How much should the trustee of a trust for Aaron Hernandez’s daughter, Avielle, pay out for her and to what extent should he take into account other resources that might be available? That is the question before the probate court because David Schwartz, a Newton Attorney, refused to pay a $10,697 bill for dance lessons. As a result, Avielle’s mother, Shayanna Jenkins-Hernandez, has asked the Bristol County Probate Court to remove Schwartz as trustee.
What Standards Should Apply?
Trustees often have wide discretion in determining how to distribute funds. Often, especially when beneficiaries are minors, the decisions can be difficult. The trustee needs to balance the beneficiary’s current needs with anticipated future ones, as well as with the interest of future beneficiaries.
Sometimes what looks like a lot of money really is not so much when all these interests are taken into account. For instance, a trust holding $1 million should really limit its spending to about $30,000 a year if its supposed to last for a young beneficiary’s lifetime with the same spending power. If distributions are limited to 3 percent per year and and the principal conservatively invested, it can be anticipated that it will grow sufficiently to keep step with inflation. On the other hand, if more is distributed on a consistent basis, the spending power of the trust will erode over time. Depending on the circumstances, the trustee may decide that such erosion makes sense. For instance, the trustee may invest in educational expenses for a young beneficiary with the goal that this will enhance their ability to earn a good living and be less dependent on the trust in the future.
Another issue that often comes up for trustees when the beneficiary is young is to what extent should the trustee make distributions that benefit other members of the beneficiary’s family. This can be especially difficult when the beneficiary’s parents (or guardians) do not have significant financial resources themselves. Is it okay, for instance, for the trustee to pay the rent for an apartment or house in which the beneficiary’s whole family lives? On the one hand, this benefits the entire family, not just the beneficiary. On the other, this may be the only way for the trustee to make sure the beneficiary has a safe and secure home.
What are Avielle’s Needs?
In looking into the beneficiary’s needs, it’s appropriate for the trustee to investigate their other resources. In Avielle’s case, Schwartz questioned how Jenkins-Hernandez was spending Hernandez’s pension and Social Security benefits, both of which are supposed to go to Avielle. According to The Boston Globe, Jenkins-Henderson used the funds for “$36,858 on clothing, including maternity wear; $39,347 on home goods; $25,577 shopping online; $11,792 in ‘self care,’ including gym fees, and visits to hair and nail salons.”
The Hernandez case is complicated by the fact that Jenkins-Hernandez and Hernandez never married and apparently Hernandez had no estate plan. As a result, the bulk of his assets went to his young daughter, now ten years old. Her mother was appointed her conservator to manage her income, reported to be about $150,000 a year. In the court battle, Schwartz questions Jenkins-Hernandez’s spending of these funds and, as a result, whether he should be making distributions on behalf of Avielle when, in his view, Jenkins-Henderson is misspending resources Avielle already has and which could be used to pay for dance lessons and other expenses on her behalf.
Grantor’s Intent When There’s No Grantor
Whether to pay for dance lessons also raises another difficult issue trustees face in some instances. Trusts often provide little guidance on how trust funds are to be used, leaving decisions to the trustee’s discretion. The trustee is supposed to carry out the grantor’s intent. Where the trustee and the grantor are well known to one another, it may not matter that the trust provides little guidance. Either the trustee knows what the grantor would have wanted in most circumstances or the grantor chose the trustee because they were confident in the trustee’s personal judgment and values.
While we don’t know much about Avielle’s trust, it was likely created by a court for her benefit. If this is the case, it means that Schwartz has no guidance from a grantor in determining how to spend the trust funds for Avielle’s benefit and must simply use his own judgment. Conflicts can often develop in such cases where the trustee’s and the beneficiary’s or the beneficiary’s family’s values differ. This case may well reflect such a difference. Schwartz may well feel that $10,697 for dance lessons for a ten year old is a bit excessive while her mother may feel that they are totally appropriate.
Schwartz may be further influenced by the size of the trust. Using the 3 percent rule of thumb, spending from Avielle’s trust, which is reported to hold about $700,000, should be limited to about $21,000 a year. Schwartz may feel that it’s inappropriate to spend half this amount on dance lessons. Jenkins-Hernandez may well disagree. This does not mean that either is right or wrong, but instead that they simply have a different judgment on the value of dance lessons to Avielle.
Likelihood of Success
Jenkins-Hernandez appears to have an uphill battle in her fight to remove Schwartz. Not only does her own spending of Avielle’s funds raise questions, but a judge is going to be reluctant to remove a trustee for a disagreement over trust distributions where the trustee is carrying out their duties in a responsible manner. On the other hand, a breakdown in communication between a trustee and a beneficiary, or in this case a beneficiary’s guardian, can be grounds for trustee removal where that rupture means that the trustee can no longer adequately carry out their duties.
Unfortunately, the legal fees involved in this case are likely to to far exceed the $10,692 bill for dance lessons that brought rise to this case.
