Managing a trust for a beneficiary with mental health challenges requires a unique combination of empathy, structure, proactive planning, and training for the moments when things start to destabilize or don’t go as planned. Beneficiaries navigating mental health disorders may face periods of instability, impaired decision-making, or heightened emotional needs, which can complicate the trustee-beneficiary relationship. Some beneficiaries have a robust support system while others are estranged from family and solely reliant on paid professionals. To effectively support these individuals while upholding fiduciary responsibilities, trustees should consider creating and implementing thoughtful strategies tailored to the complexities of mental health. This article outlines practical approaches trustees can implement to build trust, maintain boundaries, and safeguard the well-being of both the beneficiary and the trust assets.

Case Study:

You are the fourth trustee of a beneficiary in his early twenties who inherited around $700,000. The trust is not large enough to meet even his basic needs through his lifetime and is characterized as a supplemental needs trust. As would be expected, this young adult is elated and believes he is set for life. He believes the role of the trustee is to buy him what he wants, when he wants, and take care of him. This is evident by his past relationships with the previous three trustees. When he is frustrated or emotional, he shows his emotions freely and it tends to scare the trustee who is not used to such a lack of composure.

As time goes by, he is calling more just to chat, making requests for the trustee to buy him things online, asking about how much money is in his Uber account every day, and blowing through the budget given to him. The situation is becoming untenable. You like this young person, but you have other work to do and cannot keep taking his calls to chat every day. You are also concerned about the way he is quickly blowing through money and what that means for him when the trust runs out. When he does not get his way, he yells and melts down until you give in.

As a caring trustee, you know this young man has a traumatic past with multiple losses, struggles with depression and anxiety, has post-traumatic stress disorder, and because of his lack of emotional regulation, he struggles to have relationships with people who will stick with him and he has minimal family involvement at this time. You want to do something, but you are not sure what to do or where to start.

Setting Expectations:

One of the best things a trustee can do for themselves, and the beneficiary is to set expectations in advance. Setting clear expectations upfront will allow all parties to start on the same page instead of learning through missteps and misaligned assumptions. Misunderstandings often arise when roles and responsibilities are unclear, leading to frustration and mistrust. There are many times when a trustee may make exceptions to a rule and be more lenient only to later find out that the beneficiary did not understand what the true rule was to begin with, and the beneficiary is now resentful of the change. Trustees should:

• Clearly define their role: Explain what the trust documents require, emphasizing what they can and cannot do. This ensures the beneficiary understands the trustee’s scope of authority. This also helps the beneficiary to recognize that the trustee does not have the authority to give money at any time and for any reason. After the role of the trustee is understood by both parties, discuss the role of the beneficiary.
• Explore the beneficiary’s expectations and goals: Ask the beneficiary what they expect from the trustee and what goals they would like to work toward. This helps the trustee to understand the dreams the beneficiary has for themselves and clarify any expectations of the trustee that the trustee is unable to meet.
• Identify shared goals: Once expectations are established on both sides, find a way to collaborate to define objectives that align with the trust’s purpose, such as financial stability, access to medical care, or long-term planning. Pick something which can be worked on together like financial literacy, the steps it would take to preserve a smaller trust for a longer period, etc.

This process establishes a foundation of transparency and partnership, helping trustees better assess the beneficiary’s needs while aligning efforts toward mutually beneficial outcomes.

Establishing and Maintaining Boundaries

Boundaries are essential in any trustee-beneficiary relationship but are especially critical when working with individuals managing mental health conditions. People with mental health concerns often struggle with identifying and respecting other people’s boundaries, especially when they struggle to emotionally regulate or meet their own needs. By stating boundaries upfront and giving the beneficiary the opportunity to do the same, the trustee can prevent hurt feelings down the road; shame and guilt the beneficiary might feel for being “too much;” rifts in the relationship; and having to reel back when things get too far. Effective boundary setting prevents miscommunication, ensures fairness, and protects the trustee from being overwhelmed. Key strategies include:

• Defining the reasons and timing for communication: Set clear guidelines for when beneficiaries should reach out, along with reasonable timelines for responses.
• Clarifying communication methods: Specify preferred modes of communication for different types of inquiries (e.g., email for general questions, phone for emergencies).
• Outlining distribution limits: Explain the trust’s rules on distributions, including frequency and amounts, to manage expectations and avoid conflicts.

To normalize boundaries on both sides, it is important for the trustee to also ask the beneficiary what boundaries they have for themselves. If certain boundaries cannot be honored, explain why, and offer alternative ways to meet their needs, further fostering mutual understanding and respect.

Leveraging Policies and Procedures

Trustees can benefit greatly from having well-defined policies and procedures in place. These not only ensure consistency in decision-making but also create a framework trustees can rely on during challenging times where a beneficiary may be unstable. Effective policies might hedge against:

• Impulsive decisions: Having policies such as a three-to-five-day review period for any major decisions and distributions will facilitate slowing down the beneficiary and buying time for the trustee to adequately plan for what is necessary. People who are intoxicated, manic, or unstable can have higher levels of impulsivity and bad judgment. These policies also provide time for trustees to slow down, consult professionals, and carefully assess the situation.
• Perceived bias: Beneficiaries are less likely to feel targeted when decisions are based on established guidelines rather than subjective judgment of a situation. This can help save the relationship and give the trustee something to fall back on where they have no control, even if they own the trust company.
• Unpreparedness in crises: Policies can preemptively address how the trustee will respond to specific scenarios, such as financial instability or substance use, creating transparency and predictability. This could mean normalizing the need for mental health resources upfront with every beneficiary and then being able to provide them in crisis. Or it could mean having a protocol like face-to-face meetings, drug testing, or psychiatric assessment in certain contexts where known mental health or addiction issues exist.

By referencing these policies during difficult moments, trustees can maintain fairness while protecting both the trust and the beneficiary.

Creating Mutual Agreements

Beneficiaries with mental health disorders often understand their own triggers and behaviors, particularly if they are in recovery or actively managing their mental health condition. Trustees can collaborate with beneficiaries to create mutual agreements which proactively address when beneficiaries face challenges with their mental health condition. This process will start with:

• Defining red flags: Identify behaviors or situations which could signal a need for intervention, such as financial mismanagement, non-linear thoughts, incoherent thoughts, active intoxication, or repeated and frequent charges for alcohol on submitted receipts for reimbursement. Have the beneficiary describe what has been helpful in the past during these “red flag” moments.
• Outlining responses: Agree on actions the trustee will take during periods of instability, such as suspending distributions, seeking professional support, or reaching out to an emergency contact. Both parties may also agree that the trustee paying bills directly for a certain period of time will help the beneficiary buy time to learn the skills they need to successfully manage their budget or not be tempted to spend rent money on drugs, alcohol, sex, shopping, or other types of costly addictions.
• Documenting agreements: Write these agreements down, have them notarized, and revisit them after implementation to evaluate their effectiveness.

Mutual agreements foster collaboration, empower beneficiaries to take ownership of their well-being, and ensure the trustee has clear guidelines for navigating crises.

Handling Crises with Empathy and Strategy

Moments of crisis will inevitably arise. Beneficiaries may stop taking medication, resume taking drugs or drinking, have stress triggered episodes of mood instability, etc. In times of crisis, trustees can play a critical role in de-escalating the situation and connecting beneficiaries with appropriate resources. This does not mean that trustees are responsible for providing mental health care or assessment, in a similar way a good Samaritan is not responsible for administering life-saving medical care if they identify a potential medical emergency. The key for trustees is to learn to identify red flags, ask the right questions, listen effectively, and connect the beneficiary to the right resources.

• Active listening: Show empathy by listening intently and paraphrasing what the beneficiary expresses to ensure the beneficiary feels heard.
• Identifying goals: Understand the underlying purpose behind the beneficiary’s requests in the midst of a crisis. Ask, what are they saying they need to accomplish? They might even say things that may not make sense, which is common during psychotic episodes or intoxication. There is always some goal with which to align and utilize to find a way forward.
• Facilitating professional help: Use their goal to redirect the situation toward professionals better equipped to address the beneficiary’s needs, such as therapists, financial counselors, or social workers. When the beneficiary is more stable, you can revisit the conversation.

This approach not only supports the beneficiary during difficult moments but also ensures the trustee remains focused on their fiduciary duties and stay within the scope of their training.

Conclusion:

Working with beneficiaries with mental health disorders can present many types of complexity. Trustees who display empathy, compassion, understanding, and grace will always be more successful when they are able to pair these sentiments with structure, planning, and more training. By setting clear expectations, maintaining boundaries, implementing thoughtful policies, and fostering collaboration, trustees can create a supportive and transparent environment that promotes the well-being of the beneficiary while protecting trust assets. These practices not only fulfill fiduciary responsibilities but also strengthen the trustee-beneficiary relationship, ensuring a more positive and sustainable outcome for all involved.