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Unprecedented Ruling Could Have Major Impact on Special Needs Trusts

A recent groundbreaking ruling on special needs trusts could change the way trustees monitor the needs of people with disabilities and spend money on them, influence other court rulings in similar cases and bolster legislative initiatives aimed at protecting the rights of beneficiaries of special needs trusts.

Former New York County Surrogate's Court Judge Kristin Booth Glen ruled last December that banks and other special needs trustees must not only invest trust assets, but also take decisive steps to determine the needs of people with disabilities and spend trust money to improve their lives. The decision drew renewed attention as well as praise from the autism and special needs communities after it was the focus of an article in the Village Voice last week.

A special needs trust is a trust to hold assets for an individual with special needs who may not be able to manage his or her own finances. These trusts help supplement the beneficiary’s income without affecting eligibility for benefits like Medicaid or Supplemental Security Income.

Glen’s ruling is already having an impact by raising awareness among parents of children with disabilities about the steps they need to take to ensure there is always an advocate to check in on their loved ones after they’re gone and that any special needs trusts they create for their children are managed and spent according to their wishes.

Some of the steps families can take when setting up a trust are:

  • Hire an attorney who is experienced in creating special needs trusts
     
  • Hire an institutional trustee that has a reputation for utilizing social workers and case managers to monitor the welfare of beneficiaries and determine how trust funds should be spent
     
  • Clearly spell out their wishes for the disbursement of trust funds within the trust document
     
  • Appoint a trusted family member who truly cares about the beneficiary as a trustee and/or guardian
     
  • Name a trust protector or advocacy committee to oversee the actions of the trustee

Daniel Unumb, executive director of the Autism Legal Resource Center at Autism Speaks, described Glen’s ruling as a “cautionary tale that underscores the importance of trying to get it right from the beginning in terms of a carefully drafted trust document and a ready, willing, able and informed trustee.” He said Glen’s decision has drawn attention to the importance of making sure that families’  wishes are “spelled out in the trust to the greatest extent possible in terms of what they want the trust to be used for in caring for the child” and that the trust include provisions that are specific to the child’s disability and circumstance.”  

Glen’s ruling came in a case that was quite unusual not only because Mark Holman, an orphaned teen with autism, was left a multimillion dollar trust by his adoptive mother yet no family advocate to check on him, but because special needs trusts rarely come under the scrutiny of a court and usually remain a private matter. The reason Mark’s case came to the court’s attention was because the attorney, also a co-trustee, applied for guardianship.

While courts around the country can cite Glen’s ruling in similar cases and many are hoping her decision will influence other judicial opinions, it is not precedential or binding on any other courts. “Judge Glen’s decision was groundbreaking and very courageous … and I think every judge should at least consider doing the same thing in a similar situation,” said Howard Krooks, partner at Elder Law Associates and president of the National Academy of Elder Law Attorneys (NAELA), a professional association of attorneys that provide legal services to the elderly and people with special needs. “I believe and certainly hope there will be a larger impact from this decision on other courts throughout New York State and across the country.”

Since many families prefer to keep their financial matters private and avoid guardianship statutes that require intrusive and expensive court accounting, legislation could give courts the authority to intervene on a case-by-case basis to protect special needs trust beneficiaries when needed, Krooks said. “The only real solution to this is a statutory change that authorizes judges to do what Justice Glen did … Without proper jurisdiction over trusts, the guardianship court is limited in terms of making sure the ward is adequately being provided for.”

For their part, banks and institutional trustees could take notice of Glen’s decision, which threatened to reduce or eliminate trustee commissions, and start hiring case managers more frequently to ensure trust funds are being spent on the needs of beneficiaries and that their own commissions are protected.

However, since the impact of Glen’s decision on the courts, legislatures and banks will take some time and is still uncertain, parents and guardians of people with disabilities are the ones who really need to take action. Hiring an experienced special needs attorney and an appropriate trustee are probably the two most important steps families can take to ensure their children are protected. And demanding that banks and institutional trustees hire case managers could help cement a policy shift and lead to more banks offering these services.

As an additional precaution, many special needs attorneys have started advising parents to utilize trust protectors (also referred to as trust advisors and monitors) or trust advisory/advocacy committees to oversee the actions of trustees and ensure people with disabilities are being cared for as intended by their trusts. The trust protectors or advisory committees, who may or may not be paid, can make recommendations to the trustee on how to spend trust money, and ideally should have the power to file motions in court to force trust expenditures or even remove the trustee if necessary. Committees usually consist of a few members and can include parents, care managers, social workers, lawyers and other relatives or friends, and generally meet several times a year to discuss the beneficiaries’ needs.

“People can’t just make up these trusts and assume that the trustee is going to do the right thing,” said Krooks. “Are they supposed to do the right thing? Absolutely. But in cases where they don’t, there needs to be a mechanism for holding them responsible for making sure they do what the trust was set up for in the first place.”

NAELA, the Special Needs Alliance and the Academy of Special Needs Planners are the three major organizations that can connect parents with highly experienced special needs attorneys. Families can also search for special needs attorneys in their area at autismspeaks.org/resource-guide.

For more information about special needs trusts, check out the Legal Matters section of the Autism Speaks Transition Tool Kit (http://www.autismspeaks.org/sites/default/files/documents/transition/legal_matters.pdf. Also look for a new Autism Speaks Financial Planning Tool Kit in October that will include important information about special needs trusts and guardianship issues.