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For Estate Planning, Estate Administration And Disputes

3 ways a special needs trustee may breach fiduciary duties

On Behalf of | Oct 17, 2020 | Estate Litigation |

If you have a disabled relative, you may choose to establish a special needs trust. This type of trust provides disbursements for the benefit of your loved one without harming his or her eligibility for needs-based government programs.

When you form a special needs trust, you name a trustee to oversee it. Whether the trustee is a professional one, he or she likely has certain fiduciary duties. Here are three common ways a special needs trustee may breach these legal obligations.

1. Recordkeeping duties

Your special needs trust must comply with certain tax and other regulations. Therefore, the trustee should keep accurate financial records and submit relevant forms when necessary. Failing to do so probably constitutes a breach of fiduciary duty.

2. Investment duties

The special needs trustee should also take possession of assets in the trust and invest them responsibly. Among other responsibilities, investment duties require the trustee not to foster transactions in which he or she has a personal interest. Conflicted investing is almost always a fiduciary duty breach.

3. Communication duties

An effective special needs trustee must communicate with both you and the beneficiary of the trust. If the trustee does not send you regular reports about the trust, he or she may not be performing communication duties successfully.

When communicating with the beneficiary, the trustee must accomplish a couple goals. First, he or she must ensure the beneficiary has access to funds for expenses that improve his or her quality of life.

More importantly, though, the trustee may need to talk to social workers, medical professionals and others to ensure the beneficiary is receiving adequate care. If the trustee abdicates these communication duties, it may be necessary to take legal action.