TRUSTEE OF SPECIAL NEEDS TRUST VIOLATED FIDUCIARY DUTY

TRUSTEE OF SPECIAL NEEDS TRUST VIOLATED FIDUCIARY DUTY 
All trustees face the challenge of forecasting future needs of special needs trust beneficiaries.  In order to develop an expenditure plan that is reasonable and based on realistic expectation of the beneficiary and their family requires the trustee must get to know the person.  Otherwise, the trust assets will not be used in the most effective way to improve the quality of life and quality of care for the trust beneficiary.

A New York Judge recently issued an opinion that will impact how trustees administer special needs trusts.  It is refreshing to see that there are advocates, including in the judiciary, for people with disabilities seeking to protect them and improve the quality of their lives. Judge Kristin Booth Glen is to be commended. Click here to read about Judge Kristin Booth Glen. The case Judge Glen heard involved a wealthy widow who created a trust for her two sons. One of the sons, Mark Holman, had communication skills of a toddler and could not feed or dress himself. Mark was diagnosed as autistic. He lives in a group home. Mark’s trust was valued at $3M.

The drafting attorney, Harvey Platt, Esquire, and JP Morgan served as Co-Trustees of Mark's special needs trust. Mark received Medicaid benefits. Trust monies had not been disbursed for the benefit of Mark for years but had been used to pay trustee fees. The attorney for the widow petitioned the court (after the widow’s death) to become the Guardian for Mark.  Judge Glen asked attorney Platt when he had last seen Mark. Mr. Platt had not seen Mark for years before Mark's mother's death, and this greatly bothered the Judge.  This co-trustee had no idea what Mark's needs were, his abilities or how he was being cared for by the group home.

 

Judge Glen reviewed the special needs trust accounting submitted by the Co-Trustees and found that it was lacking in several ways and ordered them to amend it. Judge Glen went so far as to rule that the compensation of the Co-Trustees should be reduced or denied for the period of time that they took no steps to spend the trust assets for Mark's benefit.  Click here to read the Mark Holman decision

Here are some tips for trustees:

1. use due diligence to learn about the trust beneficiary
2. schedule at least quarterly meeting with the trust beneficiary and their legal representative
3. employ a care manager with a medical or social work background and experience to guide you in making appropriate disbursement for the trust beneficiary.

Trustees who are asked to serve as a fiduciary of a special needs trust need to determine whether they have the education, training and resources to properly administer a special needs trust. If a potential trustee does not have the resources to make this commitment then they need to decline. Trustees need to stay alert and understand that their responsibility is not just to invest the trust assets.  On a much larger scale the Trustee must fulfill the terms of the trust and use the trust assets to improve the quality of the beneficiary's life.

 

Here are some tips for families who are considering a corporate trustee: 

• Interview more than one corporate trustee
• Ask for references you can speak with (i.e. other families whose special needs trust are being administered by this trustee)
• Have a list of questions or ask your elder law attorney to provide you with questions to pose.
• When the trust is drafted consider including language that will permit the removal of a trustee for failure to establish a rapport with the beneficiary or failure to communicate with the beneficiary.

Our firm encourages our clients to interview potential trustees. In addition, I sit with my clients while they are doing the interviews to help them understand trust administration issues.  At my law firm, we empower our clients to become informed consumers.