The proposed Illinois Trust Act poses a real danger to Special Needs Beneficiaries.
Part 3: The disastrous impact of the proposed law on special needs beneficiaries.
Executive Summary: The proposed law punctures healthy trust administration and so eviscerates protections for beneficiaries of special needs trusts.
There are three defects in the proposed law which combine as a powerful force against special needs trust beneficiaries. Under the proposed law:
- Trusts don’t have to benefit their beneficiaries!
- Trustees owe no loyalty to their beneficiaries!
- Trustees have no duty to administer trusts aligned with the interests of their beneficiaries!
The proposed law comes in the guise of bringing the Uniform Trust Code to Illinois. That model Code is arguably beneficiary-centric. However, in their proposed revision, the Illinois drafters have swung the pendulum much too far against beneficiaries.
In my first article, I discussed the details of the relevant parts of the proposed law, and why they don’t work.
In my second article, I discussed the disastrous impact of the proposed statute on trusts meant to benefit aging seniors.
In other words, under this new statute, trusts are likely to injure the beneficiaries.
OVERVIEW: This series of articles addresses one aspect of the proposed changes out of the currently pending legislation for Illinois to adopt the model Uniform Trust Code (“UTC”).
Specifically, these articles focus on the proposed law’s deletion from the UTC of the idea that a beneficiary must benefit the trust. It is fundamental to trusts that a beneficiary is to benefit from the trust. And so, this proposed deletion is a radical departure from basic trust law.
My opinion is shaped by my 30 plus years of service as an independent individual professional trustee. During that time, I’ve advised and also served as trustee on many Special Needs Trusts.
Trained as and having practiced extensively as an attorney, I now help families in a wide variety of circumstances around their trusts, including helping them to fix broken trusts. Most of the Special Needs Trusts I’ve serviced came to me broken in one way or the other.
Trusts stop working for many reasons. Oftentimes they fall apart because their trustees are indifferent, and sometimes even hostile, to the beneficiaries.
Like other professional trustees, I actually stand to gain from this change in the law. That’s because the law makes it harder for beneficiaries to challenge their trustees, even when the trustees have done something harmful to the beneficiaries. Contrary to that financial incentive, I find the proposed change abhorrent because it works against the basic premise that trustees should work for the good of the family, not the good of the trustee.
In my first article, I detailed the relevant parts of the proposed law, and how it deviates from both the model law and, more importantly, from impartial and fair trust administration.
Key points from that first article include:
- The proposed law erases the rule that beneficiaries must benefit from their trusts, despite the fact that providing a benefit to the beneficiary is a basic premise of trusts. That’s why they call them “beneficiaries” – they’re supposed to benefit from the trust!
- The proposed law allows trustees to ignore beneficiaries with impunity. If beneficiaries don’t matter, they will be abused.
Click HERE to review that first article.
In my second article, I exposed the devastating impact of the proposed statute on aging seniors. Under the proposed law, surviving spouses are particularly vulnerable when they are the beneficiaries of their deceased spouse’s’ trusts.
Specifically, applying the new law that the beneficiary does not have to benefit from the trust, the trustee can deny, without consequence, the surviving spouse of:
- Care managers or caregivers of their own choice – and can even refuse to pay for any supplemental home health care altogether!
- Their preference to age in place, and not be transferred to a facility. Instead, the trustee can force these seniors to move out of their home.
- Copies of their own personal bills and payments. Under the new law, the trustee is under no obligation to supply any financial information to the surviving spouse, other than a once a year accounting.
And the list of outrages is longer! Click HERE to review that article.
In this article, I look at how the proposed deletions impact another class of family trust beneficiaries, namely special needs beneficiaries. In looking more closely at this groups of beneficiaries, the reader will hopefully also understand the potentially devastating impact of the proposed legislation generally.
The Proposed Law Allows Trustees to Lock Away Special Needs Beneficiaries.
High among the more vulnerable beneficiaries, special needs beneficiaries are particularly dependent upon the attention of their trustees.
Where the special needs beneficiaries enjoy government benefits, their trusts can be useful in filling in the gaps for a higher quality of life, including, paying for such items as:
- computer tablets, wireless access and cell phones,
- supplemental clothing and grooming,
- supplemental care managers, coaches and companionship, and
- financing outside activities and events.
Under the proposed law, the trustees have no obligation to attend to the individual needs, wants and concerns of their special needs beneficiaries. The trustees could decide to not provide any of the items on the above list, and there would be no mechanism to compel them to provide these important benefits to the special needs beneficiaries.
Instructive is the well-publicized case of Mark Holman. At a young age Mark lost his sole remaining relative, his mother, and inherited millions of dollars. Shut away in an institution, Mark didn’t talk or participate at any meaningful level with the world, and had no way to access his funds except through his trustee, who had served as the family’s lawyer.
Fortunately for Mark, a judge was supervising his trust and paying attention to his interests and what would benefit him.
At a court hearing, the trustee bragged to the judge that Mark’s financial assets were growing well. Then the judge changed the subject and asked the trustee whether he had visited Mark. Pressed on this line of questioning, the trustee eventually admitted that he had never met Mark, and so had no idea of how the trust’s growing millions could be used for Mark’s benefit.
In response, the judge ordered the trustee to visit Mark. As could be predicted, Mark benefited. The purchase of additional therapy for Mark followed. This therapy eventually resulted in Mark’s learning how to talk and a new level of quality of life!
In other words, when the trustee finally paid attention to his special needs beneficiary, the beneficiary’s life changed dramatically for the better. And paying attention starting with a simple visit.
Common sense confirms that heeding the interests of special needs beneficiaries typically starts with visits, ideally personal ones. In marked contrast, under the proposed law trustees are not obligated to visit, to communicate or to pay any attention at all to their special needs beneficiaries whatsoever!
Specifically, in not visiting with Mark and having no concept of what might benefit him, Mark’s trustee was complying with the minimum requirements set by the proposed law. It’s horrifying to think what Mark’s life would have been like if that’s where the law left him.
The minimum activity for special needs trustees should not be set so low. Instead, special needs trustees should be required to heed the interests of their beneficiaries.
For me, it’s not unreasonable to require the trustee to make personal visits to the beneficiaries — just as the judge ordered for Mark Holman. And, of course, to have the trustee give the highest consideration to the needs of their vulnerable beneficiaries. Illinois law should demand that minimum.
Wouldn’t you want the same for your beloved special needs family member?
This proposed law treats special needs trust beneficiaries worse than accused murderers. Even those criminals get their day in court. Leaving special needs beneficiaries without legal standing is something society doesn’t even impose on the worst criminal defendants.
Please join me in stopping this misguided proposal from becoming law in the state of Illinois. Contact your representative in Springfield and demand that this heinous provision be deleted from the law!