in delictual vs normal trust administration

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Court Order Special Trusts are those set up for beneficiaries who the court has deemed are not capable of managing their own affairs effectively. This is usually denoted by the beneficiary being a minor or having some mental incapacity due to disability or both. A Trust is then set up to ensure proper care of this person can be effected according to the capacity of the trust and funds available (usually in terms of a delictual award made from a third party). Here are some key differences we have identified in managing these trusts against a normal trust for fully functional beneficiaries.

  1. Ensuring Lives vs Livelihoods
    Many trusts are set up to guard assets for their beneficiaries. However, in the cases of special trusts, the trust funds are to ensure a basic quality of life, where basic needs are being met, vs contributing to the livelihood of a normal beneficiary, who can usually function normally as their starting point. The Trustee of a special needs trust has the additional burden of determining what is the best approximation of “normal” that the trust fund can afford to provide, and to ensure the trust can provide for these needs for the expected duration of the disability or in many cases, the lifetime of the beneficiary. The risk of failure to manage the trust according to the correct principles is far greater and the consequences for someone life can be onerous. It takes a great deal of responsibility and care to manage a special needs trust that totally caters to all the basic needs of a person, their “life” vs only their “livelihood”.
  2. Understanding of disabilities and disabled needs.
    It takes a unique experience and understanding to be able to cater effectively to the more demanding and quite involved extra requirements of a disabled person vs a normally functioning person. This complexity is deepened when the disabled person has mental incapacity added to their issues. On one hand there is understanding, from a medical point of view, what is required in order to enable the rehabilitation or remedial functioning of these beneficiaries, which requires close work and ongoing interaction with relevant medical experts. In addition to medical requirements, there is a certain amount of empathy and understanding of the beneficiary’s psychological condition and behaviour which needs to be incorporated in day to day dealings with the beneficiary and their Caregivers/Next of Kin. Your average legal or corporate trust professional is not usually equipped with this specific knowledge or experience and may even find it distressing to deal with these kinds of cases.
  3. Incorporating a Beneficary’s Caregivers/Next of Kin and families as part of the deal
    When dealing with the disabled or mentally incapacitated beneficiaries of special trusts, it is important to note that their primary Caregivers/Next of Kin (often family members) often pose the function of being the mouthpiece or voice of the beneficiary, being closest to them in most cases and where the beneficiary may be largely incommunicative. In most normal trusts, the beneficiary is easily able to voice their requests and needs directly to the trust manager. As mentioned above, in special needs trusts, the Trustee must often rely on the family to cite the needs of the beneficiary. This requires a close relationship with the beneficiary’s family and open communication channels. In some cases, however, a family member or caregiver can interpret a beneficiary’s needs incorrectly or incorporate their own needs as part of the beneficiary’s needs. A special case Trustee needs to be able to ascertain which needs and requests are genuinely those of the beneficiary and in the best interest of that beneficiary specifically. This also requirescareful negotiation with and ongoing education of the beneficiaries Caregivers/Next of Kin on what the trust may be used for and how the funds may be applied.
  4. Normal trust terms vs operating in a Court Order Special Trust beneficiaries best interests. Normally a trust will be quite specific in how the trust funds are to be administered and these are simple to interpret and effect. However, in special trusts, the trust managers are often given much more general directives to operate “in the best interest” of the beneficiaries. This is then open to much wider interpretation and trust managers need to be extremely careful not to be seen to abuse these wider powers. In these cases, great care needs to be taken in ensuring that decisions regarding trust fund allocations are carefully considered and recorded along with the intention behind decisions, with a careful focus on transparency at all times. There is a far greater possibility and even likelihood of a Trustee having to explain their actions to third parties beyond the beneficiary such as a consulting medical professional or family member and the reasoning needs to be clear.
  5. More onerous reporting and administration
    Due to many of the differences mentioned above, administration and reporting for special cases is far more involved and onerous. Besides the usual trust reporting structures for tax and financial administration, special trust reporting also involves medical case reporting and updates which require external medical expert assessments and reports. There also tend to be more frequent interactions and requests between special trust beneficiaries/Caregivers/Next of Kin and the trust managers as these trusts cater for day-to-day needs of the beneficiaries. More interactions and transactions require more administration and paperwork and often dedicated staff for these functions (who may need specific training and experience as previously mentioned).

It is due to these key differences, and a few others besides, that Uberrima Phoenix was incorporated as a specialist trust administrator who focuses primarily on these special trust cases. We have built the capability and capacity to effectively manage these trusts for our beneficiaries and responsibly take on trust management for legal professionals who require the best service for their clients but don’t have the internal facilities to specifically manage these special trusts.

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