It’s Not Easy Being a Trustee
by cjleclaire
Aug 29, 2013 | 28674 views | 0 0 comments | 673 673 recommendations | email to a friend | print | permalink

Some estate plans may require extra attention and protection for special needs family members. An important option to consider is the creation of a Special Needs Trust (SNT). A SNT is a unique trust that gives special needs family members the ability to have funds (placed in trust for their benefit), without jeopardizing government benefits. The trust is specifically worded so that the trustees may only supplement, but not pay for, what government benefits would cover.

The trustees who manage these trusts are sometimes responsible for more than they realize. They have an obligation when it comes to following the rules of a particular trust, and acting in the best interest of the beneficiary.

In the article below, a corporate trustee was found to have misspent almost $200,000 because they failed to adhere to the trust, and adequately investigate whether there were government benefits available for those things the money was spent on

Elder Law and Special Needs Estate Planning attorneys at the Stefans Law Group, P.C., have the experience and the know-how to help you create and manage a SNT, and to help you avoid potential problems down the road. Call (516) 692 – 2744, and make an appointment with us today so we can discuss your needs.

Please read the article below to find out what happened to one trustee when they mistakenly spent trust funds on behalf of the trust beneficiary.

Trustee Must Reimburse SNT for Excessive Distributions

A New York trial court requires a trustee to reimburse a special needs trust for nearly $180,000 that was misspent on private caregivers, cab rides, and medications that could have been obtained from government sources.  Liranzo v. LI Jewish Education / Research (N.Y. Sup. Ct., Kings Cty., No. 28863/1996, June 25, 2013).

Eirol Liranzo was injured as a child.  In 2003, $422,012.54 remaining from the settlement of his personal injury lawsuit was placed into a special needs trust for his benefit.  The trustees were authorized to spend not less than $1,500 a month on Eirol's living expenses, but the trust also specifically stated that the trustees must make a good-faith effort to determine whether Medicaid would cover home health care services prior to expending trust funds for that purpose.  The trust also required the trustees to take Eirol's eligibility for government benefits into account before making discretionary payments to him or his family.

By 2009, only $3,253.03 remained in the trust.  When BNY Mellon, the trustee, filed an order requesting that the court approve its account and release it as trustee, the court opened an investigation.  The independent examiner discovered that BNY Mellon had paid for $118,064.50 worth of home health care without making an inquiry into whether Eirol could qualify for Medicaid payments for his care.  BNY Mellon had also paid for $56,320 worth of cab fares for Eirol's family and had made payments to the family that rendered Eirol ineligible for SSI and Medicaid.

The Supreme Court of New York, Kings County, rules that BNY Mellon must repay the trust for $176,905.99 that it improperly spent while it was trustee.  The court finds that "it is clear that the trustee relegated [its duties] to others, failing to make the necessary inquiries to ensure the longevity of the Trust Fund.  It is clear to the Court that BNY breached its duty under the Trust agreement and failed to properly administer the Trust."

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