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Tuesday, July 30, 2013

Case on Special Needs Trusts

Autism Speaks reports on former New York Judge Kristin Booth Glen, who ruled that banks and other special needs trustees must determine the needs of people with disabilities and spend the money to improve their lives.  (Also see Village Voice article.)
The ruling stemmed from a case in which the attorney who had created a discretionary trust for Mark Holman, a severely autistic orphaned teen who was left a multimillion dollar trust fund by his adoptive mother Marie Holman, petitioned to become the teen's guardian in an attempt to fulfill Marie's dying wish. Glen took the attorney as well as co-trustee JP Morgan Chase to task for failing to visit Mark Holman, determine his needs, notify the residential facility in which he lived of the trust, or spend any of Mark's trust funds on improving his life, all while collecting thousands of dollars in commissions.
“The history reveals a severely disabled, vulnerable, institutionalized young man, wholly dependent on Medicaid, unvisited and virtually abandoned, despite a multimillion dollar trust left for his care by his deceased mother,” Glen wrote in her opinion. “It's 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.” In her opinion, Glen described her decision as a “clarion call” for all special needs trustees. “Courts will intervene not only when the trustee behaves recklessly, but also when the trustee fails to exercise judgment altogether,” she wrote.
In an interview with Autism Speaks, Glen elaborates:
The problem is if the trust is for a person with a significant intellectual disability and the person who created the trust, the parent, or whoever, is dead, and the trustee is not acting appropriately, who is going to challenge it? 
Two things could happen. One thing that could happen is that banks look at this and say, ‘You know, it's true; either we should put ourselves in a position to do what we need to do for people with special needs or we shouldn't take on these trusts, and if we decide that we're going to do what we need to do, we need to hire people like social workers to monitor these trusts and to make sure that the beneficiaries are getting what they need and that we're spending the money appropriately.'
The other thing that can happen because except by fluke the courts are not going to be involved in this is that there is a new concept called ‘trust protectors.' I don't think we have a statute yet about it in New York; some states do. While you appoint A to be the trustee to manage the money and spend it, you appoint B to make sure A is doing it right. 
For the ruling itself, see:

Matter of JP Morgan Chase Bank N.A. (Marie H.)[*1] Matter of JP Morgan Chase Bank N.A. (Marie H.) 2012 NY Slip Op 22387 Decided on December 31, 2012 Sur Ct, New York County Glen, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431