One of the most important decisions in creating a trust is choosing a trustee. The person creating the trust must choose a trustee that will understand what their duties are, the intent of the person behind the funding and exercise spending power for expenses that fall within the parameters set forth by the terms of the trust.
Over the past year, two important decisions have emerged from New York which detail the affirmative duties assumed by trustees managing a trust for an individual with special needs.
The first case memorialized a trustee’s requirement to take reasonable interest in and action on behalf of a beneficiary with special needs. In Matter of JP Morgan Chase Bank N.A. (Marie H.), 2012 NY Slip Op 22387, the trustees left the beneficiary without adequate care, despite his significant inheritance. The court decided that a trustee has a duty “to make themselves knowledgeable about [a beneficiary’s] condition and his needs, and the availability of services that would enable them to provide for those needs.” This duty extends to determining the medical, educational and quality of life needs that can be met by utilizing trust assets. By turning a blind eye to such needs and not approving proper and necessary payments to accommodate such needs, a trustee fails to fulfill their obligations.
The second case, Liranzo v. LI Jewish Education/Research, focuses on the obligation of a trustee to investigate the public benefits available to a beneficiary of a special needs trust and holds a trustee liable for such a breach. The court determined that it breached its duties by “failing to make the necessary inquiries.
The lesson to take away from this is to pick your trustees wisely when establishing a trust. Most importantly ensure that your trustee understands their obligation to the beneficiary.