Guardianship Case Illustrates the Need for Careful Trustee Selection and Oversight

Before she passed away, Marie Holman created a special needs trust to take care of her son Mark, who has autism. When she established the trust, Ms. Holman picked an attorney and a bank to serve as trustees, thinking that they would be best able to manage the multi-million dollar trust fund. But in the years following Ms. Holman's death, the trustees never visited Mark at his residential school and only spent the trust's money on their fees; not one cent was used for Mark's care.

This story, which only came to light after one of the trustees asked a New York City court for permission to also become Mark's legal guardian, illustrates the difficulties those creating trusts (often called "donors") face when choosing a trustee for a special needs trust.

Ms. Holman believed that she had picked qualified trustees, and, on paper, she probably did. The attorney whom she selected was a well-known estate planner for families of children with special needs, and the bank, JP Morgan Chase, is one of the largest financial institutions in the world. There is no indication that either trustee did a bad job managing the trust's assets, but financial prowess is only one of many qualities needed to be a good trustee of a special needs trust.

In Mark's case, the trustees claimed that there was no need to spend the trust funds on his care because his treatment was covered by Medicaid and he didn't require any further assistance. But when Manhattan judge Kristin Booth Glen forced the trustees to hire a care coordinator to look into Mark's living situation, she came up with a very long list of items and services that Mark's trust could provide, including video games, trips to restaurants, a vacation and shopping. Because the trustees were only focused on Mark's public benefits, they initially missed the opportunity to significantly improve his quality of life simply by utilizing some of his substantial trust funds.

Mark's case illustrates the need to go beyond the basics when interviewing potential trustees. Donors need to ask very specific questions about the trustee's philosophy regarding the use of trust funds, and they should obtain specific examples of how the trustee manages accounts for people with special needs. In many cases, large financial institutions may have specific trust departments, but it is important to determine whether anyone in the trust department actually has experience working with people with special needs. It's not enough to simply rely on a trustee's reputation or a bank's investment returns. It takes hard work and a lot of digging to come up with the perfect trustee.

Because one judge decided to take matters into her own hands, Mark's case has a happy ending. His care has improved, his treatment has progressed far beyond what the doctors thought was possible, and he has been reunited with his adopted brother, who he hadn't seen in years. You shouldn't have to rely on the court system to discover, after the fact, that your trustee is not doing his job. If you take the time to properly search for a trustee, you will avoid a lot of heartache down the line.

To read a long article about Mark and the judge who changed his life, click here.

For a list of questions to ask when looking for a professional trustee, click here.