Trustees are required to carry out the terms included in the supplemental needs trust agreement. Disabled persons in North Carolina may receive Social Security or Medicaid payments, in addition to benefits from other programs—certain documentation and deadlines are involved with these programs. Accurate records must be kept by the trustee on behalf of the beneficiary. Trustees named in supplemental needs trusts need to understand how the beneficiary’s eligibility is impacted by trust distributions and must decide if and when these payments will occur.
One case (Matter of J.P. Morgan Chase) brought attention to one particular duty of a trustee of supplemental needs trusts. These trustees have an enhanced duty to the disabled beneficiary. The case involved an autistic beneficiary of a supplemental needs trust. The beneficiary did not receive distributions for three years, while trustees continued to receive commissions exceeding $52,000 cumulatively. According to court records, the trustees did not check on the autistic beneficiary’s condition during the entire time. The court decided: “[the trustees’] failure to fulfill their fiduciary obligations should result in denial or reduction of their commissions for the period of their inaction.”
Due to lack of care and citing failure of the trustees to fulfill their fiduciary obligation to proactively monitor and respond to the beneficiary’s condition, a New York court denied the trustees’ payments. The court stated:
It is not sufficient for the trustees to simply safeguard the [trust] assets; instead, the trustees have a duty to [the beneficiary] to inquire into his condition and to apply trust income to improving it.
Trustees must advocate on behalf of the beneficiary, and in order to do so effectively they should be aware of the beneficiary’s health, well-being, and living situation. For individuals establishing a supplemental needs trust in North Carolina, the case should serve as an example how important it is to choose trustees wisely. Review options with a special needs or elder law attorney and discuss the duties with potential trustees prior to appointing them. Trustees may not be prepared for or want the responsibilities and can hire an agent to perform the duties instead.