Special Needs Trust Requires Extra Attention from Trustee

The duties of a trustee can vary depending upon the type of trust they are administering.  With most trusts, the duties are more fiduciary in nature, meaning that the trustee must protect the assets in the trust and make sure that they are handled appropriately.  But some trusts, such as a special needs trust, may require that the trustee go above and beyond just financial concerns.

A special needs trust is one that is set up for the benefit of a person who needs assistance meeting his or her own needs.  The beneficiary of the trust can be someone with a condition like autism, a mental illness, a physical handicap, or many other mental or physical conditions.  The trust is set up to ensure that the beneficiary has the necessary funds for adequate care throughout his or her life, but especially when the person’s parent or spouse or other caregiver can no longer do what is necessary.

But someone who is designated as trustee of a special needs trust must do more than manage the money.  Especially when the beneficiary has no one else to tend to his or her needs, the trustee must make every effort to follow the progress or decline of the beneficiary and make sure that adjustments are made in the treatment plan as well as making sure that the funds are available to support it.

Unfortunately this doesn’t always happen as it should, especially when there is no family member to keep close watch on the beneficiary.  Many times, the trustee will be a bank or other financial advisor who is expected to watch over the finances.  But if that “professional” trustee is the only trustee, some courts may still require that trustee to pay attention to the beneficiary’s other needs as well.

In one case that started in 2007, a judge was appalled to learn that the professional trustees of a special needs trust had not visited the beneficiary in the decade that they had been in control of the trust.  The beneficiary was a teenage boy with autism, whose adoptive mother, his only relative, had died, leaving almost $3 million in a special needs trust for his care.  A care manager was appointed to tend to the boy’s personal needs as he was ultimately moved to a private room and had his medications adjusted, which resulted in positive changes in his own abilities to care for himself and interact with others.

In 2012, the judge was close to retirement and decided to check up on the young man’s progress.  She was again alarmed to learn that, while the trust was now worth $3.6 million, only $3,525 had been spent on the boy’s care.  At the same time, the trustees had collected fees of almost $80,000 during that period.

While this may be an extreme situation, the judge herself acknowledged that it isn’t unusual to find that professional trustees do not spend much time with the beneficiary of the trust.  But she believes that special needs trustees must do more than protect the assets of the trust; they must also monitor the beneficiary’s condition and progress and make sure that adequate assets of the special needs trust are made available to improve the beneficiary’s condition however possible.  Even when the trustee’s fees are reasonable, it still doesn’t excuse the obligation to inquire into the care of the person being served by the trust.  The best way to ensure that this situation does not happen is to have the trust designed by an estate planning attorney with experience with special needs trusts to make sure that all of the needs of the beneficiary are served.