Planning for Life

Why Lawyers Should Think Twice About Serving as Trustee

Posted by Jamie Marshall on April 28, 2011

By Harry S. Margolis

The story of a Massachusetts attorney who received a three-month suspension for failing to fulfill his duties as co-trustee of a special needs trust should serve as a cautionary tale for any attorney (or anyone else for that matter) asked to step into this role. The attorney was only two years out of law school when in 2003 a client asked him to become the independent co-trustee of a special needs trust for the benefit of the client’s son.

The Demise of the Trust

At that time the young attorney became involved, the trust held approximately $543,000. Though the attorney was co-trustee with the father, he permitted the father to run the trust and cooperated in the trust purchasing a house for the child in New Hampshire.

Subsequently, the father withdrew $120,000, which the attorney did not monitor or prevent. Finally, the attorney acquiesced in the father’s decision in 2004 to purchase a food service business. That was the beginning of the end.

Only later did the attorney learn that the father had a criminal history and that the business had various environmental, health code and building violations. Then the father was incarcerated and the business was run by employees with the attorney’s help.

Ultimately, the business was lost, as was the house, which had been mortgaged to raise funds for the business, leaving the child with nothing.

The Lawyers' Mistakes

Lawyering is a helping profession. And lawyers are problem solvers. When a client asks for assistance, the lawyer's immediate impulse is to figure out a way to help. That’s what this young attorney did, to the ultimate harm of the beneficiary of the trust and of the lawyer himself. What could he have done differently?

  1. Refuse to get involved without knowing more about the matter and the family.
  2. Demand to retain control of the trust assets, which might have prevented his involvement in the first place, since the father may have gone elsewhere in search of a corporate trustee.
  3. Refuse to get involved in a business, which is not a normal trust investment.
  4. Refuse to be involved with self dealing -- the father should not have been able to serve as both co-trustee and the manager of a business funded by the trust.

This formerly-young attorney has no doubt learned these lessons the hard way. Perhaps the last lesson is not to venture into fields in which you do not have experience without working with others who have that experience.

Topics: trusts, special needs planning, Special Needs Trust

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