While it's an honor that your relative or friend has enough faith in you to appoint you as trustee, being a trustee is a big responsibility. If you don't perform your duties properly, the trust will not perform as designed, the beneficiaries may end up worse off, and you could be personally liable. Fortunately, you can avoid these potential bad outcomes by understanding your role and taking a few important steps.
While day-to-day obligations can certainly get in the way, at some point as a parent of a child with special needs you will need to create a special needs trust to shelter and manage whatever you may leave the child. This is the only safe way to make sure that the funds you leave are protected and well managed and that the child, who by then is probably an adult, can continue to qualify for vital public benefits.
Here are some of the questions you will need to consider in guiding their attorney to create the trust:
The George Clooney character in The Descendants is under pressure to sell extremely valuable Hawaiian land held in trust for his family for over a hundred years because if he doesn't act soon the trust will terminate with the property being distributed outright to dozens of family members. They might never agree among themselves on what to do with the property without expensive and extensive litigation.
The reason the trust will end? The "rule against perpetuities," the bugaboo of many a first-year law student.
I was recently consulted by the trustee of a special needs trust who was wondering how she could use the trust to distribute money to the beneficiary, who is her niece. Any regular distributions would cause an increase in the niece's rent in subsidized housing. The problem is the language of the trust which requires that
payments will not render Jane Doe ineligible for any benefits of cash, medical, housing, or other forms of assistance which Jane Doe receives or may receive as a result of any disability, handicap or needs from any state or federal government or governmental agency, from any charitable source, or from any private insurance company or other organization that may provide payments, housing, services or assistance to disabled, handicapped or needy persons and, furthermore, that such payments will not, in the Trustees' judgment, cause a reduction in any such benefits that Jane Doe receives.
Trusts commonly provide that distributions may be made for the "reasonable maintenance, comfort and support" of the beneficiary. These are often part of the so-called "HEMS" standard -- "health, education, maintenance and support" -- that the Internal Revenue Service has deemed to create a safe harbor. If distributions are limited to this standard, they will not be deemed to belong to the trustee when she dies. But what do these words really mean?
The case of Harootian v. Douvadjian (80 Mass. App. Ct. 565, October 4, 2011) helps answer this question, and the answer is that these words give very wide discretion to the trustee. Andrew H. Ansbigian left a trust for the benefit of his wife, Beatrice, and also named her as trustee. The trust provided that she could make distributions for her own "support in reasonable comfort and maintenance."
In the case of Sherman, et al. v Shub, et al., the judge dismissed the consumer protection claim against lawyers and tax advisors who drafted two allegedly defective life insurance trusts because the damages were too speculative to determine.While it's a longstanding legal doctrine that the difficulty of establishing the amount to damages does not preclude recovery,
Judge Peter M. Lauriat in his decision argues that the issue here is not the extent of damages but whether damages will exist at all, since whether the plaintiffs will have to pay any estate
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.