Introduction
Next to the question 'how to set up a special needs trust,' one of the most common inquiries that we often get from clients or attorneys that are considering this option is: ” What are the costs involved in setting up a special needs trust?”
What Are the Initial Costs of Setting Up a Special Needs Trust?
Initially, the legal fee to get a trust up and running can be anywhere from $2,000 to $3,000. These estimates include getting the trust drafted and implemented. In some cases, a court approval process is required as part of the settlement.
Depending on who the trustee is or which entity is serving this trustee, there may be fees charged by a trustee as well. So, whether it’s a corporate trustee, a trust company, or a private, professional trustee, a fee schedule of some sort should outline the trustee’s fees. Some trustees charge based on the amount of assets that are in the trust, and some charge on an hourly basis.
In some situations, a family member may act as the trustee of a special needs trust. If a family member is acting as trustee, the trustee will most often be reimbursed for any expenses incurred, but family member trustees do not generally charge a fee to serve in that role.
We have a guide on how to choose a trustee for a special needs trust, which you can read for more insights.
What is the Asset Management Fee?
The other ongoing fee associated with a special needs trust is the asset management fee. Typically, in a third-party trustee situation, there is a trustee that acts in the best interest of the beneficiary and has a fiduciary obligation to make prudent decisions with the funds in the trust.
Most often, the trustee will hire a third party asset management or investment management company (like Amicus) to manage the assets inside the trust. Investment management companies typically charge an investment management fee — which is usually about 1% per year of the amount of assets that they're managing.
Ideally, an investment management company should be earning you much more than 1% by investing the assets in the trust. So, hiring an investment manager to prudently invest the funds in the trust is money well spent.
Before you go, here are some resources you may find beneficial:
- Special Needs Trust Distribution Guidelines
- Special Needs Trust vs. ABLE Account
- First Party vs. Third Party Special Needs Trust
In Summary
In sum, the expenses associated with a special needs trust are typically as follows:
- An initial drafting and implementation fee that ranges from $2,000 to $3,000.
- A trustee fee (if the trustee is a professional trustee).
- Asset management fees.
If you need help with setting up a special needs trust or asset management for you or your client, give us a call. Amicus Settlement Planners can help you decide whether a special needs trust is in the best interest of you or your client. We can talk to you about the fees, and help you pick a trustee — depending on the factors that are unique to that case. We'd love to talk with you and help you figure it out.
