This week, the Village Voice took up the issue of Special Needs Trusts — special funds created to ensure that beneficiaries who are disabled or mentally ill can enjoy the use of property which is intended to be held for their benefit (these trusts are occasionally set up for severely injured personal injury clients).

As the Voice article states, “there are virtually no rules governing whether trustees are spending in the best interests of their clients. Worse, the courts can only review these cases if someone complains.”

Recently, according the article, Manhattan Surrogate Judge Kristen Booth Glen picked a fight with the banks who oversee such trusts, and issued a ruling that could change the way such trusts are managed.

The full article in the Voice is available here, while a preview appears below.

Our thoughts about Special Needs Trusts and the quandaries involved? We have handled a plethora of cases where a Supplemental Needs Trust or a Pooled Trust has become necessary because our client received certain benefits from the government (such as Medicaid) to cover healthcare, public assistance, food stamps, and housing. To accept a settlement or obtain a verdict in a personal injury case without taking the proper precautions could result in forfeiture of those benefits. Accordingly, a Trust is needed.

The problems with the trust are numerous, but here are a few:

1. If the Plaintiff (recipient) is not mentally disabled or impaired they are often frustrated and annoyed with all the “red tape” attached to obtain permission and consent for expenditures. They are also upset with the limitations reviewed and often imposed as to what may be purchased and when.

2. Also if the Plaintiff (recipient) is not mentally disabled or impaired they are often resentment of the limitations as they view the money awarded as being compensation for their pain and suffering. They often don’t see the big picture in that taxpayer’s money has carried them and will continue to support them in the future. They become resentful that the attorney earns a fee while they have constant and substantial limitations and tight procedures to follow.

3. (This is more in line with the Voice article:) When the Plaintiff is mentally disabled or impaired and relies upon a trustee or guardian to make decisions, in addition to the procedure “red tape” involved there is always the problem and temptation for that trustee or guardian to abuse his/her discretion and authority and use some of those funds for benefits on people or items other than for the sole benefit of the Plaintiff.

4. In all instances where a trustee or guardian is eligible for a fee for services rendered there is always the possibility to seeking payments in excess of services rendered. This applies to attorneys and law firms who have put in such positions of authority.

5. In a pooled trust where the remaining funds revert back to a charity upon the death of the Plaintiff (recipient) there often appears to be an ongoing battle between the trustee and Plaintiff for the release of funds, due to the trustee seeking to preserve as much of the corpus as possible for the charity when Plaintiff dies.

The full article in the Voice is available here, while a preview appears below.

The Ruling That Could Change Everything For Disabled People With Million-Dollar Trusts
A pissed-off judge, a $3 million inheritance, and a neglected autistic man

By Katia Savchuk for THE VILLAGE VOICE
Published: July 10, 2013

WHEN JUDGE KRISTEN BOOTH GLEN walked into her Manhattan Surrogate’s courtroom one day in 2007, she had no idea she was about to challenge the nation’s top banks on behalf of tens of thousands of disabled people.

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