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Dispute Between Special Needs Trustee and Beneficiary’s Family

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MARCH 28, 2016 VOLUME 23 NUMBER 12

A recent case from the Alaska Supreme Court addresses special needs trusts. It doesn’t break any legal ground (the decision actually focuses on an entirely procedural issue), but it does give us a chance to talk about common problems arising in the administration of such trusts.

“T.V.”, then twelve years old, was riding his bicycle on an Anchorage residential street when he was struck by a car. He was seriously injured; he spent months in a coma, incurred over a million dollars in medical bills, and is now paralyzed from the chest down.

A lawyer was hired, and a lawsuit filed. Unfortunately, there was not enough insurance coverage to pay for T.V.’s care, and the settlement ultimately reached was not large enough to cover T.V.’s medical costs.

What to do with the too-small settlement? The lawyer asked the Alaska courts for permission to transfer T.V.’s settlement proceeds to a special needs trust, managed by a local Alaska non-profit. As it happened, the attorney sat on the Board of Directors for the non-profit, but he explained that he would avoid any involvement in managing T.V.’s money.

T.V.’s father Jack apparently became unhappy over the trust’s administration. He complained that the non-profit refused to make T.V.’s money available for his needs — though the non-profit insisted that he had never actually requested any trust distributions. Whatever the basis, Jack, representing himself, filed a motion with the court which had approved the original settlement. His motion asked that the court release T.V.’s trust money to him (with interest); he apparently figured that he could make better decisions about the settlement money than the non-profit trustee.

A court officer considered Jack’s request, but noted that the trustee was not actually a party to the original lawsuit, and so recommended that it be denied. Jack appealed to the Alaska Supreme Court, which directed the lower court to enter a final order on Jack’s petition. In response, the trial judge directed a hearing be held so that Jack could explain his concerns.

At the hearing, the non-profit trustee explained that they had never received any written requests for distributions. Jack insisted that he had made verbal requests, which had been ignored or denied. The trustee responded that they require requests to be written, and that they would work with Jack to resolve his concerns.

The trial court ultimately ruled that the trust itself was not a party to the personal injury lawsuit, and that any order directing return of the funds could have unintended consequences (like T.V. losing his eligibility for Medicaid coverage for his medical needs). Jack’s request for return of the trust funds was denied.

The Alaska Supreme Court then took up Jack’s appeal, and agreed with the trial judge. The correct way for Jack to proceed, they ruled, would have been to file an action for court supervision of the trust, and lay out his grievances with the trustee in that proceeding. For the moment, at least, Jack’s objections to the administration of the trust were unavailing. In the  Matter of a Petition for Approval of a Minor Settlement T.V., March 18, 2016.

Though there’s not much of legal substance in T.V.’s father’s challenge to his special needs trust, there is a lot that is of practical interest. Many special needs trusts name professional trustees. Family members often feel that they should be given more autonomy and control in management of those trusts. Professional trustees, however, are required to consider the needs of the trust beneficiary first — not the needs or desires of family members.

The appellate decision in T.V.’s trust case does not indicate how much money is in the trust, but one can reasonably infer that the settlement amount was very modest. In such a case, the challenge to a trustee is to maximize the benefit to the beneficiary (T.V., in this case), while minimizing any effect on Medicaid, Supplemental Security Income or other resources providing assistance or care. The trustee also has to keep administrative costs, accounting requirements and tax considerations in mind. All that must be balanced to make sure the trust’s administration is handled as carefully as possible.

Family members often see those constraints as unnecessarily restrictive. When families (particularly caretaker families) have settled on what they see as a good use of the funds, they often resist any discussion of alternatives, limitations or explanations about why their planned use may need to be modified. Tensions can and do arise, and can be exacerbated by what the family sometimes sees as bureaucratic excuses.

T.V.’s trustee’s requirement that requests be put in writing makes good sense, and is a reasonable limitation on fund use. A willingness to work with family members and sort out the priorities is critical; though the family may see that as the trustee being obstinate, it is important to have a process and to follow it.

What about when family members act as trustee? Sometimes the loss of a professional filter can put the trust at risk, leading to too-rapid diminution of its value and possible unintended effects on Medicaid and other public benefits.

What about just turning T.V.’s money over to Jack, his father, to manage and spend on his own? That likely would result in the temporary — or even semi-permanent — suspension of the very public benefits keeping T.V.’s medical and personal care going (we don’t know enough about his actual benefits profile to be certain of that, but it’s a likely outcome).

It can be a challenge to figure out how best to manage and spend limited personal injury proceeds for a trust beneficiary with considerable medical and social needs. Family members’ wishes are of course important, but should be carefully considered and monitored. A good working relationship is critical.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.