A recent case from Rhode Island portrays how easy it can be for untrustworthy people to steal from a trust created to benefit a child with special needs. Matthew Goodness was born with cerebral palsy and later obtained a deferred annuity as a partial settlement of a lawsuit. The payments started on Matthew’s 18th birthday. They were deposited into a trust for special needs created by his parents, Mary and Francis Goodness, for his sole benefit. His parents were assigned as the co-trustees of the trust, and Fleet Bank (now Bank of America) was appointed as successor trustee.
By the time Matthew started receiving the annuity payments, his parents were separated and seeking a divorce. Mary and Francis began withdrawing money from Matthew’s trust and putting the funds into their separate personal bank accounts. While Mary used trust fund money to buy groceries and pay rent, Francis spent the funds he took on beer. Although Matthew’s essential living expenses were paid for, neither parent coordinated his care with the other. Eventually both Mary and Francis asked the court to remove the other as a co-trustee. After a hearing, the Rhode Island Superior Court ousted both Mary and Francis as trustees and appointed Bank of America as the successor. The court concluded that both parents “(1) breached their duty of loyalty to the Trust; (2) impermissibly comingled Trust funds with their personal funds; (3) wasted and depleted Trust fund assets; and (4) breached their fiduciary duty to the Trust.”
The Goodness case serves as a drastic example in commingling trust funds with personal assets, and should alert reliable parents who are the trustees of a special needs trust. Trustees have a “fiduciary duty” to administer a trust in the best interests of the beneficiary. Key to successfully managing a trust of any nature is the separation of trust assets from the beneficiary’s and the trustee’s personal property. One who takes funds designated for the beneficiary and uses them for himself without approval is not only violating his fiduciary duty, but also stealing. Common solutions to this problem are to appoint an independent trustee to serve alongside a family member trustee or establish a committee of trust advisors to monitor the trustee. The trustee must remember to keep the best interests of the beneficiary at heart and to work with a qualified special needs planner to monitor and supervise the trust.
To read the opinion, click here.
Source for Post: Academy of Special Needs Planners
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