Varian Law LLC

It Is Not Easy to Replace a Special Needs Trustee

The Trustee of a special needs trust sometimes needs to be replaced, but it can be quite challenging for the beneficiary to do so.

If a special needs trustee is not up to the job or intentionally mishandles the trust, it can be difficult for the beneficiary to change the trustee, according to the Wills, Trusts & Estates Prof Blog in "Can the Beneficiary of a Special Needs Trust Change the Trustee?"

The primary benefit of a special needs trust is to allow the beneficiary to have access to the Trust funds while remaining eligible for needs-based government benefits.  However, special needs trusts are subject to numerous restrictions, rules and requirements.  Among other things, they must be drafted and administered in very specific ways, and a third-party trustee is needed.

The beneficiary of a special needs trust can petition a Court to have the trustee removed and another appointed.  However, this can be a difficult process and many people with special needs are not able to handle the complex legal issues of filing a petition with a Court, let alone arguing for a trustee change. This could potentially stick a beneficiary with a bad trustee and no recourse.

Accordingly, it is very important to ensure that special needs trusts are drafted with this potential problem in mind.

An estate planning attorney with experience in special needs planning can assist you with the preparation of a special needs trust.

Reference: Wills, Trusts & Estates Prof Blog (Sep. 27, 2017) "Can the Beneficiary of a Special Needs Trust Change the Trustee?"

Protecting Family Wealth from the Family

Wealth created by the original generator does not always remain.

The heirs of James Jewett Stillman have found themselves in the position of auctioning off art to obtain money to save the estate, according to Bloomberg in "New York Banking Royalty's Heirs Are Unloading Art to Save the Family Estate."

Stillman, who is credited with running the bank that eventually grew into Citigroup, was also known for his valuable art collection. The art collection and his other wealth was intended to last for generations. However, that isn’t necessarily how it is going to work out.

The source of the problem, in this case, appears to be that the trustees who were charged with running the estate have squandered millions of dollars over the years. The estate's funds have run so low that the heirs have no choice but to sell something.  Therefore, they have chosen to sell the art.

The immediate lesson to be learned? It is very important to choose trustees carefully and to make sure that trust documents are carefully crafted to make squandering money very difficult.

A qualified estate planning attorney can guide you in creating a plan that will fit your unique circumstances, as well as how to carefully choose a trustee and perhaps protect future generations from themselves.

Reference: Bloomberg (April 4, 2017) "New York Banking Royalty's Heirs Are Unloading Art to Save the Family Estate."

A Diversified Portfolio May Get More Challenging

Dramatic shift possible in equities and bonds resulting in impact on investment in trust assets.

The equity and bond markets have been relatively stable with a negative correlation for the past three decades. However, that may be about to change, according to the Financial Advisor in "Forget 30 Years Of Stock And Bond Divergence, Bernstein Says."

If this shift does occur, trustees will need to pay attention. Trustees are generally required to invest trust assets by following the prudent investor rule. For the last 30 years, that has meant following the modern portfolio theory and diversifying assets between different classes of investment. However, a return to bonds and equities having a positive relationship, will make diversification of investments more difficult, and Trustees' jobs will become much more difficult.

Of course, this shift has not happened yet and might never happen. Most market predictions never come to fruition. However, trustees should pay attention and make sure that they are following the best advice about investing trust assets.

Reference: Wealth Management (Jan. 10, 2017) "Forget 30 Years Of Stock And Bond Divergence, Bernstein Says."