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Case Raises Serious Issues About Special Needs Trustees

By Harry S. Margolis

A 2013 case reported in The Village Voice highlights the difficulties families often have in choosing the trustee of a special needs trust, especially when there are no other family members to intervene. The article features the now retired judge, Kristen Booth Glen, who intervened instead.Special-Needs-Trustees-Estate-Planning-Wellesley

She became aware of the case in 2007, when attorney Harvey J. Platt came to see her about becoming guardian for a severely autistic teenager, Mark Holman, whose adoptive mother, Marie Holman, had recently passed away. Attorney Platt had drawn up Mrs. Holman’s estate plan which included a special needs trust for Mark’s benefit, naming attorney Platt and J.P. Morgan Chase as successor trustees. At the time, the trust held nearly $3 million.

Judge Glen learned that Mark was living at a special school in upstate New York for people with autism and that neither attorney Platt nor anyone from J.P. Morgan Chase had visited him during the decade they had served as trustees. It’s not clear from the Voice article or Judge Glen’s decision when the special needs trust was funded or whether Platt and J.P. Morgan became trustees prior to Mrs. Holman’s death.

In any event, subsequent to Judge Glen’s questioning, the trustees hired a care manager to begin monitoring Mark’s care. As a result, he was moved to a private room, medication adjustments were made and he began to progress in his ability to care for himself and be involved in various activities. Ultimately, Judge Glen appointed attorney Platt as guardian and he and the bank continued to act as trustees.

In 2012, just prior to her mandatory retirement at age 70, Judge Glen followed up on Mark and the trust.  She was upset to learn that during the intervening five years, while the trust had grown to $3.6 million and J.P. Morgan and attorney Platt had been paid trustee fees of $52,000 and $26,000, respectively, the trust had spent only $3,525 on Mark’s behalf. She found that the trustees were not fulfilling their obligations, stating:

“It is not sufficient for the trustees to simply safeguard the Mark Trust’s assets; instead, the trustees have a duty to Mark to inquire into his condition and to apply trust income to improving it. . . .Courts will intervene not only when the trustee behaves recklessly, but also when the trustee fails to exercise judgment altogether.”

Now teaching law, Judge Glen asserts that this situation of trustees managing special needs trusts and collecting fees without really looking out for the best interests of the beneficiaries is not unusual.

In this case, no one knows whether J.P. Morgan and attorney Platt have done a good job of managing the trust funds or whether their fees were appropriate. Problems arise because professional trustees, while adept at managing, investing, and accounting for trust funds, have no training or interest in dealing with the myriad of issues raised by special needs beneficiaries. Often they rely on family members to take the lead, which can work when they are involved and capable. But when no such family members exist, Judge Glen found that trustees have an obligation to be more proactive.

Parents of children with special needs are faced with the challenge of choosing appropriate trustees, especially when they don’t have other children who can fill that role. Often a co-trustee arrangement makes sense, with a family member handling care issues and a professional trustee managing funds. When no appropriate family members exist, another option is to appoint a care committee with whom the professional trustee must consult and who monitor and advise on the care provided to the beneficiary.

Attorneys who specialize in the field of special needs planning are more likely to have faced these issues in the past and be able to suggest practical alternatives. Attorney Platt, while apparently a very experienced and competent estate planning lawyer, is not experienced in the field of special needs planning. He is now over 80 years old and continuing to serve as Mark’s trustee. He needs to appoint a successor and come up with a plan for Mark’s continuing care.

Related blogs:

Your Must-Have Checklist if You Need Guardianship When Your Child with Special Needs Turns 18

Choosing a Trustee for A Child’s Special Needs Trust

Special Needs Trusts and Retirement Benefits: A Complicated Subject

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