New York Judge Takes Bank, Lawyer to Task Over Special Needs Trust

MARCH 9, 2013 VOLUME 20 NUMBER 10
We don’t very often focus on trial court decisions, and especially not in cases from outside Arizona. Trial judges are often very dedicated and bright, and their opinions may be eloquent and well-reasoned, but they do not establish precedent we can describe for our readers. Once in a while we come across a trial court opinion that speaks to our area of law practice, however, and we want to share it with you.

Such a case comes to us from now-retired New York Surrogate’s Court Judge Kristin Booth Glen. Surrogate’s Court is similar to Arizona’s probate court — it is where trusts, estates and guardianships are handled. Judge Glen handled a particularly challenging estate and trust, and wrote an opinion detailing the history of the case on her last day in office.

The case involved a guardianship of a profoundly developmentally disabled adult named Mark (his full name is not given in the judge’s opinion). Mark was 16 when his adoptive mother Marie died in 2005. Mark was then living in a group home, where Marie had placed him after she learned that she was terminally ill.

Marie’s living trust (which, as an aside, was apparently never funded) divided her assets between Mark and his brother. Mark’s share was to be held in a special needs trust, with JP Morgan Chase Bank and Marie’s lawyer acting as co-trustees. Her pour-over will left everything to the trust; in the probate proceeding initiated after her death, the total estate was described as just short of $12 million. Probate-related costs and expenses reduced that by almost a million dollars, and another $3.5 million was paid in estate taxes. Inexplicably, Mark’s one-half share of the remaining $8 million was reported as $1,420,343.29.

A year after Marie’s death, her lawyer sought appointment as Mark’s guardian. For reasons not explained in the written decision, no hearing was held for almost a year. When the attorney appeared before the judge, he told her that he was fulfilling a death-bed promise he had made to his former client, but that he had not actually seen Mark in more than ten years. He had not visited the facility where Mark was living, and he had not asked the staff whether Mark had any unmet needs. In the almost three years he had been co-trustee of the trust for Mark, not a penny had been spent on him.

Judge Glen ordered the lawyer and the bank to explain themselves — to file an accounting in the trust detailing income and expenditures. She also suggested that they ought to find someone to evaluate Mark and his needs, and to figure out whether there were things the trust could provide for his benefit. A professional care manager was eventually hired (though it inexplicably took a year before she was sent to visit Mark), and a program of providing for Mark’s needs finally began. Meanwhile, Marie’s considerable estate had sat idly, paying only administrative expenses, for almost five years after her death.

The judge’s written opinion details all that history, and the gradual improvement in Mark’s life and care over the two-year period since the care manager began visits and recommendations. It also leaves little doubt about the judge’s frustration at not getting sufficient information to determine how the estate shrank from $12 million to the $1.5 million (or so) in Mark’s trust, or how much had been paid to the bank or the lawyer in probate fees and trust administration fees. It laid out a few next steps to guide her successor after her own retirement. It did not resolve any potential or actual challenges to the fees charged by the bank or lawyer, but it clearly signaled her likely intention to reduce fees and potentially order return of some fees already collected. In the Matter of the Accounting by JP Morgan Chase Bank, N.A., v. Marie H., December 31, 2012.

Though this written opinion is from a trial court rather than a court of appeals, it is worth looking at and considering. Though it is a New York case, it speaks to judges, trustees, beneficiaries and families in other states, as well. It lays out a disturbing history of inattention to the needs of a severely disabled man even though there apparently were funds available for his benefit. It tells trustees that:

  • inaction can be as bad as affirmative misbehavior.
  • it can be helpful to bring in a professional care manager to assess needs and make recommendations.
  • the courts can initiate reviews on their own, even if no complaint has been filed, when it becomes apparent that oversight is needed.
  • beneficiaries who are unable to protect themselves need special protection.

What happens next? We really don’t know — though the three months the judge gave for a more detailed accounting and action plan will expire at the end of this month. It will be interesting to see what Judge Glen’s successor does with this case, and how her written decision affects professional trustees and lawyers in New York and elsewhere. We’ll let you know as we see updated information.

Meanwhile, we hope that Mark continues to see benefits from his mother’s trust. It sounds like he has made a lot of progress with a little protection, oversight and professional care recommendations.

 

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One Response

  1. Eve Totin

     /  March 30, 2013

    Hi
    I am the guardian of a severely handicapped brother, and trustee of a special needs trust for him. From this article, you can see that a trustee must have a vested interest in their client (is their a better name?), in order to make a difference in their lives. Anything can happen to the client, whether in a group home, foster home, attending an adult day care during the day, or receiving respite care from time to time. In the 7 years since my parents death, APS has been involved twice. I think that a trustee should be in contact with the client’s guardian to see what his/her special needs are. I have seen this first hand, and welcome other’s comments.

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