All Special Needs Trusts are Not Created Equal: Buyer Beware!

For those unfamiliar with the complex nature of government benefits and the laws governing special needs trusts (SNTs) it might be assumed that it is a ‘forms practice.’  Nothing could be further from the truth.  Draft the SNT correctly the first time and the benefit is a happy client who maintains eligibility for government benefits and an informed trustee who can properly administer the SNT.  Alternatively, draft the SNT incorrectly and it is a very expensive mistake which has led to malpractice suits.

Our firm was recently hired to represent two family members as Co-Guardians of their sister who has a disability.  The guardianship had been established in 2005 as a result of a lawsuit settlement. In reviewing the documents provided by the clients I was curious about the SNT – how it was drafted, how it was being administered, and whether there was proper reporting to the relevant government agencies.

As I dug deeper I learned:

• The SNT agreement was missing witness signatures;
• The SNT agreement was missing a notary;
• There was no legally authorized Settlor identified in the SNT;
• The  Social Security Administration was never notified of the settlement and the establishment and funding of the SNT;
• The Agency for Persons with Disabilities was never notified of the settlement and the establishment and funding of the SNT;
• The SNT agreement incorrectly authorized reimbursement to SSA at the death of the beneficiary.

When I advised our new clients of my assessment and that the trust was invalid they were flabbergasted and upset. They didn’t understand how those mistakes could have been made as they were relying on an attorney who they thought knew what she was doing.  After they calmed down we proposed a solution of seeking judicial reformation of the SNT to fix these mistakes.  Our petition will request reformation nunc pro tunc as of the date the SNT was first established so that hopefully the trust beneficiary will not lose her government benefits and the agencies will not ask for reimbursement of benefits now.  I believe we have a high probability of success.

We appreciate the trust and confidence these clients have placed in us and only wish that they had been referred to us initially so that we could have saved them additional expense and stress.  Help your clients to make an informed decision and wise investment in their future – refer them to a Board Certified Attorney.

“Proper Planning May Create Peace of Mind”

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