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2019 Fundamentals of Special Needs Trusts
Administration Webinar
Friday, April 26, 2019
Stetson University College of Law Gulfport, Florida
2019 Fundamentals of Special
Needs Trusts Webinar
© Copyright 2019 by Stetson University
College of Law. Copying of any portion of this manual is expressly prohibited
without the express permission of the College of Law.
To obtain additional copies, contact:
Office of Professional Education
1401 61st Street South Gulfport, FL 33707
(727) 562-7898 Fax (727) 345-1838
Email: [email protected] Visit our Web site: www.law.stetson.edu/conferences
The Fundamentals of Special Needs Trust
Administration Webinar
Friday, April 26, 2019
A half-day webinar that addresses challenging administrative issues faced by trustees,
attorneys, financial planners and others involved in Special Needs Trust Administration.
1:00-1:10pm EDT
Welcome and Announcements Professor Rebecca Morgan
1:10-2:10pm EDT
Medical Marijuana, Recreational Marijuana and the Trustee’s Decisions. Megan Brand
As Recreational and Medical Marijuana becomes legal in more states, we are faced with many decisions as
trust administrators. We’ll explore the federal and state differences, the impact on government and
employment benefits for the people we serve, why Marijuana may be requested by our beneficiaries, the
logistics of purchases and finally, our liability as trustee.
2:10-3:00pm EDT
Guardians & Trustees: Working Together is the Goal—But is it the Reality? Edwin M. Boyer
and Genesis Smith
Guardians and trustees both serve as fiduciaries and have duties to the beneficiary. Yet the decisions they
make, and the rules and procedures that govern their decisions, may differ. This session will review the duties
and obligations of the trustee and guardian, examine situations where conflicts may occur, and offer
suggestions on resolving those conflicts.
3:00-3:50pm EDT
Training the Trustee – What Your Agent Doesn’t Know CAN Hurt You. Jennifer L. VanderVeen
You’ve drafted a beautiful document and it’s been approved, signed and funded. You may think your job is
over. But whether it’s a corporate or individual trustee, a trust advisor or trust protector, what they don’t
know can come back to hurt you. Learn about your potential liability for a fiduciary’s lack of knowledge and
the tools and techniques you can use to educate and train trustees, trust advisors and trust protectors.
3:50- 4:40pm EDT
Decision-Making Practices—Why Intentional Decision-Making Matters Professor Roberta Flowers
Trustees make a lot of decisions in a day. Those decisions need to be thoughtful and intentional. Having a
process for making decisions that are intentional rather than off the cuff enable trustees to make better, and
defensible, decisions. This session will explain the importance of having a process and why intentional
decision-making matters.
4:40-5:00pm EDT Question and Answer Panel with Megan, Edwin, Genesis, Jennifer, and Roberta on the Topics of the Day
The webinar speakers will problem solve for the audience.
The Fundamentals of Special Needs Trust Administration
2019 Speakers
Megan Brand
Executive Director
Colorado Fund for People with Disabilities
Denver, Colorado
www.cfpdtrust.org
Megan graduated from the College of St. Benedict with a degree in Social Work and following
work experience with people with disabilities in Minnesota, began working with CFPD as a case
manager in 2003. After various roles at CFPD, she became the executive director in 2010. In
addition to leading the staff, Megan serves on the board for the National Planned Lifetime
Assistance Network, the Colorado Guardianship Association and is a frequent presenter in the
community on Special Needs Trusts.
Edwin Boyer, Board Certified Elder Law Attorney
Boyer & Boyer, P.A.
Sarasota, Florida
https://www.boyerboyer.com/
Edwin M. Boyer is a Florida Bar Board Certified Elder Law Attorney and a member of the law
firm of Boyer & Boyer, P.A. Mr. Boyer has practiced law in Sarasota, Florida, since 1978. He
received his Law degree from Stetson University College of Law in 1978, and he holds a
Bachelors, Masters and Educational Specialist Degree from the University of South Florida. Mr.
Boyer is past President of the National Academy of Elder Law Attorneys, a Fellow in the
Academy and a member of the Council of Advanced Practitioners of the Academy. He is also
past President of the Academy of Florida Elder Law Attorneys, the Florida Chapter of NAELA.
Mr. Boyer is past Chair of the Board of Governors of Senior Friendship Centers of Southwest
Florida Inc., Co-Chair of the Florida Department of Children and Families Adult Protection
Services Team for Manatee and Sarasota County, Florida, member of the Board of Directors of
the Florida Attorney Generals Seniors vs. Crime, Inc., member of the Board of Directors of
Legal Aid of Manasota Inc, and past member of the Board of Directors of the Alzheimer’s
Association of Southwest Florida. Mr. Boyer served as a member of the State of Florida Long
Term Care Ombudsman Council for 12 years. In 2008, Mr. Boyer was selected as a
Distinguished Fellow of the Canadian Center of Elder Law. He is also the recipient of the Florida
Bar President’s Pro-Bono Service Award for the 12th Judicial Circuit (1994), Stetson University
College of Law Wm. Reece Smith, Jr. Public Service award (2009-2010), Manatee County Bar
Association Community Service Award (2012), and NAELA President’s Recognition Award
(2013). Mr. Boyer practices in the area of Elder Law with an emphasis on guardianship, estate
planning and administration, advance directives, end of life issues, nursing home resident's
rights, and elder exploitation. He is a co-author of the book, Planning for the Elderly in Florida,
and he speaks nationally on Elder Law issues. He is an Adjunct Professor of Law at Stetson
University College of Law, and in 2012 and 2013 he was named the Borchard Foundation
Distinguished Professional Lecturer in Elder Law at Stetson University College of Law.
Roberta K. Flowers
Professor at Law
Stetson University College of Law
Gulfport, Florida
www.law.stetson.edu
Roberta Flowers is a professor of law at Stetson University College of Law. Within the Elder
Law LL.M. program, Professor Flowers teaches Ethics in an Elder Law Practice. She also
teaches Evidence, Criminal Procedure, and Professional Responsibility.
Professor Flowers has lectured worldwide on the topic of ethics. She won a Telly Award for
Excellence in Educational Films for having produced a series of educational videos on the ethical
issues faced by prosecuting attorneys. Along with Professor Rebecca Morgan, she created a
video series used to train and educate attorneys nationwide on the ethical dilemmas faced by
elder law attorneys. The Florida Supreme Court awarded Professor Morgan and Professor
Flowers the Florida Supreme Court Professionalism Award for their video productions.
Additionally, with Professor Morgan, Professor Flowers designed the nation's first "elder
friendly courtroom," which serves as model for courtrooms of the future.
Before arriving at Stetson, Professor Flowers worked as a prosecutor in both the state and federal
system. She began her career in 1984 as a deputy district attorney for the 18th Judicial District of
Colorado, where she served as a trial attorney in the criminal division. In 1989, she was
appointed assistant U.S. attorney for the Southern District of Florida, where she served in the
Appellate Division, the Major Crimes Unit and the Public Corruption Unit.
Genesis Smith, J.D.
Associate Trust Officer
Raymond James Trust
St. Petersburg, Florida
Genesis Smith joined Raymond James Trust, N.A. as an Associate Trust Officer in January of
2017. She is responsible for the administration of a broad range of trust accounts, wherein RJT
serves in a number of different capacities, including Agent, Custodian, and Co-Trustee.
However, her primary focus is on the administration of special needs trusts.
Genesis is a graduate of the University of South Florida (2011) with a Bachelor's degree in
international studies. In 2016, Genesis received her Juris Doctorate from Stetson University
College of Law in Gulfport, Florida.
Genesis resides in Temple Terrace with her husband, Greg, and their puppy, Gigi.
Jennifer L. VanderVeen, CELA
Partner, Tuesley Hall Konpa, LLP
South Bend, Indiana
https://www.thklaw.com/
Jennifer, a Certified Elder Law Attorney (CELA) by the National Elder Law Foundation and is
accredited by the Veteran’s Administration to practice before the VA. She is a member of the
Elder Law sections of both the Indiana and Michigan state bars and is a past chairperson of the
Indiana Elder Law section and current member of the Board of Directors of National Academy
of Elder Law Attorneys (NAELA). In 2016, Jennifer was elected to NAELA’s Council of
Advanced Practitioners (CAP). A member of CAP is an attorney who has been nominated and
selected by her peers – experienced Elder and Special Needs Law attorneys – to be part of the
Council as a result of their commitment and contribution to their clients and the ethical, high-
quality practice of Elder and Special Needs Law.
2019 Fundamentals of Special Needs Trusts Administration
Webinar Friday, April 26, 2019 1:10 P.M. – 2:10 P.M.
Presenter: Megan Brand
• Materials • PowerPoint
Medical Marijuana, Recreational Marijuana and the Trustee’s Decisions
1
Medical Marijuana, Recreational Marijuana and the Trustee’s Decisions.
Megan Brand, Executive Director Colorado Fund for People with Disabilities (CFPD)
2
I. Introduction
Marijuana is a distribution that trustees only recently had to consider as a request for the
beneficiaries of pooled or supplemental needs trusts. The number of states allowing marijuana
for recreational and medicinal use continues to grow every year while the benefits of cannabis
continue to be researched and discovered. There are many factors the trustee must take into
consideration when considering a request including: what is being requested, how it is being
used, how it will be purchased and other consequences such as employment, residential setting
and government benefits.
II. What is Marijuana?
It is important for the trustee to understand Marijuana in all of its forms to make a well-informed
decision when a trust beneficiary requests it as a distribution from their trust. Not all Marijuana
is created equal. According to the United States Food and Drug Administration’s (FDA)
website1, Cannabis is a plant that contains over eighty compounds. Of these compounds, delta-
9-tetrahydrocannabinol (THC) and cannabidiol (CBD) are the most common and well-known.
Since 1970, marijuana (listed as “marihuana”) has been considered a Schedule 1 drug under the
Controlled Substances Act (CSA) due to its potential for abuse and the psychoactive effects of
the THC.
a. THC containing products
THC can be found in several different products2. The most common form is “weed” or “pot.”
The leaves and buds of the plant are dried and then smoked. Hashish or hash is another form in
which the resin from the cannabis plant is dried into blocks that create an oily, solid substance. It
is often smoked in a pipe or bong and is often mixed with tobacco. Hashish oil is the strongest
form of the drug and it is typically smoked in a pipe or even painted onto a cigarette. Marijuana
can also be taken orally, made into creams and can be added to foods or even cooked into foods
such as brownies, cookies, candy or drinks. A news report in Colorado3 recently reported that
cannabis users often over-consume edible products because it is difficult for them to titrate their
1 https://www.fda.gov/NewsEvents/PublicHealthFocus/ucm421168.htm#whatare 2 https://www.verywellmind.com/types-of-marijuana-22323 3 https://www.9news.com/article/news/health/edibles-lead-to-inordinately-high-number-of-emergency-visits-study-finds/73-f978b9e8-fa11-459f-825c-5408fb36de22
3
desired effect. This has led to a threefold increase in emergency visits in Colorado since
legalization of marijuana.
b. CBD containing products
CBD can also be found in many different products and taken into the body in many different
formats4. It can be smoked or vaped, or ingested. CBD is also becoming very popular in
veterinary medicine. These products are typically marketed and sold specifically for animals.
CBD does not induce a high or have the same psychoactive effects of THC containing products.
CBD sold in dispensaries has more than 0.3 percent THC. (See more below in re: Hemp-derived
CBD).
c. THC and CBD containing products
Products available at dispensaries can contain either THC or CBD or a combination of the two.
There are certain conditions that benefit from products that contain a combination (especially a
1:1 ratio) of both THC and CBD5. This is referred to as the “entourage effect” and the concept is
that the two chemicals combined are greater than their individual parts.
d. Hemp-derived CBD
The Agriculture Improvement Act of 2018 (the 2018 Farm Bill) changed the production and
marketing of hemp. It defines hemp as “the plant Cannabis sativa L. and any part of that plant,
including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and
salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of
not more than 0.3 percent THC on a dry weight basis”.6
In December, 2018, the FDA found that products containing hulled hemp seed, hemp seed
protein powder and hemp seed oil are safe and can be marketed as such for human consumption.
These products can be sold anywhere.
e. FDA Approved Cannabis products
4 https://en.wikipedia.org/wiki/Cannabidiol 5 https://www.consumerreports.org/cbd/how-to-shop-for-cbd/ 6 https://www.fda.gov/NewsEvents/PublicHealthFocus/ucm421168.htm#whatare
4
The Food and Drug Administration has approved Epidiolex for the treatment of Lennox-Gastaut
syndrome or Dravet Syndrome in patients age 2 and older. Epidiolex contains a purified form of
CBD. The FDA has also approved Marinol and Syndros for the treatment of anorexia associated
with weight loss in those patients with AIDS. These drugs contain dronabinol which is a
synthetic THC.7
f. What the consumer needs to know
At the end of the day, it is often difficult for the consumer to know what they are buying and the
content of each product. The consumer should ask for a Certificate of Analysis, or COA. Every
state and their requirements are different, but the COA is a good starting point to understand the
amount of THC in each product, any contaminants in the product and its performance.8
III. What we know about the Benefits of Marijuana
In a 2017 National Academy of Medicine panel, three primary benefits of cannabis stood out.
They are 1.) a reduction in nausea and vomiting as a result of chemotherapy, 2.) a modest
reduction in chronic pain, and 3.) a reduction in involuntary muscle contractions in people with
Multiple Sclerosis.9 As reported earlier, the FDA has also approved cannabis in limited
circumstances to treat rare forms of epilepsy.
There are literally hundreds of other claims of the benefits of cannabis products. The American
Cannabis Nurses Association recently released an article that cited benefits to many diagnoses,
including anxiety, post traumatic stress, neurodegenerative disorders, depression, blood pressure,
inflammation, Parkinson’s disease, Huntington’s disease, schizophrenia, eating disorders, bipolar
disorder, etc.10 Further, the Boulder, CO based Real-Time Diagnostics Ventures just announced
a study related to the role of hemp derived CBD products in those recovering from brain injury.11
Finally, the Colorado Legislature adopted a bill this April to add autism spectrum disorders in
children to the list of disabling conditions that authorize a person to use medical marijuana12.
7 https://www.fda.gov/NewsEvents/PublicHealthFocus/ucm421168.htm#whatare 8 https://www.consumerreports.org/cbd/how-to-shop-for-cbd/ 9 https://www.wbur.org/commonhealth/2019/03/01/what-we-know-cannabis-evidence-science 10 https://cannabisnurses.org/Press-Releases/6999998 11 http://www.dailycamera.com/top-business/ci_32493862/boulder-company-conducting-study-effects-cbd-brain-injury 12 https://leg.colorado.gov/bills/hb19-1028
5
That said, we still do not have enough long-term information about the benefits and risks of
cannabis products. Part of the reason for this is that many more clinical trials and studies need to
be conducted to show the effectiveness13. The FDA welcomes the opportunity to talk with states
who are supporting or considering support of medical research. So long as cannabis is
considered a Schedule 1 drug, the funding and support of large studies with significant
recognition to show the effectiveness of cannabis will be limited - a bit of a Catch 22.
IV. Marijuana According to Federal and State Law
a. Federal
As stated in Section II of this paper, marijuana is considered a Schedule 1 drug which makes it
illegal on a federal basis. There is ongoing conflict between federal and state laws on marijuana.
On August 27, 2013, United States Deputy Attorney General James Cole issued a memorandum
that announced that the Department of Justice would not be making any moves in Colorado or
Washington to prevent the implementation of the laws there to legalize recreational marijuana
(Sam Kamin, Cooperative Federalism and State Marijuana Regulation, 85 U. Colo. L. Rev.
1105 (2014)).
Then on January 4, 2018, a new memo on Marijuana Enforcement was released by the Attorney
General Jeff Sessions. In that memo, the Attorney General states as follows: “Therefore,
today’s memo on federal marijuana enforcement simply directs all U.S. Attorneys to use
previously established prosecutorial principles that provide them all the necessary tools to disrupt
criminal organizations, tackle the growing drug crisis, and thwart crime across our country.”14
b. Across the States
And yet, states continue to legalize cannabis in their states in various forms. The map of the
United States15 re: Cannabis by state was updated March, 2019 and provides useful information
by the National Conference of State Legislatures. There are now ten states-California, Alaska, Colorado,
Washington, Oregon, Nevada, Michigan, Vermont, Maine, Massachusetts-and the District of Columbia
13 https://www.fda.gov/NewsEvents/PublicHealthFocus/ucm421168.htm#whatare 14 https://www.justice.gov/opa/pr/justice-department-issues-memo-marijuana-enforcement 15 http://www.ncsl.org/research/health/state-medical-marijuana-laws.aspx
6
where cannabis is legal recreationally and medically. There are thirty-six states in which cannabis is legal
medically or on a limited (low THC) basis. Finally, there are four states in which cannabis is strictly
illegal-including Idaho, South Dakota, Nebraska and Kansas. Each “low THC” state defines this
differently and so the rules of each state must be analyzed carefully. In addition to the map, the National
Conference of State Legislatures also has a comprehensive table with each state, its laws and where the
laws can be found.
V. What the Trustee must consider
There are so many factors a trustee must consider when determining if cannabis is an appropriate
distribution from a trust. First, it is important to remember again that not all cannabis is created
equally. There is much less risk, for instance, in making a distribution for hemp-derived CBD
oil. This is especially true with the new Agriculture Improvement Act of 2018 and the FDA’s
accepting position on hemp-derived CBD oil. The following discussion is primarily focused on
the cannabis products that have THC higher than 0.3 percent.
a. Housing
Public Housing Authorities (the program traditionally known as Section 8) follow the federal
regulations and do not allow marijuana use by their recipients regardless of the rules in the
7
individual states. Similarly, long-term care facilities such as group homes, assisted living
facilities and nursing facilities will likely have individual policies regarding marijuana use-even
in states where it is legal. The prohibition policies in many ALF and SNFs is due to the fact that
they accept Medicare and Medicaid funding. Finally, extended stay hotels, homeless shelters
and other congregate settings will often have rules prohibiting marijuana use. The trustee will
need to evaluate these potential consequences for a distribution for a beneficiary residing in one
of these settings.
b. Employment
University of Denver Sturm College of Law’s Sam Kamin co-authored a review of the
complications between state and federal law which is a priceless resource for fiduciaries
(Cooperative Federalism and State Marijuana Regulation, 85 U. Colo. L. Rev. 1105 (2014)). In
2015, Colorado’s Supreme Court has ruled that Brandon Coats, a gentleman with quadriplegia
who was fired by Dish Network after testing positive for marijuana use, has no recourse for
losing his job. While Dish Network agreed that Mr. Coats wasn’t “high” on the job, they
stressed that they have a federally accepted zero-tolerance drug policy. (Coats v. Dish Network,
LLC, 2015 CO 44, (June 15, 2015)). This is a great reminder to the trustee that even though
marijuana is legal in their state, the marijuana use could be putting their beneficiary in jeopardy
of losing their job if they are employed by a federal employer or even by a company or
organization which has a policy prohibiting marijuana use.
c. VA and SSA Benefits
The Department of Veterans Affairs is another federal entity which has recognized the need for
additional research to support the efficacy of cannabis for certain conditions.16 In fact, a bill was
introduced in 2018 and then another in 2019 (Senate Bill 179 VA Medicinal Cannabis Research
Act of 2019)17 to support the Department of Veteran’s Affairs in carrying out clinical trials and
other research. To date, this bill has not passed. While the VA does not condone the use of
cannabis, the VA Official site does state that those Veterans using cannabis are not in danger of
losing their military benefits, and use does not affect their eligibility for VA care and services.
16 https://militarybenefits.info/va-medical-marijuana/ 17 https://www.govtrack.us/congress/bills/116/s179
8
In fact, the site goes on to state that it encourages Veterans to discuss their marijuana use with
their medical providers.
Similarly, the Social Security Administration does not explicitly state that SSA beneficiaries will
be ineligible for SSA benefits due to marijuana use. In fact, according to POMS GN
02613.90018, Title II and Title XVI benefits would only be denied or suspended based on drug-
related abuse crimes that resulted in a felony conviction. The author opines here that an SSA
beneficiary would have to have a felony related to the sale, smuggling, possession or production
of marijuana and this would be unlikely in a state in which marijuana has laws allowing it.
d. Medical Card Holders cannot be Gun Owners
The classification of marijuana as a schedule 1 drug has created another problem when it comes
to individuals who would like to own or use a firearm. The Bureau of Alcohol, Tobacco,
Firearms and Explosives defines anyone with a Medical Marijuana prescription as an admitted
drug user and they are therefore prohibited by owning, possessing or using a firearm.19 If a
trustee required the Medical Marijuana card in order to use the trust for a marijuana purchase,
this may present as a difficult decision for a beneficiary who would like to own a gun now or in
the future.
e. Medical professionals who prescribe/recommend
The best way for a trustee to limit their liability in agreeing to purchase marijuana is to suggest
that the beneficiary get the recommendation from their medical doctor. However, it is important
to note here that many medical professionals are not well-versed in marijuana or comfortable
about making recommendations or prescriptions for its use. At the same time, doctors who are
able to prescribe marijuana are not typically treating the other conditions of the individual and
are not aware of all of the potential drug interactions. One of the biggest concerns is that
marijuana can interfere with other medications because all medications including marijuana are
metabolized differently. 20
f. Even if you have not purchased, you may be dealing with these issues
18 https://secure.ssa.gov/apps10/poms.nsf/lnx/0202613900 19 https://www.washingtontimes.com/news/2018/feb/7/marijuana-laws-and-gun-ownership/ 20 https://www.wbur.org/commonhealth/2019/03/01/what-we-know-cannabis-evidence-science
9
The reality is that every trustee has beneficiaries who are using marijuana-even if it is not legal
in their state. At the same time, a trustee may need to become involved to solve problems that
were created by or are related to marijuana use even if the trust did not make the distribution for
the marijuana. In either scenario, it is important for the trustee to be well educated about
marijuana.
g. When Marijuana, or any drug, becomes a problem
Unfortunately, marijuana can become problematic for some of the people the trustee serves.
Beneficiaries who use marijuana may use other drugs, they may become addicted, they may
surround themselves with drug users who bring on other difficulties, the drug use may lead to
impulse control or other behavioral issues, they may get evicted. In one horror story encountered
by the author, the trust beneficiary began as a marijuana user. He began making requests for the
equipment to grow marijuana. Over time, and initially unbeknownst to the trustee, the trust
beneficiary had rewired and replumbed his home, was producing meth, was housing seven
previously homeless individuals and was a known entity to the Drug Enforcement Agency.
While his marijuana use did not necessarily lead to these issues, we as trustees had to pay
attention to increased energy bills, missed appointments and other odd requests in order to
uncover the problems. A trustee is never successful when asleep at the wheel and even after
approving marijuana as a distribution must continue to always monitor the beneficiary and other
requests.
VI. Paying for Marijuana
After all of the consideration, you’ve finally decided to pay for the marijuana. So….how do you
actually do it?
a. Ordering online—Hemp derived CBD
Hemp-derived CBD is legal to purchase and use in all 50 states. The author interviewed
Kathrine Golden, the Executive Director of Leaf 411, for information related to cannabis. Leaf
411 is non-profit providing a public good for Colorado. Their vision is to make affordable
cannabis information from trained medical professionals readily available to everyone. Leaf 411
believes that knowledge is power, especially when it comes to legal cannabis use.21 Ms. Golden
21 www.leaf411.org
10
highly recommends Functional Remedies22 for hemp-derived CBD products. She also
recommends Color Up Therapeutics.23 The consumer reports article24 is also very helpful in
where to buy and what to look for. This article reports that most hemp is grown in Colorado and
Oregon, and Colorado is considered to have the most robust hemp programs in which spot-tests
of hemp plants are performed to identify illegal pesticides and measure THC levels. With the
recent passage of the Agriculture Improvement Act of 2018, more and more states will begin to
grow hemp and we will likely see a great expansion of products.
b. Purchases at Dispensaries
One of the main problems encountered by trustees is the ability to pay for marijuana from
dispensaries. Most dispensaries do not accept credit or debit cards due to marijuana sales being
illegal federally. A trustee still has a few options when it comes to the purchase of marijuana in
a dispensary. They could approve the purchase and reimburse a friend or family member for the
expenditure. It is important to collect a clean copy of the receipt with an acknowledgement from
the beneficiary that they received the products. A trustee could also give a Limited Durable
Power of Attorney (DPOA) to an Agent with funds to make the purchase. This Limited DPOA
would need to require receipts and also should specifically name the individual as an Agent of
the trust so as not to be construed as cash/income to the individual or beneficiary.
True Link25cards may be another option for purchases. Per representatives at True Link, the
transaction for a marijuana purchase would be run as a “cashless ATM purchase.” While the
beneficiary never receives the cash (it literally means moving cash from one drawer to the other
within the register), it will show up as “cash” on the transaction and would likely create a
problem for a beneficiary, especially those on SSI. If a trustee desires to BLOCK dispensary
purchases, they have done so by blocking CASH on the True Link card. If a trustee desires to
ALLOW the True Link card to be used for a beneficiary who is NOT on SSI, then True Link has
had administrators who 1) temporarily allow cash just while the purchase is being made and then
2) require receipts for the purchase.
22 https://functionalremedies.com 23 https://coloruptherapeutics.com/ 24 https://www.consumerreports.org/cbd/how-to-shop-for-cbd/ 25 https://www.truelinkfinancial.com/
11
VII. If you decide no, what do you do next?
There are always alternatives to saying “no” outright when it comes to beneficiary requests.
Prior to the final decision, a trustee should conduct a values check. Fiduciaries are human; prone
to biases and prejudices tempered by their own life experience. As such, every fiduciary must to
be aware of their own bias in making a decision, especially when it comes to controversial
issues. For example, a fiduciary may come from a background or belief that any sexual activity
outside of marriage is immoral. The fiduciary can also easily slip into a paternalistic position of
approving or denying a request simply on what they think is best. However, the fiduciary has a
duty of impartiality not only between beneficiaries (such as in a family trust with multiple
beneficiaries), but also to separate their own personal partiality from the decision making
process. One option is to have at least two parties involved with every beneficiary request. A
case manager or family member may make the request and advocate the desires of the
beneficiary. The independent fiduciary can then make the decision based on the information
presented and the other components of the framework for decision making. Finally, an opinion
of outside counsel is always available when a fiduciary is perplexed or the beneficiary has
appealed a denial by the fiduciary and asks that it be reconsidered.
A fiduciary may consider the following options:
a. Approve a separate expenditure to free up additional personal income for the
beneficiary.
b. ALWAYS document your decision (as well as the due diligence performed) in
writing.
c. Give a thorough explanation for the ‘why’ of the denial. Cite the law or trust
document if applicable.
d. Educate the beneficiary about your appeal process.
Lastly, particular care and consideration must be taken by fiduciaries who are federally regulated
(banks/trust companies with national, federally granted trust powers). While their beneficiary
may live in a state wherein marijuana use is legal, these fiduciaries are governed by federal law.
VIII. Summary
12
Trustees face a somewhat daunting task when considering expenditures for marijuana. We must
balance the needs of the beneficiary with state and federal law as well as the liability and legal
consequences for both the beneficiary and the fiduciary themselves. The equilibrium of these
differing interests and risks can create a challenge that must be approached with creativity,
understanding, discretion and thorough due diligence. In the end, our beneficiaries may have the
right to access marijuana; but as fiduciaries, we must proceed with proper vigilance and care
when considering such distributions.
Megan Brand, Executive DirectorColorado Fund for People with Disabilities (CFPD)
Medical Marijuana, Recreational Marijuana and The Trustee’s Decisions
Our ServicesSupplemental Needs Trusts(Pooled and Individual)A way to set aside some extra money and still qualify for Social Security and Medicaid benefits
ConservatorshipsCourt-ordered money management with compassion
Case Management ServicesExpert guidance on an as-needed basis
Representative PayeeBills paid accurately and on time
Mission SupportsConnection to services for Denver residents with I/DD who are homeless
What is Marijuana?THC
• Cannabis is a plant that contains over eighty compounds; delta-9-tetrahydrocannabinol (THC) and cannabidiol (CBD) are the most common and well-known.
• Federally, marijuana has been a Schedule 1 drug since 1970
• Many products contain THC
Weed, Pot most common – consumed by smoking or vaping;
“edibles” – can be difficult to establish correct dosing for eaten products; increase in emergency room visits
Hashish, hash, wax– highly concentrated, smoked or added to foods as oil
What is Marijuana?CBD
• Cannabidiol (CBD) is in many types of products
Smoked, vaped, ingested, used in oils, tinctures, creams
• CBD does not induce a high or have the same psychoactive effects of THC containing products
• Can be sold in dispensaries, where it typically has more than .3% THC content
• CBD products outside dispensaries contain below .3% THC, if any; hemp-derived
• Certain conditions benefit from a combination of CBD and THC to produce the “entourage effect,” typically in a 1:1 ratio
• CBD is increasingly being used in veterinary medicine
Hemp-derived CBD
• The Agriculture Improvement Act of 2018 (the 2018 Farm Bill) changed the production and marketing of hemp
• In December, 2018, the FDA found that products containing hulled hemp seed, hemp seed protein powder and hemp seed oil are safe and can be marketed as such for human consumption.
• These products can be sold anywhere.
FDA-Approved Cannabis Products
• Epidiolex: Approved for the treatment of Lennox-Gastaut syndrome or Dravet Syndrome in patients age 2 and older
• Marinol and Syndros for the treatment of anorexia associated with weight loss in those patients with AIDS. These drugs contain dronabinol which is a synthetic THC.
• The FDA has an excellent Q and A document on their website answering many common questions about THC, CBD and hemp-derived CBD https://www.fda.gov/NewsEvents/PublicHealthFocus/ucm421168.htm
What the Consumer Needs to Know
• Often difficult for consumer to really know content of each product
• Important to ask for a Certificate of Analysis (COA) to be sure; may be indicated on the product label, should indicate: amount of THC, contaminants, expected performance
COAs are not always readily available. Ask at dispensary or call manufacturer.
• Each state has different requirements
What We Know About the Benefits
• 2017 National Academy of Medicine panel determined:
reduction in nausea and vomiting as a result of chemotherapy
modest reduction in chronic pain
reduction in involuntary muscle contractions in people with Multiple Sclerosis.
• FDA has also approved cannabis in limited circumstances to treat rare forms of epilepsy
• There are literally hundreds of other claims of the benefits of cannabis products
What We Know About the Benefits• The American Cannabis Nurses Association recently cited benefits for many
diagnoses:
Anxiety, post traumatic stress, neurodegenerative disorders, depression, blood pressure, inflammation, Parkinson’s disease, Huntington’s disease, schizophrenia, eating disorders, bipolar disorder, etc.
• Real-Time Diagnostics Ventures just announced a study related to the role of hemp derived CBD products in those recovering from brain injury
• The Colorado Legislature adopted a bill this April to add autism spectrum disorders in children to the list of disabling conditions that authorize a person to use medical marijuana
What We Know About the Benefits• We still do not have enough long-term information about the benefits and
risks of cannabis products
• Many more clinical trials and studies need to be conducted to show the effectiveness
• So long as cannabis is considered a Schedule 1 drug, the funding and support of large studies with significant recognition to show the effectiveness of cannabis will be limited
Marijuana Under Federal Law
• Illegal on a federal basis – remains a Schedule 1 drug
• Ongoing conflict between federal and state law
• Enforcement varies depending on stance of Attorney General: Cole vs. Sessions
Marijuana Under State Law
http://www.ncsl.org/research/health/state-medical-marijuana-laws.aspx
Marijuana Under State Law
• There are now ten states - California, Alaska, Colorado, Washington, Oregon, Nevada, Michigan, Vermont, Maine, Massachusetts, and the District of Columbia where cannabis is legal recreationally and medically.
• There are 36 states in which cannabis is legal medically or on a limited (low THC) basis.
• There are four states in which cannabis is strictly illegal-including Idaho, South Dakota, Nebraska and Kansas.
• National Conference of State Legislatures also has a comprehensive table with each state, its laws and where the laws can be found. http://www.ncsl.org/research/health/state-medical-marijuana-laws.aspx
What the Trustee Must ConsiderRisks to Health, Housing
• Assess risk:
THC vs. CBD, hemp-derived products
Risk to other benefits
• Public Housing Authorities/Section 8 – no use allowed
• Long-term care facilities such as group homes, assisted living facilities and nursing facilities will likely have their own policies and often prohibit if receiving Medicare/Medicaid funding.
• Extended stay hotels, homeless shelters and other congregate settings will often have rules prohibiting marijuana use.
What the Trustee Must ConsiderRisks to Employment
• Employment Concerns: One case went to Colorado Supreme Court
• Brandon Coats, a gentleman with quadriplegia, was fired by Dish Network after testing positive for marijuana use
• Mr. Coats wasn’t “high” on the job; employer has a federally-accepted zero-tolerance drug policy
• Consider how your distribution for marijuana products might impact a beneficiary’s job if with federal employer, or an employer with their own policies
What the Trustee Must ConsiderPolicies for Veterans
• VA has recognized need for additional research - Senate Bill 179 VA Medicinal Cannabis Research Act of 2019 (referred to committee)
• VA’s Position:
Will not condone use of marijuana
Will not put vets in danger of losing VA benefits
Does not affect eligibility for VA Health Care or benefits
Encourages discussion with medical providers
What the Trustee Must ConsiderPolicies for SSA Income Recipients, Gun Owners
• SSA does not explicitly state marijuana users will be ineligible
• POMS say Title II and Title XVI benefits would only be denied or suspended based on drug-related abuse crimes that resulted in a felony conviction (POMS GN 02613.900)
• One Trustee’s Opinion: An SSA beneficiary would have to have a felony related to the sale, smuggling, possession or production of marijuana and this would be unlikely in a state in which marijuana has laws allowing it
• Medical card holders cannot be gun owners; trust policies that require a medical card may make this a difficult choice for beneficiaries
What the Trustee Must ConsiderThe Role of Medical Professionals
• Trustee should always recommend consulting with a qualified doctor
• Many medical professionals are not well-versed in marijuana or comfortable about making recommendations or prescriptions for its use
• Doctors who are able to prescribe marijuana are not typically treating the other conditions of the individual and are not aware of all of the potential drug interactions
• Marijuana can interfere with other medications because all medications, including marijuana, are metabolized differently; professional advice can help avoid contraindications
• Look for Medical resources in your state, such as Leaf 411
You’ll be dealing with this in any case.
• Trustee must assume they have beneficiaries using marijuana, whether legal or not
• Trustee may need to become involved in marijuana-related behavior, even if trust did not pay
• Get educated before situations arise
When It Becomes a Problem• Marijuana use can become problematic for some; users may use other
legal/illegal drugs, become addicted, hang out with other users
• Could lead to impulse control or other behavioral issues
• True Story:
Regular user requested funds to purchase plants, growing equipment Rewired and re-plumbed the home to expand grow operation, add
methamphetamine production Housed seven homeless individuals Known to the DEA Signs for the Trustee included increased energy bills, missed
appointments, other odd behavior
• Trustee must continue to always monitor the beneficiary and their other requests.
Paying for MarijuanaBEFORE you pay…
• Develop or review your policy re: Marijuana
• Consider only paying for Medicinal marijuana or hemp-derived CBD
• Do not allow staff to purchase the marijuana in person on behalf of the beneficiary.
• Address accessories to marijuana
• Keep a close eye on the updates to the law in your state and federally.
• Create an Acknowledgement signed by the beneficiary to address the following: employment status, housing and/or housing benefits, sole benefit, risks and interactions and hold harmless for trustee, report of any changes in status
Paying for MarijuanaHow do you actually do it?
• Ordering online — Hemp-derived CBD; legal for purchase in all 50 states
• Most dispensaries do not accept credit or debit cards
• Approve the purchase, enlist family/friend to make reimbursable purchase, get receipts AND acknowledgement beneficiary received the products
• Consider using Limited Durable POA, naming person Agent of the Trust
• True Link Debit Cards – “cashless” ATMs; may result in some cash for customer; could also show up as “cash” transaction, causing problems for beneficiaries, especially those on SSI
• True Link settings may help give temporary access
When Purchases Are Not Approved
• Consider our “No, but…” approach
• Do a quick values check – yours or the beneficiary’s?
• Remember duty of impartiality; ensure equity among beneficiaries, separate your own values from the decision-making process
• Helps to have two parties involved with every beneficiary request; split client advocacy and fiduciary decision-making
• Get outside counsel if unsure, or getting push back from beneficiary for reconsideration
Suggested Process for Making Decisions
• Approve a separate expenditure to free up additional personal income for the beneficiary.
• ALWAYS document your decision (as well as the due diligence performed) in writing.
• Give a thorough explanation for the ‘why’ of the denial. Cite the law or trust document if applicable.
• Educate the beneficiary about your appeal process.
• Banks/trust companies with national, federally-granted trust powers need to follow federal rules, even in states where marijuana is legal
Honor Beneficiary Rights, Proceed with Caution
• Balance the needs of the beneficiary with state and federal law as well as the liability and legal consequences for both the beneficiary and the fiduciary themselves
• Approach the decision with creativity, understanding, discretion and thorough due diligence
• Share best practices as they emerge
2019 Fundamentals of Special Needs Trusts Administration
Webinar Friday, April 26, 2019 2:10 P.M. – 3:00 P.M.
Presenters: Edwin M. Boyer & Genesis Smith
• Materials • PowerPoint
Guardians & Trustees: Working Together is the Goal – But is it
the Reality?
The Fundamentals ofSpecial Needs Trust
AdministrationApril 26, 2019
Genesis M. Smith, Esq.Associate Trust Officer
Raymond James Trust, N.A.St. Petersburg, FL
Edwin M. Boyer, Esq.Boyer & Boyer, P.A.
Sarasota, FL
Guardians & TrusteesWorking Together
Robert’s Settlement
• Guardianship, Personal Injury Claims, and Special Needs Trusts - Making all the Parts Fit
• Protecting Trustees while working In the Guardianship System
Basic Concepts of Guardianship Law
• Guardianship is a Court proceeding like civil litigation – butdifferent.
• It has a beginning (getting into the system with petitions andorders)
• It is ongoing (working in the system with petitions and orders)• It has an ending (getting out of the system with petitions and
orders)• There are certain things guardians can do without court approval
(pay taxes, pay living expenses, invest assets).• However, many important things require court order (approving
settlements, creating Trusts, making repairs to property, enteringinto leases, abandoning property, prosecuting claims, buying orselling property).
Basic Concepts of Guardianship Law• Guardianship is a last resort• The policy of the law - Fla. Stat. §744.1012(2):
• Look to least restrictive alternatives to guardianship• Make available the least restrictive form of guardianship.
• What takes the place of guardianship? • Trusts• Representative payee• Power of attorney• Advance Health Care Directives
• A Ward has the right to participate as fully as possible in all decisions. Fla. Stat. §744.1012(3).
Basic Concepts in Guardianship Law
• Limited guardianship• Restoration of rights.• Rights that cannot be removed – rights that can be
removed but not delegated – rights that can beremoved and delegated to a guardian.
• Due process rights• Right to a competent guardian
Basic Concepts of the Role of the Guardian
• Guardian is a fiduciary appointed by the court and may exercise only those rights removed.
• Guardian must act in the wards best interest• Attorney for the guardian also owes a duty to the
ward• Guardian is under courts constant supervision
Duties of a GuardianDuty to act in good faith Fla. Stat. § 744.361(3)Duty to not act contrary to wards best interests Fla. Stat. § 744.361(4)Duty to use special skills Fla. Stat. § 744.361(5)Duty of prudent investment per Ch. 518 Fla. Stat. Fla. Stat. § 744.361(10)(a)Duty to deal with wards property as a prudent person Fla. Stat. § 744.361(11)Duty to inform and account Fla. Stat. § 744.361(6)(7)Duty of Professional Guardians to comply with OPG Rules (140) Rule 58-2.009M
Basic Concepts of the Role of Trustee
• Trustee is a fiduciary appointed by the grantor of the document to hold legal title to the assets and utilize them in the best interest of the beneficiary.
• Owes various fiduciary duties to the beneficiary.
• Trusts are not automatically subject to court supervision.
Duties of a TrusteeDuty to administer the trust UNIF. TRUST CODE § 801, Fla. Stat. § 736.0801Duty of loyalty UNIF. TRUST CODE § 802, Fla. Stat. § 736.0802Duty of impartiality UNIF. TRUST CODE § 803, Fla. Stat. § 736.0803Duty of prudent administration UNIF. TRUST CODE § 804, Fla. Stat. § 736.0804Duty to incur only reasonable expenses UNIF. TRUST CODE § 805, Fla. Stat. § 736.0805Duty to use the trustee’s skills UNIF. TRUST CODE § 810, Fla. Stat. § 736.0810Duty to inform and account UNIF. TRUST CODE § 813, Fla. Stat. §§ 736.0813-
736.08135
Special Needs Trusts
• May 1993, Congress passed the Omnibus Reconciliation Act (OBRA) and carved out the Special Needs Trust exception. 42 U.S.C. 1396p(d)(4)(a).
• December of 2014, the Achieving a Better Life Experience (ABLE) Act was passed. 26 U.S.C. 529A.
• December of 2016, the Special Needs Trust Fairness Act was signed into law. Pub. L. 114-255 §5007.
Considerations for the Special Needs Trustee
• Identify the type of SNT and the requirements for proper administration.
• Understand the beneficiary’s disability, how it affects his or her capacity, and what level of medical intervention is required.
• Assess public benefits eligibility and stay current on relevant laws.
• Engage third party service providers where needed.• Create a long-term plan for care management and investment
that addresses needs while maximizing assets.• Educate the beneficiary (and family) on proper administration.
Robert’s SettlementIssue 1
Guardianship, Personal Injury Claims and Special Needs Trusts - Making all the Parts Fit
2.
Roberts Settlement
• Robert is 52 years old and single. As an employee of a local roofing company, he fell from a bucket loader and suffered traumatic brain and spinal cord injuries. Following hospitalization and rehabilitation he moved in with his sister Louise and her husband Ted who provide 24 hour supervision and care. Ted and Louise retained attorney Erika and filed a petition to have Robert declared to be incapacitated and have a guardian appointed for him because he could no longer make personal or financial decisions.
Roberts Settlement
• There is a potential Workers Compensation claim. Because of legal and financial issues Louise is not qualified to serve as either guardian of the person or property and Ted can only serve as guardian of the Person. Robert’s cousin Tim, a banker, was appointed guardian of the property for Robert at Erika’s recommendation. Without telling Erika, Tim retained counsel to pursue the workers compensation claim. Without telling Erika, Tim participated in mediation of the claim and signed a settlement agreement.
Retaining Counsel and Pursuing the ClaimTim had taken the required course on guardianship and also received thehandout from Erika explaining duties and responsibilities as Guardian. Timnever asked Erika if he needed court approval - Is it too late?
• Fla. Stat. §744.441(11) Powers of Guardian Upon Court Approval – Afterobtaining approval of the court pursuant to a petition for authorization toact, the guardian….may: §744.411(11) – Prosecute or defend claims orproceedings in any jurisdiction for the protection of the estate and of theGuardian in the performance of his or her duties.
• Doesn’t “after obtaining approval” mean that you have to act first?• Rule 5.630 Fla. Prob. R. – (a) When authorization or confirmation of any
act of the guardian is required, application shall be made by verifiedpetition.
Retaining Counsel and Pursuing the Claim• Fla. Stat. §744.441 - After obtaining approval of the court pursuant to a
petition for authority to act….a guardian may (11) prosecute or defend claims or proceedings in any jurisdiction for the protection of the estate and of the guardian in performance of his or her duties.
• Rule 5.630 Fla. Prob. R. – Notice to the ward, to the next of kin, if any, and to those persons who have filed requests for notices and copies of pleadings.
• Fla. Stat. §744.102(14) - Next of Kin – those persons who would be heirs at law of the ward or alleged incapacitated person if the person were deceased and includes the lineal descendants of the ward or AIP.
• Fla. Stat. §744.444 – Guardians can retain counsel to assist them without court approval – Do it anyway.
• Petition to confirm actions of the guardian to pursue the claim.
Approval of the Mediated SettlementFla. Stat. §744.387 Settlement of Claims(1) When a settlement of any claim by or against the guardians, whetherarising as a result of personal Injury or otherwise, and whether arisingbefore or after appointment of a guardian , is proposed, but before anaction to enforce it is begun, on petition by guardian of the propertystating the facts of the claim, question, or dispute and the proposedsettlement, and on any evidence is introduced, the court may enter anorder authorizing the settlement if satisfied that the settlement will be forthe best interests of the ward. The order shall relieve the guardian fromany further responsibility in connection with the claim or dispute whenthe settlement has been made in accordance with the order. The orderauthorizing the settlement may also determine whether additional bond isrequired, and if so, shall fix the amount of it.
Approval of the Mediated Settlement
• Fla. Stat. §744.387 – Settlement of Claims (3)(a) Nosettlement after an action has been commenced is effectiveunless approved by the court having jurisdiction of theaction.
• You need two courts to approve the settlement – theguardianship court and the court having jurisdiction of theworkers compensation case.
Robert’s Settlement• The gross settlement is $995,000. Net after fees and expenses is
$876,000. It is proposed that the carrier purchase a $450,000 annuity, which will pay $2,096.39 a month guaranteed for 10 years. A SNT will be established for the remaining $426,000. After the accident Robert applied for SSI and Medicaid. SSI pays $650.00 a month and is being paid to the guardian. Louise and Ted rent a home for $950 per month and provide 24 hour supervision for Robert. The landlord is evicting them and they are looking for new housing, which is difficult because Robert is a registered sex offender. If the SNT is established, they want the trust to purchase a home. They also want the Trust to pay them for caring for Robert and reimburse them for past expenses. Christmas is approaching and they want the Trust to buy gifts for Roberts friends.
Establishment of the Special Needs Trust
Fla. Stat. §744.441 - After obtaining approval of the courtpursuant to a petition for authority to act….a guardian may(19) Create or amend revocable trusts or create irrevocabletrusts of property of the wards estate which may extendbeyond the disability or life of the ward in connection withestate, gift, income, or other tax planning or in connectionwith estate planning. The court shall retain oversight of theassets transferred to a Trust, unless otherwise ordered by thecourt.
Considerations in establishing the special Needs Trust
• Who will be the Trustee?• Disbursal of settlement proceeds from Attorney Trust
account directly to the Trustee of the SNT and verification of deposit of funds to Trust with copies. (critical for third party SNT)
• Ownership of the Annuity by Trustee and annuity payments made directly to Trustee.
• At what point does or should the Special Needs Trustee become involved.
Roberts SettlementIssue #2
Protecting Trustees while working within the Guardianship System
Roberts SettlementDifferences arise between the professional guardian and Robertand Erika withdraws as counsel for both. Each now has separatecounsel. Robert’s new attorney wants to have a meeting toestablish a budget for Robert and he says that Robert and Ted aredesperate for funds and if there is any more delay he will petitionthe court to establish a budget for the guardianship and theTrust. He also has filed a petition in the guardianship court toapprove his fees and the proposed order states that the fees willbe paid from the guardianship estate or the Trust. He is alsoimplying that if they are not able to reach a satisfactory budget,he will petition in the guardianship court to remove the Trustee.
Uniform Trust Code
• UTC - Article 2, Section 201• (a) A court may intervene in the administration of a Trust to
the extent its jurisdiction is invoked by an interested person or as provided by law
• (b) A Trust is not subject to continuing judicial supervision unless ordered by the court
• (c) A judicial proceeding involving a trust may relate to any matter involving the trust’s administration, including a request for instructions and an action to declare rights.
Florida Trust Code Fla. Stat. 736.0201• Judicial proceedings (except proceedings to review employment of agents and
fees) shall be commenced by filing a complaint and shall be governed by the Florida Rules of Civil Procedure.
• A trust is not subject to continuing judicial supervision unless ordered• A judicial proceeding involving a Trust may relate to the validity, administration,
or distribution of a Trust, including proceedings to:• Determine validity of all or part of a Trust• Appoint or remove a Trustee• Review Trustees’ fees• Review and settle interim and final accounts• Ascertain beneficiaries, etc.• Obtain a declaration of rights• Determine any other matters involving trustees and beneficiaries
• Fla. Stat. 736.1001 Remedies for Breach of Trust.
The Guardian vs. The Special Needs Trustee• The SNT is a sole benefit, irrevocable, spendthrift Trust (Fla. Stat.
736.0502) - The Guardians first Challenge – Jurisdiction• Beekhuis v. Morris, 89 So.3d 1114 (Fla. 4th DCA 2012) – Guardianship
court enjoined daughter/Trustee of Mom’s Trust from selling wards house owned by the Trust. Overruled. There was no service of process on Trustee and Trustee did not voluntarily submit to jurisdiction of court in her capacity as Trustee.
• If the Trustee submits itself by consent to the jurisdiction of the court [Sowden v. Brea, 47 So.3d 341 (Fla. 5th DCA 2010)], or participates in litigation by moving the court to grant requests materially beneficial to them, [Inglis v. Casselberry, 137 So.3d 389 (Fla. 2nd DCA 2013)] the court has jurisdiction.
The Guardian vs. The Special Needs Trustee• The Guardians Second Challenge – Has the Trustee acted arbitrarily or
is it mandated by the Trust instrument• Giglio v. Perretta, 493 So.2d (Fla. 4th DCA 1986) – “The Trial Court
erred in requiring the Trustee to use trust assets to reimburse the guardian of the Trust beneficiary for guardianship administration expenses, attorney’s fees, and other costs. We explained that although paying some of these costs may have been allowed, in the Trustees discretion, these payments were “not legally mandated” by the Trust provisions so the court had no authority to compel the Trustee to make these payments”.
Cohen v. Friedland, 450 So.2d 905 (Fla. 3rd DCA 1984)
• Probate court directed the Co-Trustee, Cohen, to transfer $200,000 inTrust principal to a newly created Guardianship for Friedland.
• A Trustee in the Strictest sense, holds legal title to property to which headministers for the named beneficiary in accordance with the terms ofthe instrument creating the Trust. The Trust instrument provides thatthe beneficiary, George Friedland, is to receive the income of the Trust,and that the trustees in their sole discretion may invade the principal ofthe Trust estate to provide for his maintenance, comfort and welfare. Inthe absence of proof that the Trustee has failed to perform, or hasperformed arbitrarily , a court is without authority to remove assetsfrom control of the Trustee to be administered by the court or otherGuardian.
Question?
• Many first party Special Needs Trusts are approved by court order.
• Doesn’t that submit the Trust to the jurisdiction of the court?• Maybe have the order approving the settlement and SNT not
retain jurisdiction even though Chapter 744 states that the Court retains oversight. Is that the same as jurisdiction?
• If ultimately the Court does have jurisdiction you still have the Cohen v. Friedland case indicating there must be a showing that the Trustee acted arbitrarily.
Duties of a Trustee
• Fla. Stat. §736.0801 Duty to Administer Trust – The Trustee shall administer the Trust in good faith and in accordance with it’s terms and purposes and the interests of the beneficiaries and in accordance with this code.
• Fla. Stat. §736.0802(1) Duty of Loyalty - As between Trustee and the beneficiaries, a Trustee shall administer the Trust solely in the interest of the beneficiaries.
Trustee’s Perspective• Unless the court retains jurisdiction in the order creating the SNT, the
Trustee is not automatically subject to court oversight.
• The duties of the SNT Trustee require a balance between thebeneficiary’s current and future needs as well as attention to thenuances of public benefits.
• A court may not understand the consequences of implementing abudget that orders distributions which jeopardize the beneficiary’seligibility for public benefits.
Roberts Settlement Issue #2 – The Budget
• Housing – purchase or rent• Payment for providing care• Reimbursement for past expenses• Gifts to Roberts friends• Utilities• Transportation • Entertainment• Clothing, toiletries, and laundry
Trustee’s Perspective
• Engage a third party provider to perform a care assessment andpublic benefits analysis to identify medical needs, what additionalbenefits are available to assist with those needs, and assess housing.
• Forecast expenses given the recommendations outlined in theassessment and weigh the appropriateness of and the options foraddressing each of the requests.
• Make a determination on the requested items and develop a plan toaddress the needs identified and requests where appropriate.
Housing Rent v Purchase
If the Trust contributes to rent, Robert may lose the $650/mo. SSI payment and the Trust may only pay for Robert’s pro-rata share of expenses.
If the Trust instead purchases a home, the home:• Is considered an asset of the trust;• Is subject to asset concentration limits unless otherwise ordered by the
court;• Is subject to state Medicaid payback provisions; and• The trust is responsible for property taxes and maintaining proper
insurance coverage, but can only provide pro-rata share of household or utility expenses.
Caregiver StipendA first-party SNT may payments to third-parties for services rendered tothe beneficiary. POMS SI 01120.201F.3.a. However, the request forhousing and the payment of a caregiver stipend must be consideredtogether.
• If the Trust purchases a home where individuals other than thebeneficiary also reside, the trustee should obtain an occupancyagreement from those individuals and require rent or risk running afoulof the sole benefit rule.
• A Trustee may forego requiring non-beneficiaries to pay rent inexchange for services to the beneficiary where appropriate.
Reimbursement of Past Expenses• Reimbursements to a third-party for funds expended on behalf of the
beneficiary may be appropriate. POMS SI 01120.201I.1.g.
• The items that a trust beneficiary may receive from a third-party arestill subject to income and resource rules. POMS SI 01120.201I.1.g.
• Reimbursements for food and shelter are considered in-kindmaintenance and support. POMS SI 01120.201I.1.g.
• Third-Party payments are still subject to the sole benefit rule. POMSSI 01120.201F.1-3.a.
Gifts
• 42 U.S.C. § 1396p(d)(4)(a) requires that the trust be for the sole benefit of the beneficiary.
• POMS SI 01120.201F.3 – Recent clarification of primary benefit.
• Ultimately, gifts are not proper distributions from first-party SNTs.
The BudgetTrustee should work with Ted and the Professional Guardian to the extent possible to reach an amicable solution on the items requested and the establishment of a budget.• Housing: purchase is likely better but would be capped at $106,500• Caregiving stipend: in addition to rent-free living would not be appropriate
if home is purchased. • Reimbursements: some reimbursement may be appropriate if Ted and
Louise can produce receipts.• Gifts are never appropriate from a first-party SNT.• Between Robert’s $2096.39/mo. annuity and $650 SSI payments he has
sufficient liquidity to cover ongoing expenses like utilities, clothing, and entertainment while preserving the corpus for investments that will produce sufficient income for his future needs.
Richard’s Settlement
A Take-HomeExam
Richards Settlement• Richard is a 53 year old real estate investor who suffered a serious stroke in
November 2015. He is aphasic, partially quadriplegic, and can no longer providefor his basic needs. He is married to Lucie who is not employed. They have threechildren, all of whom are minors. Over the years, he invested in and manages over20 rental properties and three small businesses. All the properties and businessaccounts are in his name alone. He and his wife keep a small joint checkingaccount. He has no Power of attorney or other legal documents.
• Lucie files petitions for incapacity and to appoint herself as guardian. Becausethere is an imminent risk of harm to Richard’s property she also files a petition toappoint an emergency temporary guardian (ETG). The court appoints counsel torepresent Richard at the examining committee. Lucie is appointed ETG and at thefinal hearing held December 15, 2015 she is appointed Plenary guardian. You giveLucie your memorandum explaining her responsibilities as guardian and whatactions require court approval. You also arrange for her to take the required 6hour course for family guardians.
Richards Settlement• Richard’s cost of care is $10,000 per month. You recommend a plan to
qualify Richard for Medicaid ICP which includes transferring the businessesand income producing property to Lucie, transferring the homestead toLucie, setting up a burial account, and exercising the spousal refusal option.
• On September 1, 2018, Lucie calls you and says that she needs to meet withyou as soon as possible. Unknown to you, Lucie retained a personal Injuryattorney to pursue claims against Richards physicians who treated him in2015 as well as the hospital where he was initially treated. The claims arefor damages and loss of consortium for Lucie and the Children. Lucieattended mediation with her PI attorney and they have reached a globalsettlement for $6,000,000 against all defendants. Her personal injuryattorney recommends that she consult with an attorney to create a SNT forRichard’s portion of the settlement as well as the allocation of damages forherself and the children. Two of the children are now 18 and 20, and thethird is now 12.
Richard – The initial guardianship and the Medicaid Plan
• In December 2015, Richard was transferred to a nursing home heapplied for and was approved for Medicaid ICP. What must theguardian do.
• Now widely accepted that guardians can engage in Medicaid planning.• Fla. Stat. §744.441 Powers of Guardian Upon Court Approval. (19)
Create or amend revocable trusts or create irrevocable trusts ofproperty of the wards estate which may extend beyond the disabilityor life of the ward in connection with estate, gift, income, or other taxplanning or in connection with estate planning. The court shall retainoversight of the assets transferred to a Trust, unless otherwiseordered by the court.
• Fla. Stat. §744.441(17) - Powers of Guardian Upon Court Approval (17)Make gifts of the wards property to members of the wards family inestate and income tax planning procedures.
Richard – The initial guardianship and the Medicaid Plan• Richards Medicaid plan
• Spousal Refusal application – Richards assets were neither counted or used in the determination of his financial eligibility for Medicaid - Connor v. Southwest Florida Regional Medical Center Inc. 668 So.2d 175.
• The right to seek spousal support in the amount equal to what Medicaid paid out was assigned to the State of Florida.
• Transfer assets to the well spouse. • Burial account.• Richard qualifies for Medicaid ICP and receives 32 months of
payments before reaching age 55.
Lucie participated in Mediation and settlement… without disclosing it.
• So you ask – What was the PI attorney doing?
• Is it too late for Lucie to get approval of the settlement
Lucie Hired Counsel to Pursue PI claimLucie took the guardianship course and received the handout from counselexplaining authority of the Guardian but never asked if she needed courtapproval - Is it too late?
• Fla. Stat. §744.441(11) Powers of Guardian Upon Court Approval – After obtainingapproval of the court pursuant to a petition for authorization to act, theguardian….may: §744.411(11) – Prosecute or defend claims or proceedings in anyjurisdiction for the protection of the estate and of the Guardian in the performance ofhis or her duties.
Doesn’t “after obtaining approval” mean you have to act first?• Rule 5.630 Fla. Prob. R. – (a) When authorization or confirmation of any act of the
guardian is required, application shall be made by verified petition.
Approval to bring the Personal Injury Claim (and Retain Counsel)
• Fla. Stat. §744.441 After obtaining approval of the court pursuant to a petition for authority to act….a guardian may (11) prosecute or defend claims or proceedings in any jurisdiction for the protection of the estate and of the guardian in performance of his or her duties.
• Rule 5.630 Fla. Prob. R. – Notice to the ward, to the next of kin, if any, and to those persons who have filed requests for notices and copies of pleadings.
• Fla. Stat. §744.102(14) - Next of Kin – those persons who would be heirs at law of the ward or alleged incapacitated person if the person were deceased and includes the lineal descendants of the ward or AIP.
• Fla. Stat. §744.444 – Guardians can retain counsel to assist them without court approval – Do it anyway.
• Petition to confirm actions of the guardian to pursue the claim.
Approval of the Mediated SettlementFla. Stat. §744.387 Settlement of Claims(1) When a settlement of any claim by or against the guardians, whetherarising as a result of personal Injury or otherwise, and whether arisingbefore or after appointment of a guardian , is proposed, but before anaction to enforce it is begun, on petition by guardian of the propertystating the facts of the claim, question, or dispute and the proposedsettlement, and on any evidence is introduced, the court may enter anorder authorizing the settlement if satisfied that the settlement will be forthe best interests of the ward. The order shall relieve the guardian fromany further responsibility in connection with the claim or dispute whenthe settlement has been made in accordance with the order. The orderauthorizing the settlement may also determine whether additional bond isrequired, and if so, shall fix the amount of it.
Approval of the Mediated Settlement
• Fla. Stat. §744.387 – Settlement of Claims (3)(a) Nosettlement after an action has been commenced is effectiveunless approved by the court having jurisdiction of theaction.
• You need two courts to approve the settlement – theguardianship court and the court having jurisdiction of the PIcase.
What Else Needs to be Done?
• Does Lucie have a conflict on Interest?• Fla. Stat. §744.391 Actions by and against guardian or
ward – If an action is brought by the guardian againstthe ward, or vice versa, or if the interest of theguardian is adverse to that of his or her ward, aguardian ad litem shall be appointed to represent theinterests of the ward in that particular litigation
What Else Needs to be Done?• What about the minor child?• Fla. Stat. §744.387 Settlement of Claims (2) The natural guardians or
guardian of a minor may settle any claim on or on behalf of a minor that does not exceed $15,000. A legal guardianship shall be required when the amount of the net to the ward exceeds $15,000.
• Fla. Stat. §744.3025 Claims of Minors – The court may appoint a guardian ad litem to represent the minor’s interest before approving a settlement of the minor’s portion of the claim in a case in which the minor has a claim for personal injury, property damage, wrongful death, or other cause of action in which the gross settlement of the claim is $15,000.
• The court shall appoint a guardian ad litem if the minors claim equals or exceeds $50,000
What Else Needs to be Done?• The circuit court settlement was a lump sum global
settlement and the PI attorney’s and the Court left it up tothe Guardianship counsel and the probate court to do anallocation of the $6,000,000.
• The PI counsel did not deal with medical bills andoutstanding medical claims and liens and deferred toguardianship counsel to deal with those issues.
• Ad litem to make a recommendation to the court on thoseissues?
• Authority?
Summary• Petition to confirm action to hire PI counsel• Petition for confirm action to pursue claim PI litigation• Petition to confirm action to mediate and settle the PI action • Petition to appoint Lucie as Guardian for the Minor child Sam• Petition to appoint ad litem to represent the interests of Sam in
allocation of damages and approving settlement• Petition for the appointment of an ad litem to represent the interests
of Richard because of Lucie’s conflict of interest• Petition for the appointment of an ad litem to make a
recommendation to the court on allocation of damages
And FinallyEstablishment of the Special Needs Trust
Fla. Stat. §744.441 Powers of Guardian Upon Court Approval.(19) Create or amend revocable trusts or create irrevocable trusts ofproperty of the wards estate which may extend beyond the disability orlife of the ward in connection with estate, gift, income, or other taxplanning or in connection with estate planning. The court shall retainoversight of the assets transferred to a Trust, unless otherwise orderedby the court.
Considerations in establishing the Special Needs Trust
• Pre 55 ICP Medicaid benefits are not subject to Medicaid EstateRecovery. If Richard opts for a SNT, the 32 months (about $208,000)would be subject to payback. Medicaid payback cannot be limited toany particular period of time with a first party SNT.
• POMS-SSA Regulations - SI 01220.203(B)(10)• 42 U.S.C. 1396p(b)(1)• Take a lump sum and no SNT – pay private pay until that is gone and
there is no recovery of the $208,000• At what point does or should the Special Needs Trustee become
involved?
Considerations in establishing the special Needs Trust
• Who will be the Trustee?• Disbursal of settlement proceeds from Attorney Trust account directly
to the Trustee of the SNT and verification of deposit of funds to Trust with copies.
• Medicaid and other liens total $500,000 and this does not include computation of the amounts that are required to be set aside to cover future Medicare costs.
• December 5, 1980 – Medicare Secondary Payer Statute – Made Medicare a secondary party to insurance plans. If recovery is received in a settlement that includes future medicals, Medicare wants its cut – Set aside money that would have otherwise been paid by Medicare.
Considerations in establishing the Special Needs Trust
• Two more petitions• Petition to authorize creation of a Medicare Set-Aside Trust within
the SNT and• retain someone do the computations for the set aside.• Petition to retain a company to negotiate a reduction of the
Medicare and other medical liens.
Considerations in establishing the Special Needs Trust
• Two more petitions• Petition to authorize creation of a Medicare Set-Aside Trust within
the SNT and• retain someone do the computations for the set aside.• Petition to retain a company to negotiate a reduction of the
Medicare and other medical liens.
The Special Needs Trustee’s perspective
• Must ensure that distributions from both the MSA as well as the SNT are appropriate.
• May consider utilizing a third party to manage MSA payments.
The Fundamentals of Special Needs Trust Administration Webinar
Friday, April 26, 2019
2:10-3:00 p.m.
Guardians & Trustees:
Working Together is the Goal—But is it the Reality?
Genesis M. Smith, Esq. Edwin M. Boyer, Esq.
Associate Trust Officer Florida Bar Certified Elder Law Attorney
Raymond James Trust, N.A. Boyer & Boyer, P.A.
880 Carillon Parkway 46 N. Washington Blvd, Suite 21
St. Petersburg, Florida 33716 Sarasota, Florida 34236
727.567.4894 941.365.2304
2
INTRODUCTION
Two’s Company?
The roles of guardian and trustee share many similarities. Each role may be incredibly
broad or, meticulously tailored to particular needs or specific property. Both roles may be crafted
so precisely that they almost seem to overlap in some instances. For all the similarities however,
the roles are separate as the functions that each serves and the duties owed are vastly different.
Invariably, the two must often work together to achieve both mutual and independent goals.
Both trustees and guardians serve as fiduciaries and the respective duties of each are
considered and compared below. Specifically, how the trustee’s duties of are underscored in
Special Needs Trust (SNT) administration while also as remaining largely unsupervised by any
court. Guardians by contrast, serve as many functions as the court may appoint that likely far
exceed the scope of the trustee’s role, are subject to constant court supervision, and are not afforded
the same statutory protections as trustees. Understanding the differences between each role
partially explains why so often courts must intervene where an individual is the beneficiary of a
trust and the ward under a guardianship. Guardians may also petition a court for the authority to
intrude on the trustee’s relationship with the beneficiary, altering or creating trusts or even
removing the trustee. The guardian’s potential power over a trust or trustee coupled with the
constant court supervision over the guardian bring many of the matters between the two fiduciaries
within the court’s purview.
Trustees and Guardians may have just as many competing interests as they do interests in
common and grappling with those interests while remaining compliant with each one’s own
fiduciary duties can be complicated. However, by working together to set the appropriate
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expectations at the outset, regularly communicating with one another where appropriate, and
diligent record keeping, the guardian and trustee may avoid unnecessary court intervention.
COMPARISON OF FIDUCIARY ROLES & RESPONSIBILITIES
Not All Fiduciaries Are Created Equal
A. TRUSTEES
A trust, when viewed through the lens of contract law, is an agreement to convey property.1
That conveyance is governed by the terms of the trust agreement and the laws of the relevant situs,
if chosen.2. Every trustee who serves to facilitate this transfer is a fiduciary governed primarily by
the terms of the trust document and is appointed by the grantor of the trust.3 As fiduciaries,4 trustees
owe a variety of duties to the beneficiary of the trust.5 Most notably, are the duty of prudent
administration,6 the duties of loyalty and impartiality,7 and the duty to keep records,8 and account.9
The duty of prudent administration, taken together with the duty to administer the trust,
requires the trustee to carry out the terms of the document in good faith exercising reasonable care,
skill, and caution in furthering of the interests of the beneficiary.10 The duty of loyalty, which may
1 Langbein, John H., “The Contractarian Basis of the Law of Trusts” (1995), Faculty Scholarship Series, Paper 502,
http://digitalcommons.law.yale.edu/fss_papers/502. 2 Id. 3 In certain instances, the court or a consensus of the beneficiaries may appoint a trustee. Fla. Stat. §736.0704(3)-(5). 4 The role of fiduciary is ancient in origin yet complicated by the passage of time and the evolution of the law.
Tamar Frankel, Fiduciary Law, 71 CALIF. L. REV. 3, 795 (1983). See also DeMott, Deborah A., Beyond Metaphor:
An Analysis of Fiduciary Obligation, 1988 Duke L. J. 879, 880-82 (1988). 5 See generally Fla. Stat §736.0801-.0817 and UNIF. TRUST CODE ART. VIII (2010). These sections impose several
specific duties on the trustee not fully discussed here including; the duty to incur only reasonable expenses, the duty
to use the trustee’s skills, the duty to control and protect the trust property, the duty to enforce and defend claims,
and the duty to distribute upon termination of the trust. Id. 6 Fla. Stat. §§736.0801; 736.0804. 7 Fla. Stat. §§736.0802; 736.0803. 8 Fla. Stat. §736.0810. 9 Fla. Stat. §736.0813-.08135. 10 The Florida statutes also require a trustee to utilize his or her special skills or expertise, if any. Fla. Stat.
§736.0806.
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be the most widely commented on and litigated of all fiduciary duties, affirmatively forbids the
trustee from engaging in self-dealing or otherwise exploiting the relationship for personal gain. In
Van Dusen v Southeast First National Bank,11 the Third District adopted the classic standard of
trustee behavior as first articulated by Justice Cardozo:
Many forms of conduct permissible in a workday would for those acting at arm’s
length are forbidden to those bound by fiduciary ties. A trustee is held to
something stricter than the morals of the marketplace. Not honesty alone, but the
punctilio of an honor the most sensitive is the standard of behavior.12
The duty of loyalty however requires more than just refraining from self-dealing. Referred
to as “the essence of the fiduciary relationship”13 loyalty, when taken with the duty of prudent
administration, forms the basis of the laws governing fiduciary duty.14 As the duties of prudent
administration and loyalty evolved to meet the discretion required for the role of the modern
trustee,15 the trustee’s duty to keep records and account makes the enforcement of those duties
possible.16 In every instance however, the trustee’s duties are framed by and limited to the property
in the trust.17
11 478 So. 2d 82, 92 (Fla. 3d DCA 1985) (holding that “[t]he duty of loyalty owed by trustees is of the highest
order.”). 12 Meinhard v Salmon, 249 N.Y. 458, 464, 164 N.E. 545, 546 (1928). 13 J.C. Shepherd, The Law of Fiduciaries 48 (1981). 14 John Langbein, The Contractarian Basis of the Law of Trusts, 105 YALE L.J. 625,655 (1995). Karen E. Boxx,
Of Punctilios and Paybacks: The Duty of Loyalty Under the Uniform Trust Code, 67 MO. L. REV. 280, 281 (2002). 15 See id at 281-92 (discussing the history of the common law history and purpose of the fiduciary duty of loyalty
and administration). 16 See Julia C. Zajac & Robert Whitman, Fiduciary Accounting Statutes for the 21st Century, 36 ACTEC L. J. 444
(explaining that the “canons of fiduciary duty are inextricably connected to fiduciary accounting”). 17 Building Educ. Corp. Ocean Bank, 982 So. 2d 37, 41 (Fla. Dist. Ct. App. 2008) (affirming that no duty exists with
regard to matters beyond the scope of the fiduciary relationship).
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While trustees owe various fiduciary duties, many of the responsibilities of a trustee may
be delegated to agents.18 Trustees are also afforded statutory protections.19 Unlike other fiduciaries,
a trustee’s compensation is typically based on a percentage of the assets being managed and a
trustee can reach agreement with the settlor or beneficiary as to the ultimate fee charged
particularly for extraordinary work like managing special assets.20 Moreover, because a trustee’s
scope of work is limited both by the nature of the relationship, and potentially by statutory or trust
provisions, a trustee can easily anticipate its fee.
In the context of a special needs trust (SNT), a trustee must be sensitive to the nuance of
such administration and alert to the additional liability involved. A trustee administering an SNT
must understand the differences between the two most basic types of SNTs, first-party and third-
party SNTs,21 stay current with the relevant laws,22 and understand the complexities of public
18 Fla. Stat. §736.0807. Agents may range from tax preparers to construction consultants for home modification
projects. As long as the trustee exercises reasonable care, skill, and caution in selecting, delegating to, and
overseeing the agent, the trustee is not liable for the actions of the agent. Fla. Stat. §§736.0807(2)-(3), §518.112(4).
Under Florida law, a fiduciary may delegate investment functions and the investing agent performing the delegated
function is subject to the same investment standards as the trustee. Fla. Stat. §§518.112(1), 518.112 (6). 19 While strictly governed, a trustee may be afforded protection in the trust document itself by way of an exculpatory
clause. Fla. Stat. § 736.1011. A trustee’s potential liability to the beneficiaries may also be mitigated either by virtue
waiver from the beneficiary. Fla. Stat. §§736.0813(2), 736.0125(1)(c). 20 By providing notice to a beneficiary, the trustee may limit an action for contesting the validity of a revocable trust.
Fla. Stat. § 736.0604(2). A beneficiary may have up to forty years after the termination of a trust or resignation of a
trustee to bring an action where the trustee did not provide an accounting. Fla. Stat. §736.1008(6). A beneficiary
may bring an action up to four years after the termination of a trust or the resignation of a trustee to bring an action
where the trustee adequately disclosed the matter in an accounting or other form of disclosure. Fla. Stat.
§736.1008(1)(a). A trustee may further reduce the statute of limitations to six months by providing the beneficiary
with notice and adequate disclosure or accounting. Fla. Stat. §736.1008(2). 21 A first-party SNT is subject to statutory requirements including a payback provision and that the trust be for the
sole benefit of a beneficiary who is disabled according to Social Security Administration guidelines and under the
age of 65 at the time the trust is established. 42 U.S.C. §1396p(d)(4)(A). A third-party SNT is a trust established by
someone other than the disabled beneficiary where the beneficiary may not revoke the trust or have direct access to
the assets for maintenance and support. 42 U.S.C. §1382b(e); 20 C.F.R. § 416.1201(a)(1); POMS SI
01120.200(D)(2). 22 The last five years alone have yielded meaningful clarifications to the Social Security Administration’s Program
Operation Manual System (POMS), the passage of the Achieving a Better Life Experience Act, as well as the
Special Needs Trust Fairness Act. See generally POMS SI 01120.200; 26 U.S.C. 529A; Pub. L. 114-255 §5007.
While the POMS are not law, SSA representatives utilize the POMS in making decisions that affect SSI recipients
including SNT beneficiaries. Moreover, the Supreme Court has recognized the POMS “warrant respect.”
Washington State Dep’t of Soc. & Health Services v Guardianship of Keffeler, 537 U.S. 371 (2003).
6
benefits.23 An SNT trustee should document the specific benefits the beneficiary is receiving and
understand how it affects administration of the SNT.24 The trustee should also regularly assess the
beneficiary’s receipt of benefits to ensure needs are adequately met and the trust is able to
maximize and enhance the beneficiary’s life.25
B. GUARDIANS
Guardians are also fiduciaries however; guardians are more closely regulated than trustees,26
and may serve in a myriad of capacities ranging from property management to matters of dignity.27
In Florida, guardians are the only single fiduciary that may be appointed to manage both a person’s
property and personal decision-making.28 Guardians are also the only fiduciary whose appointment
and supervision by the court is mandatory. 29 In addition, every ward that a guardian serves suffers
from some form of incapacity.30 All of these factors make the role of a Guardian uniquely
challenging.
23 Kevin Urbatsch & Michele P. Fuller, Traps for the Unwary During Special Needs Trust Administration, 40 Estate
Planning, No. 6, 14 (highlighting confusing public benefits programs, confusing the types of SNTs, and making
improper distributions from SNTs as some of the most common and detrimental mistakes a trustee may commit). 24 Id at 18-20 (providing specific examples of how improper distributions jeopardize a beneficiary’s eligibility for
public benefits). See also Kemp C. Scales & Linda M. Anderson, Special Needs Trusts: Practical Tips for Avoiding
Common Pitfalls, 74 Pa. B. Ass’n Q. 169, 170 (2003). 25 Amber K. Quintal, Planning for Individuals with Disabilities: Special Needs Trusts, The Practical Tax Law. 17,
17 (2008) (explaining that “Special needs trusts are means for persons with disabilities to qualify to receive
government benefits from needs-based programs while having access to additional funds to pay for supplemental
expenses not covered by the government benefits.”). 26 In addition to the Florida Statutes, guardians are regulated by the Florida Administrative Code as well. See
generally FLA. ADMIN.CODE 58M-2. Guardians are required to take an oath to “faithfully perform his or her duties.”
Fla. Stat. § 744.347. 27 A guardian is defined as “a person who has been appointed by the court to act on behalf of a ward’s person or
property, or both.” Fla. Stat. § 744.102(9). Fla. Stat. §744.1012(2) (providing the legislative intent favoring the least
restrictive means). 28 A limited guardian is appointed by the court only after a ward has voluntarily petitioned for the appointment and
the court determines the ward lacks the capacity to exercise “some, but not all, of the tasks necessary to care of [the
ward’s] person or property.” Fla. Stat. §744.102(9)(a). A plenary guardianship by contrast, is ordered by the court
where the court finds the ward fully incapacitated. Fla. Stat. §744.102(9)(b). 29 Fla. Stat. §744.372. Compare Fla. Stat. §709.2102(1) (defining an agent under a power of attorney as being
granted his or her authority under the document executed by the principal) and Fla. Stat. §736.0402 (requiring that
the settlor name a trustee and task him or her with duties to perform as a prerequisite of a valid trust). 30 In the context of a special needs trust, the beneficiary does suffer from some disability, but is not necessarily
incapacitated. The beneficiary of a special needs trust may have a disability that is purely physical. Whereas the
ward, by definition, suffers from some incapacity and serves as the basis for the guardian’s appointment.
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Most notably, unlike a trustee, a guardian’s fiduciary duties are not necessarily confined
solely to the property of the ward and often encompass a range of issues from banking to
constitutional rights.31 In addition to the expansion of fiduciary duties owed by the guardian,
guardians may not freely delegate responsibilities.32 Guardians are also not permitted to limit
liability or otherwise obtain waiver from the ward explicitly or implicitly in exchange for
disclosures.33 Finally, a guardian’s fees are not protected in the same manner as a trustee.34
CASE STUDIES
Who’s In Charge?
The administration by a guardian and trustee who share an SNT beneficiary-ward often times
overlap and the two roles, dedicated to specific imperatives and governed by different rules, may
conflict. When the two are unable to agree, court intervention may be appropriate or even
necessary. While a guardian may not take many actions without a court order, a guardian may be
afforded extensive powers through court approval. A court may grant a guardian the power to
create or amend both a revocable or an irrevocable trust with the ward’s property.35 In addition, a
31 See Fla. Stat. §744.3215 (listing the various rights of which an individual may be relieved). 32 Guardians are permitted to designate “surrogate guardians” to act only “if the guardian is unavailable….” Fla.
Stat. §744.442(1). However, the guardian is required to request court approval of the surrogate guardian. Fla. Stat.
§744.442(2); see also Fla. Stat. §744.372 (mandating that the court retain jurisdiction over all guardianships).
Similar to a trustee, a guardian may also delegate investment functions. Fla. Stat. §518.112. 33 By virtue of the relationship, the ward of a guardian lacks the incapacity to provide consent. Supra n. 30; see also
Fla. Stat. §744.33(5)(b) and §744.331(3)(h)(6) (demonstrating the only instances where waiver is permitted on the
part of the incapacitated person, or his or her attorney, is prior to the determination of incapacity and limited to
procedural matters). 34 A guardian’s fee must be approved by the court. Fla. Stat. § 744.108. 35 Fla. Stat. §744.441(19).
8
guardian may also amend a trust to remove a trustee.36 In doing so, the guardian brings the trust
within the purview of the court’s supervision.37
Case Study I
Robert’s Settlement
Consider the case of Robert’s settlement. Robert was 52-years-old and single when, in his
capacity as an employee of a local roofing company, he fell from a bucket loader and suffered
traumatic brain and spinal cord injuries. Following hospitalization and rehabilitation, he moved in
with his sister, Louise, and her husband, Ted. Together they provided Robert with provided 24-
hour supervision and care. Ted and Louise retained an attorney, Erika, to file a petition to have
Robert declared incapacitated and have a guardian appointed for him because he could no longer
make personal or financial decisions. In addition, there was a pending workers compensation
claim. Because of legal and financial issues, Louise is not qualified to serve as either guardian of
the person or property and Ted can only serve as guardian of the Person. A professional guardian
was appointed for Robert at Erika’s recommendation. A settlement offer has been made in the
workers compensation case and a guardian of the property is necessary to finalize the settlement.
36 Fla. Stat. §744.441(2). See In re Guardianship of Muller, 650 So. 2d 698 (Fla. 4th DCA 1995) (affirming the
guardian had a right to amend the trust and remove the trustee under Fla. Stat. §744.441(2) where the guardian was
able to demonstrate the trustee had a conflict of interest); and Rene v Sykes-Kennedy, 248 So. 3d 1164 (Fla. 5th DCA
2018) (allowing a guardian to remove the trustee and appoint herself where such removal and appointment was in
the ward’s best interest). However, such right is not without limitation. See Reddick v SunTrust Bank, 718 So. 2d
950 (Fla. 5th DCA 1998) (refusing to permit the spouse serving as guardian from removing the corporate trustee
where not in the ward’s best interest). 37 Fla. Stat. §744.441(19). Trusts are largely private matters. However, a trust where the beneficiary is also a ward
under guardianship is also arguably subject to court supervision because guardians are, by virtue of their position,
always subject to court supervision. A guardian has a duty to verify inventory and if the ward is a beneficiary of a
trust, the inventory must reflect the ward’s beneficiary interest in the trust, the amount of the trust, and identify the
trustee. Fla. Stat. § 744.365(2)(a). It follows therefore, that the Trustee administering a trust with a beneficiary that
is under guardianship will be subject to some form of court supervision as well by extension of the common
relationship to the ward.
9
The gross settlement is $995,000. Net after fees and expenses is $876,000. The carrier
purchased a $450,000 annuity, which will pay $2,096.39 a month guaranteed for 10 years. An SNT
was established for the remaining $426,000. After the accident, Robert applied for SSI and
Medicaid. The application for SSI was approved and began paying $650.00 a month to the
guardian. Louise and Ted rent a home for $950 per month and provide 24-hour supervision for
Robert. However, when the landlord evicted them and they began looking for new housing, they
discovered it was difficult to find suitable housing because Robert is a registered sex offender. Ted
and Louise now want the SNT to purchase a home, pay them for the care they provide Robert,
reimburse them for past expenses, and purchase Christmas gifts for Robert’s friends.
Differences arise between the professional guardian and Robert forcing Erika to withdraw
as counsel for both. Each hires separate counsel. Robert’s new attorney wants to have a meeting
to establish a budget for Robert insisting that Robert and Ted are desperate for funds and if there
is any more delay, he will petition the court to establish a budget for the guardianship and the
Trust. In addition, Robert’s attorney also filed a petition in the guardianship court to approve his
fees and the proposed order states that the fees will be paid from the guardianship estate or the
Trust.38 He is also implying that if they are not able to reach a satisfactory budget, he will petition
in the guardianship court to remove the trustee.
Trusts, even SNTs where not otherwise ordered, are not automatically subject to court
supervision.39 Jurisdiction is therefore the first hurdle in bringing the SNT within the guardianship
court’s purview.40 Only interested parties with specific grievances may petition a court for judicial
38 Distributions from a first-party special needs trust must be for the sole benefit of the beneficiary. 42 U.S.C.
§1396p(d)(4)(A). While the POMS have carved out a specific exception for trustee fees, no such exception exists for
guardian fees. See POMS SI 01120.201F.3.c.5. 39 Fla. Stat. §736.0201(3); UNIF. TRUST CODE §201(b) (2010). 40 Fla. Stat. §736.0201(1); UNIF. TRUST CODE §201(a) (2010).
10
intervention of a trust.41 While Robert’s attorney may be able to establish jurisdiction, he will also
be required to show that the trustee acted arbitrarily.42
The trustee must however remain loyal to the beneficiary and execute her duties
faithfully.43 Robert’s guardians have made requests and the duty of prudent administration requires
the trustee to consider the requests and provide a timely response.44 In considering the requests,
the trustee must balance Robert’s current needs as well as Robert’s future interests while remaining
mindful that he is the recipient of means-tested public benefits. In properly assessing the
beneficiary’s needs and the appropriateness of the request, the trustee should engage third party
professionals for an assessment. While it would be appropriate to rely on the expertise of a
professional guardian, Robert’s trustee and guardians are presently in conflict. Therefore, the
trustee should consider engaging a disinterested third party to perform a care assessment and
document all needs including medical, housing, and transportation and assess what additional
public benefits may be available to assist. The trustee should also attempt to manage the
expectations and cultivate a good working relationship with the guardians. By communicating the
purpose of the assessment, agreeing on a timeline for completion, and providing a detailed plan
for addressing Robert’s needs the parties may avoid unnecessary court intervention.
41 Fla. Stat. §736.0201(2); Fla. Stat. §736.0201(4); UNIF. TRUST CODE §201(a) (2010). 42 Cohen v Friedland, 450 So.2d 905 (Fla. 3rd DCA 1984)(finding no authority to remove assets from the trustee’s
control where the guardian was unable to establish proof the trustee failed to perform or acted arbitrarily). 43 The trustee has an affirmative duty to administer the trust pursuant to the terms and act in the beneficiary’s best
interest. Fla. Stat. §§736.0801-.0802. 44 The duty to administer the trust, and to administer prudently, requires the trustee to consider all of the
beneficiary’s requests and make distributions where appropriate. Fla. Stat. §736.0801; Fla. Stat. §736.0804; see also
supra n.25 at 18 (describing the common failure of overprotective SNT administrators to refuse to make
distributions).
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Case Study II
Richard’s Settlement
Richard was a 53-year-old real estate investor who suffered a serious stroke in November of
2015. As a result, he became aphasic, partially quadriplegic, and could no longer provide for his
own basic needs. Richard’s wife Lucie was not employed and their three children were all minors
at the time. Over the years, Richard had invested in and managed over 20 rental properties and
three small businesses. All the properties and business accounts were in his name alone. He and
his wife kept a small joint checking account. He had no Power of attorney or other legal documents.
Following the stroke, Lucie filed petitions for incapacity and to appoint herself as guardian.
Because there was an imminent risk of harm to Richard’s property, she also filed a petition to
appoint an emergency temporary guardian (ETG). The court appointed counsel to represent
Richard at the examining committee and Lucie was appointed ETG. At the final hearing held
December 15, 2015 Lucie was appointed plenary guardian. Lucie’s attorney provides her with a
memorandum explaining her responsibilities as guardian as well what actions require court
approval, and arranged for her to take the required six-hour course for family guardians.
Richard’s cost of care is $10,000 per month and the attorney recommends a plan to qualify
Richard for Medicaid ICP, which includes transferring the businesses and income producing
property to Lucie, transferring the homestead to Lucie, setting up a burial account, and exercising
the spousal refusal option. That same month, Richard was transferred to a nursing home and his
application for Medicaid ICP was approved.
On September 1, 2018, Lucie contacts the attorney for the guardianship explaining that she
had also retained a personal injury attorney to pursue claims against the physicians who treated
Richard in 2015 as well as the hospital where he was initially treated. The claims are for damages
12
and loss of consortium for Lucie and the children. Lucie attended mediation with her personal
injury attorney and they have reached a global settlement for $6,000,000 against all defendants.
Lucie’s personal injury attorney did not address the medical bills or outstanding medical claims
and liens. Instead, the personal injury attorney deferred to the guardianship attorney and
recommended that she consult with an attorney to create an SNT for Richard’s portion of the
settlement as well as the allocation of damages for herself and the children. Two of the children
are now 18 and 20 years old. The third child, Sam, is now 12 years old.
Spousal Refusal is an appropriate method for dealing with the present facts.45 However,
Lucie also pursed a claim in her capacity as guardian without prior court approval and obtained a
settlement.46 Therefore, Lucie will need to petition the court to confirm her actions. Lucie will also
need ratification of the settlement.47 Moreover, because Lucie reached a global settlement where
compensation for her claims are comingled with compensation for Richard’s injuries, Lucie
potentially has a conflict of interest and may require a guardian ad litem to handle Richard’s
portion of the settlement.48 Finally, while a natural guardian for a minor child may settle claims on
behalf of the minor,49 there is a statutory requirement that a guardian ad litem be appointed if the
minor’s claim equals or exceeds $50,000.50
45 Connor v Southwest Florida Regional Medical Center, Inc., 668 So.2d 175. Assets are neither counted or used in
the determination of financial eligibility for Medicaid. Id. 46 Fla. Stat. §744.441(11). Florida statutes require a guardian to seek court approval before prosecuting or defending
claims or proceedings in any jurisdiction. Id. 47 Fla. Stat. §744.387. Both the guardianship court and the court having jurisdiction over the personal injury case
must approve the settlement. 48 Fla. Stat. §744.391. 49 Fla. Stat. §744.387. 50 Fla. Stat. §744.3025.
13
In addition to the petition to confirm her past actions,51 Lucie should consider a petition to
be appointed Sam’s guardian and petition for a guardian ad litem for purposes of allocating
damages and approving the settlement. Lucie should also consider petitioning for a guardian ad
litem to represent Richard’s interests in the settlement as she has a conflict of interest. While a
portion of Richard’s settlement would still be subject to recovery,52 a special needs trust for
Richard’s share is most appropriate. However, given the medical claims, Lucie should petition to
retain a company to negotiate a reduction of the medical liens and authorize the creation of a
Medicare Set-Aside trust. Given the potential conflicts of interest, the size of the settlement, and
the complexities of administration, Lucie should consider a corporate fiduciary to handle ongoing
administration.
CONCLUSION
Recommendations for Cooperative Relationships
As in any relationship, setting expectations at the outset helps the parties understand and
anticipate one another. In the context of a guardian and trustee relationship, communicating early
on to understand the roles, duties, and boundaries of the other will help each to meet expectations
of the court and the beneficiary-ward. Appropriate communication throughout the guardian’s or
trustee’s administration will also naturally set a tone that is more welcoming than adverse. Finally,
while record-keeping is already paramount for a fiduciary, documenting required matters as well
as contact with a counterpart provides clarity over time.
51 Lucie should petition to confirm her actions to hire counsel, pursue the personal injury claims as well as mediate
and settle the claims. 52 Pre 55 ICP Medicaid benefits are not subject to Medicaid Estate Recovery. If Richard opts for a SNT, the 32
months (about $208,000) would be subject to payback. Medicaid payback cannot be limited to any particular period
of time with a first-party SNT.POMS SI 01220.203B.10. 42 U.S.C. 1396p(b)(1).
2019 Fundamentals of Special Needs Trusts Administration
Webinar Friday, April 26, 2019 3:00 P.M. – 3:50 P.M.
Presenter: Jennifer L. VanderVeen
• Materials • PowerPoint
Training the Trustee – What Your Agent Doesn’t Know CAN Hurt You
Training the Trustee – What your agent doesn’t know CAN hurt you Jennifer L. VanderVeen, CELA
Tuesley Hall Konopa, LLP 212 E. LaSalle Ave
South Bend, IN 46617
1. Overview - Why should we, as attorneys care about whether the trustees that our clients
name are educated about their duties and responsibilities? Why should we take the time and make the effort to work with those named individuals to ensure that we have made an effort to explain to them the limits of their positions and the ongoing requirements of their service?
a. Added service to our clients – Elder law attorneys do more than draft documents. We are putting together a security plan for our client’s well being and security. When clients know that the trustees they put in place will have some guidance and assistance, they are often more comfortable executing the documents and, because they want their children to know which attorney to go see, they share information more readily – including sharing your contact information!
b. Build relationships – Advising client’s fiduciaries can lead to client relationships with other family members and build word of mouth referrals. Just be certain that you have a good inter-generational conflict letter in hand. An excellent example can be found in Stuart Zimring’s article, Ethical Issues in Representing Multiple Family Members, found in the December 2011/January 2012 issue of the NAELA News.
c. Distinguish yourself from other estate planners or estate planning services – Online “do it yourself” estate planning companies and trust mills will not be available to answer questions when a trustee needs help. We can give our client’s fiduciaries the assistance and guidance they need in a crisis situation.
d. Prevent conflicts and misunderstandings – Educating trustees about the need to maintain open communication and providing information to beneficiaries can keep everyone informed and on the right track.
e. Protect against malpractice claims – As we will discuss later, there is a possibility that failure to properly advise a trustee can result in liability for an attorney.
2. Client Identification – In the world of elder law and fiduciary representation, this is perhaps the most critical, and often vexing, question attorneys face. It is also the most important. Unfortunately, the Model Rules of Professional Conduct are fairly thin on this point. Turning to NAELA’s Aspirational Standards, Standard B deals entirely with client identification.
a. Standard B2 states that an elder law attorney “Recognizes the unique challenges of identifying the client when a fiduciary is acting on behalf of a protected individual.”
i. In a typical case, there could a few possible clients 1. The principal 2. The trustee, on behalf of the trust
3. The trustee, individually ii. Each carries its own risks and requirements
b. The Standards specify that, once an attorney identifies who will be the client, it should be memorialized in writing in the engagement agreement.
i. If the attorney represents the principal, you can receive authority to later represent the trustee in his or her capacity as a trustee via an authorization to disclose or a waiver of conflict.
3. Attorney Liability/Responsibility – MRPC 1.2 can be, and has been, interpreted to allow beneficiaries and principals to hold attorneys responsible for the misdeeds of trustees when the attorney could have or should have advised the trustee to act differently. Unless the case arises in a state with strict privity rules (Texas, Nebraska, New York and Ohio), the court is likely to apply a multi-factor test to analyze whether an attorney owes a duty to the beneficiaries of the trust. See Biakanja v. Irving, 320 P.2d 16 (Cal. 1958), Trask v. Butler, 872 P.2d 1080 (Wash. 1994), Charleston v. Hardesty, 839 P.2d 1303 (Nev. 1992). Depending upon the test applied, the court may consider criteria such as:
a. The extent to which the transaction was intended to affect the beneficiary; b. The foreseeability of harm to the beneficiary; c. The degree of certainty that the beneficiary suffered harm; d. The closeness of the connection between the attorney’s conduct and the injury
suffered; e. The policy of preventing future harm; and f. The burden on the legal profession if a duty is found to exist
4. Educating the Principal a. In some cases, the principal (whether that is the grantor, present beneficiary or
remainder beneficiary) is the first line of defense and the first person to notice something is wrong.
b. Prior to drafting documents, review the powers, duties and responsibilities of the potential trustee with the client, both to ensure the correct trustees are named and so that the principal understands the scope and purpose of each document.
c. Discuss whether the grantor wants to authorize a third person to review the actions of the trustee (for example, receive accountings) if the grantor is incapacitated
d. Share your educational materials with the principal so they can review and reinforce your instructions
e. Get advance authorization to disclose information to trustees and discuss the scope and limits on that authorization, if any.
5. Educating the Trustee a. The Basics
i. Who you represent – You may be meeting with the trustee when the case is already well underway. Even if you had a clear representation agreement with your original client, you should, at a minimum, provide a written disclosure to the trustee of who you consider to be your client and to whom your duties and confidentiality belong.
ii. Self-dealing – The first rule of acting as a trustee is the rule against self dealing. While self dealing may be permissible in certain circumstances, it
is likely better for you and the trustee to set clear boundaries early, requiring disclosure and discussion of any possible self dealing IN ADVANCE. As I often tell trustees, many times we can figure out a way to make something work within the boundaries of their authority, but I cannot put a genie back in a bottle once it’s loose.
iii. Showing authority – Fiduciaries should clearly understand what documents provide them with their authority, who should be provided with copies, and what the limitations of the document itself may be.
iv. How to sign/act – One of the most frequent mistakes made by fiduciaries is failing to sign documents correctly. Providing the trustee with examples and frequent reminders can prevent this from happening. You may also need to provide answers to such seemingly basic questions as “how do I access trust/estate funds?” or “how will I know which bills to pay?” Keep in mind that, although we deal with these situations on a daily basis, many of our fiduciaries have never been in this position before and may never have known someone else who was, either. You may also need to correct misinformation that comes from the trustee having either acted before in a similar situation or knowing someone who did. If you know your trustee has some prior experience and you were not the attorney in that case, ask how they handled the responsibility and how they managed things. This can allow you to correct bad habits before they affect your case.
v. Money management – If you are in a situation where a financial planner is not already involved in the case and the trustee has little experience with managing finances, refer them to trusted financial planners who can help. All trustees should be briefed on the prudent investor rule, even if it needs to be in the simplest terms possible. You never want to put yourself in a situation where the trustee turns to you and says “You never told me I couldn’t invest in Bitcoin.”
vi. Recordkeeping – Although the timeframes for required recordkeeping and the form may be different for each type of trustee, the basics are the same. There are tips and trick you can arm fiduciaries with to make recordkeeping easier and minimize questions on any future accounting.
1. Trustees should always have check copies included with bank statements, even if the bank charges an extra fee. Many courts require them with accountings and it can save on hassle and expense later.
2. Check registers have two available lines for each check, one usually shaded in grey. That second line is the perfect place to note what a transaction or check was for to help jog an trustee’s memory in the future.
3. The memo line on a check is an trustee’s best friend. It can also be used to specify purpose of any check written
4. Software and apps such as Quicken can make accountings quick and easy. Some accountants provide software and tutorials for clients.
5. Scanning apps such as Office Lens, Scannable or PDF Scanner make keeping and tracking bills and receipts easy. Scannable has the added feature of linking to Evernote, where you can organize and tag the pdfs.
vii. Rules for distributions. – Whether the trust is a true “sole discretion” special needs trust, an ascertainable standard trust, or some hybrid of the two, the trustee must have a clear understanding of how and under what circumstances distributions can or must be made. The trustee should be clearly advised to seek counsel if he or she has any questions as to whether a distribution is appropriate.
viii. Who the trustee is responsible to – You should clearly set out for the trustee their responsibilities to the various individuals involved in the case, including the present and remainder beneficiaries. Contact information should be provided, if available, and the trustee should be encouraged to maintain direct contact with these individuals, if feasible. In certain situations, direct contact between the trustee and beneficiaries is not in anyone’s best interest, in which case, the trustee should be in frequent contact with the attorney who can provide updates to the beneficiaries.
ix. What reports are required/suggested – Each type of trustee role has its own accounting requirements. From the laughably simple for required by the Social Security Administration to the complicated, detailed accountings required by some jurisdictions where a trust is part of a guardianship or conservatorship, an trustee should be prepared to give detailed reports on income to and withdrawals from all accounts with explanations of each transaction at any time. If the principal is competent, quarterly reports are not so frequent to be burdensome, but often enough to keep the principal informed. In addition, quarterly reports allow any questions to be asked while the transaction is still fresh enough in the trustee’s mind to respond. At a minimum, reports should be complied annually, even if the reporting requirements are less frequent.
x. CFPB Guides The Consumer Financial Protection Bureau has guides available on their website for trustees who are managing someone else’s money (www.consumerfinance.gov) In addition to general guides, several states have their own state-specific guides and the CFPB provides a Word version of the guides that you can customize for your own clients.
6. When Educating Doesn’t Work – When an attorney represents a trust beneficiary or grantor and the trustee, what action can an attorney take if the trustee breaches his or her fiduciary duty?
a. Withdraw from the case – In some situations, this may be easier said than done. However, an attempt to withdraw can put a court on notice and a letter to beneficiaries of a trust that you no longer represent the trustee would hopefully cause someone to realize there is something wrong.
b. Take action against the trustee – This can get tricky. See the ACTEC Commentaries to MRPC Rule 1.6. If you have been clear in your non-representation of the trustee and that your loyalty is to the principal, you can take action upon direction of the principal to do so. However, in a family situation,
that can be hard to get. In that case, you may be able to get the principal’s authorization to notify adult protective services or a similar third party to take action and to execute new documents stripping the trustee of their powers.
Understanding. Insightful. Effective.
Jennifer L. VanderVeen, CELATuesley Hall Konopa, LLP212 E. LaSalle Ave., Suite 100South Bend, IN 46617
Phone: 574.232.3538Fax: 574.232.3790
Email: [email protected]: www.thklaw.com
Training the Fiduciary
Understanding. Insightful. Effective.
Overview
1. Why should we educate fiduciaries?2. Who is our client?3. What is our liability/responsibility?4. Educating the Principal5. Educating the Fiduciary6. What happens when things go wrong?
Understanding. Insightful. Effective.
Why bother?
1. Providing an added service to clients2. Building relationships3. Distinguish yourself from “estate plan in a box”
or online planning4. Prevent conflicts and misunderstandings 5. Protect against malpractice claims
Understanding. Insightful. Effective.
Who is the client?
1.CRITICAL issue2.May not be clear3.Need to define clearly and in writing to all
involved
Understanding. Insightful. Effective.
What is our liability/responsibility?
1.MRPC 1.22.Case law supports principal or beneficiaries
having claims against attorney for acts of fiduciary
Understanding. Insightful. Effective.
Educating the principal
1.Careful review of documents 2.Discussion of roles and responsibilities 3.Encourage dialogue with named agents4.Authorize third party oversight5.Advance authority to discuss with agent
and/or represent agent
Understanding. Insightful. Effective.
Educating the Trustee
1. Who Is Your Client?2. Self-dealing3. How do they show authority?4. How to act5. Managing money 6. Recordkeeping7. Making distributions 8. Responsibilities 9. Reports
Understanding. Insightful. Effective.
Tuesley · Hall · Konopa, LLP
2019 Fundamentals of Special Needs Trusts Administration
Webinar Friday, April 26, 2019 3:50 P.M. – 4:40 P.M.
Presenter: Roberta Flowers
• Materials • PowerPoint
Decision-Making Practices – Why Intentional Decision-Making
Matters
1
INTENTIONAL DECISION MAKING FUNDEMENTALS OF SPECIAL NEEDS TRUSTS
Roberta K. Flowers Stetson University College of Law
Trustees must make discretionary decisions continuously that require the consideration of
both the legal requirements of Special Needs Trust disbursements and also the needs of the
beneficiaries. Many times, the correct decisions are not specifically delineated in the rules and
regulations. Consequently, making these decisions require making discretionary decisions within
the boundaries of the law. They also need to be made consistently and quickly in order to serve
the needs of the beneficiaries. Disbursements that do not comply with the law can endanger
benefits or at least reduce the amount of the benefit for a period of time, causing additional
hardship on the beneficiaries. These decisions, therefore, must be the product of intentional
processes to assure that everyone within the trust company makes consistent legal disbursements.
This presentation will take up some of the issues that trustees, and the attorneys that represent
them, should consider in order to make intentional discretionary decisions.
Trustee’s as Fiduciaries
Trustees act as fiduciaries.1 A fiduciary is defined as someone
who is required to act for the benefit of another person on all matters
within the scope of their relationship; one who owes to another the duties of good
faith, trust, confidence and candor … one who must exercise a high standard of
care in managing another’s money or property.2
The definition suggests three important concepts of the fiduciary relationship that inform
both the fiduciary and the attorney as to the general duties of the fiduciary.
1. Act for the benefit of another—the fiduciary is taking actions that should
benefit the principal. The concept is that the fiduciary must consider the benefit to the principal
before taking any action within the scope of the fiduciary relationship. The idea of self-dealing
and use of the principal’s property for the benefit of a third person are totally contrary to the
definition of a fiduciary.
2. Exercise duties of good faith, trust, confidence and candor—These
concepts sound particularly familiar to the attorney, as they represent the duties attorneys owe to
their clients. They recognize that the fiduciary when dealing with the principal should keep the
principal’s secrets, should not hide what the fiduciary is doing from the principal, and that the
fiduciary should do his best to operate for the best interest of the principal.
3. High standard of care in managing another’s money and property—The
fiduciary is also called to use care in managing the money and property of the principal. This
part of the definition is the bases of the Uniform Prudent Investor Act (UPIA), which will be
discussed below.
1 BLACK’S LAW DICTIONARY (Bryan A. Garner ed., 9th ed. West 2009)(defines a trustee as “[o]ne who stands as a
fiduciary or in a confidential relation to another [especially] one who having legal title to property holds it in trust
for the benefit of another and owes a fiduciary duty to the beneficiary”). See also Roberta Flowers and Rebecca
Morgan, ETHICS IN THE PRACTICE OF ELDER LAW (ABA 2013). 2 Id.
2
Therefore, trustees have several ethical duties to their beneficiaries. Those duties
include:
1. Avoiding self-dealing 2. Improper delegation of responsibilities 3. Deal impartially with beneficiaries 4. Prudently invest trust assets 5. Keeping accurate records 6. Filing tax returns and/or accountings 7. Complying with the terms of trust documents.
Application of the Model Rules of Professional Conduct
The ABA Model Rules of Professional Conduct although not directly applicable to non-
attorney trustees, can be instructive. First, the Rules provide for Competency under Rule 1.1,
which suggests that competency “requires the legal knowledge, skill, thoroughness and
preparation reasonably necessary . . .”3 This is exceptionally true for the trustee, who is making
disbursements for the benefit of the beneficiary. The trustee must have knowledge of the law
and its limitations on disbursements, but also exercise the thoroughness and preparation to make
sure the beneficiary is being provided the help they need. Trust companies must assure that each
of the staff that are making disbursements are thoroughly trained and kept updated on the some
time shifting opinions of government agencies overseeing disbursements.
In order to make disbursements for the benefit of the beneficiary, the trustee must know
the specific needs of the individual beneficiary. This requires communication with the
beneficiary, or their family or support system if the beneficiary is unable to communicate. The
ABA Rule explains that communication requires the following:
(1) informing the client of any decisions;
(2) consulting with the client about the means by which the client's objectives will be
accomplished;
(3) keeping the client informed about the status of the matter; and
(4) promptly complying with requests for information4
Trustees need to be communicating similarly with beneficiaries about the disbursements.
Making intentional decisions about disbursements means the trustee knows the individual
beneficiary’s needs. Creating ways to accomplish this communication will differ depending on
the structure of the trust company.
Confidentiality is also essential in trust work. Confidentiality does not only include the
financial information about beneficiaries, but any information including that they have a Special
Needs Trust in place. The ABA Rules define confidential information as “any information related
to the representation”5 Trustees must be trained to maintain confidentiality throughout the span of
their responsibilities to the beneficiary. Trustees must also be aware of the confidentiality rules
3 ABA Model Rule of Professional Responsibility 1.1 (2016). 4 ABA Model Rule of Professional Responsibility 1.4 (a) (2016). 5 ABA Rule of Professional Responsibility 1.6 (2016).
3
regarding communications with their attorneys. One special problem related to the extent of the
Trustee’s duty to beneficiaries is when and to what extent the Trustee must disclose to the
beneficiaries the Trustee’s communications with the Trustee’s lawyer concerning trust matters.
Comment f to Restatement (Third) of Trusts (“Restatement Third”) § 82 states that:
The trustee is privileged to refrain from disclosing to beneficiaries or co-
trustees opinions obtained from, and other communications with, counsel
retained for the trustee’s personal protection in the course, or in anticipation,
of litigation (e.g., for surcharge or removal). This situation is to be
distinguished from legal consultations and advice obtained in the trustee’s
fiduciary capacity concerning decisions or actions to be taken in the course
of administering the trust.
The attorney-client privilege in this context is not absolute. States differ as to whether
beneficiaries are entitled to access to communications between the Trustee and the Trustee’s
attorney. For example, in Jacob v. Barton, 6 a beneficiary sued a Trustee over alleged
mismanagement of a trust’s funds. The Florida district court’s decision upheld the attorney-client
privilege with respect to the Trustee’s attorney’s billing records. The court reasoned that the
Trustee hired the attorney to defend her in the dispute with the beneficiary. Therefore, the Trustee,
and not the beneficiary, was the client.
Courts in other states have carved out exceptions to the attorney-client privilege for
beneficiaries and have required disclosure of otherwise privileged communications between the
Trustee and the Trustee’s lawyer. These courts believe that the professional responsibilities of the
Trustee’s lawyer run through to the beneficiaries. The Court of Common Pleas of Pennsylvania7
held that there was no attorney-client privilege with respect to communications regarding the
management of the trust. The court reasoned that trust law imposes a duty on Trustees to share
with the beneficiary’s information relating to the trust, including opinions of attorneys that guide
the Trustee in his or her administration of the trust. The decision also stated that, on the other
hand, consistent with the Restatement Third, if a conflict arose between a beneficiary and a
Trustee, and the Trustee hired his or her own independent counsel, paid for by his or her private
funds and not out of the trust’s assets, their communications would be privileged.
The Supreme Court of the United States considered this issue in United States v. Jicarilla
Apache Nation,8 In this case, a Native American tribe sued the United States as Trustee for Apache
lands, alleging breach of trust. In the course of alternative dispute resolution, the United States
withheld certain evidence, claiming that such evidence was privileged information between the
Trustee and its lawyer. Lower court decisions had held that such evidence was not privileged, but
the Supreme Court upheld the privilege. However, this decision was based at least in part on the
Supreme Court’s finding that the United States, in its capacity as a fiduciary for the Apache lands,
was acting not as a traditional private Trustee, but rather its fiduciary obligations were created and
imposed by statute rather that common law, and further was acting pursuant to its sovereign interest
in the execution of federal law rather than as a private Trustee. Based on the Supreme Court’s
6 877 So.2d 935 (Fla. Dist. Ct.App. 2004) See, e.g., Wells Fargo Bank, N.A. v. Superior Court, 7 Follansbee v. Gerlach, 56 Pa. D. & C. 4th 483 (2002), 8 131 S. Ct. 2312 (2011).
4
distinction between the fiduciary obligations of the United States in this case and the fiduciary
obligations of a private Trustee, this case gives only limited guidance with respect to attorneys for
private Trustees and their clients.9
Finally, trustees must be alert to conflicts of interests that can arise. Conflicts can arise
from a variety of circumstances. Trustees must be aware and disclose any conflicts they may
have. Such conflicts could arise due to financial relationships with service providers that are
vendors for the trust company. Being deliberate about training and compliance are essential.
Laws applying to Trustees-Generally
Three uniform codes should be considered by trustees. They include the Uniform Trust
Code,10 the Uniform Prudent Investor Act11 and the Uniform Principal and Income Act.12 As
these are uniform acts, one needs to consult whether the state in which the trust is operating has
adopted these acts.
Much of the Uniform Trust Act deals with the provision of the trust itself. The key
provisions are regarding the default provisions that trust document can override, the mandatory
rules regarding what a trust must include. It also includes the duty of the trustee to act in good
faith, and that the purpose of trust is for benefit of its beneficiaries. Additionally, the trust must
have a lawful purpose and not violate public policy. The Uniform Code also provides for more
flexibility in modifying and terminating trusts. The Code treats revocable trusts as the equivalent
of a will and that a trust is revocable unless it is specified otherwise. Additionally, the Uniform
Code includes provisions for the Court to modify or terminate a trust and require a bond. Many
of these provisions will be considered at the time of the drafting of the trust.
Uniform Prudent Investor Act is again a model act and therefore trustees must consider the
application of the Act in the trust entity’s state. The Act sets standards for the investment of the
total portfolio not as to individual investments. Primary considerations should be between to
balance between risk and return considering the needs of the beneficiary. The Code does not
restrict the types of investments, but the requirement of diversification is under the prudent
investment definition. Investment responsibilities can be delegate with proper supervision.
Uniform Principal and Income Act is the final act that trustees must be aware of in the course
of handling the money entrusted to them. The provisions of this act can be substantially waived
by language in trust instrument. Some provision of this act may govern distribution to
beneficiaries.
9 See Charles Bennet, Frontiers in Ethics: The Estate Lawyers Duty of Loyalty and Confidentiality to the Fiduciary
Client: Examining the Past to Make Wise Choices Now and in the Future, 2007 Ohio Northern L. Rev. (2007). 10 https://my.uniformlaws.org/committees/community-home?CommunityKey=193ff839-7955-4846-8f3c-
ce74ac23938d (last visited April 25, 2019). 11 https://www.uniformlaws.org/viewdocument/final-act-with-comments-70?CommunityKey=58f87d0a-3617-4635-
a2af-9a4d02d119c9&tab=librarydocuments (last visited April 25, 2019). 12 https://www.uniformlaws.org/committees/community-home?CommunityKey=1105f9bb-eb93-4d4d-a1ab-
a535ef73de0c (last visited April 25, 2019).
5
Of course, Special Needs Trusts have specific requirements by federal statute. The trustee
under a Special Needs trust must be well versed in the issues surrounding public benefits and
how those benefits can be affected by distributions to the beneficiary. More coordination is
required with legal guardians, parents, advocates and trust advisors when acting as a trustee of a
special needs trust.
Role of the Attorney when Representing Trustees
One of the most important roles the attorney plays is education of the trustee as to the
requirements and limitations on disbursements. Attorney for trust companies handling special
needs trusts, need to take a proactive role in helping to educate and set policy within the
company that will direct the disbursements.
Client-Centered
The goal of the trust should be to consider the entire person and their quality of life. In
addition, the trust should be an effective partner with the beneficiary in building a better life
looking to critical areas that often have been overlooked in the past, such as employment. The
trust should have a process to regularly engage all beneficiaries in developing their plan for a
quality life in critical areas.13
The Trust should have a process in effect to routinely collect information about the trust’s
beneficiaries, so that when requests are made, information is available about the beneficiary. The
beneficiary’s desires and needs should be considered, even if the trustee might consider their
wants frivolous.
Office Policies
Intentional Decisions require that the trusts have developed policies that will address the
issues that arise in the area of disbursements every day. These policies should be specific and
give guidance to the authority of each trustee and the limitations on the trustee’s authority.
Some of the areas that should be covered by policy include:
Confidentiality Beneficiary Budgets Distributions Communications Assessments Providing Additional Services to Beneficiaries
Contracting with 3rd
Parties and the Use of Agents.
13 See A. Frank Johns, Legal Ethics applied to Initial Client-Lawyer Engagements in Which Lawyers Develop
Special Needs Trusts, 29 Wm Mitchell L. Rev. 48, 48-49 (2001-2003).
6
Appendix A
Applicable Rules of Professional Conduct
Rule 1.1 Competence
A lawyer shall provide competent representation to a client. Competent representation requires
the legal knowledge, skill, thoroughness and preparation reasonably necessary for the
representation.
Comment
Legal Knowledge and Skill
[1] In determining whether a lawyer employs the requisite knowledge and skill in a particular
matter, relevant factors include the relative complexity and specialized nature of the matter, the
lawyer's general experience, the lawyer's training and experience in the field in question, the
preparation and study the lawyer is able to give the matter and whether it is feasible to refer the
matter to, or associate or consult with, a lawyer of established competence in the field in
question. In many instances, the required proficiency is that of a general practitioner. Expertise
in a particular field of law may be required in some circumstances.
[2] A lawyer need not necessarily have special training or prior experience to handle legal
problems of a type with which the lawyer is unfamiliar. A newly admitted lawyer can be as
competent as a practitioner with long experience. Some important legal skills, such as the
analysis of precedent, the evaluation of evidence and legal drafting, are required in all legal
problems. Perhaps the most fundamental legal skill consists of determining what kind of legal
problems a situation may involve, a skill that necessarily transcends any particular specialized
knowledge. A lawyer can provide adequate representation in a wholly novel field through
necessary study. Competent representation can also be provided through the association of a
lawyer of established competence in the field in question.
[4] A lawyer may accept representation where the requisite level of competence can be
achieved by reasonable preparation. This applies as well to a lawyer who is appointed as counsel
for an unrepresented person. See also Rule 6.2.
Thoroughness and Preparation
[5] Competent handling of a particular matter includes inquiry into and analysis of the factual
and legal elements of the problem, and use of methods and procedures meeting the standards of
competent practitioners. It also includes adequate preparation. The required attention and
preparation are determined in part by what is at stake; major litigation and complex transactions
ordinarily require more extensive treatment than matters of lesser complexity and consequence.
An agreement between the lawyer and the client regarding the scope of the representation may
limit the matters for which the lawyer is responsible. See Rule 1.2(c).
7
Maintaining Competence
[8] To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in
the law and its practice, including the benefits and risks associated with relevant technology,
engage in continuing study and education and comply with all continuing legal education
requirements to which the lawyer is subject.
Rule 1.4 Communication
(a) A lawyer shall:
(1) promptly inform the client of any decision or circumstance with respect to which the client's
informed consent, as defined in Rule 1.0(e), is required by these Rules;
(2) reasonably consult with the client about the means by which the client's objectives are to be
accomplished;
(3) keep the client reasonably informed about the status of the matter;
(4) promptly comply with reasonable requests for information; and
(5) consult with the client about any relevant limitation on the lawyer's conduct when the lawyer
knows that the client expects assistance not permitted by the Rules of Professional Conduct or
other law.
(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to
make informed decisions regarding the representation.
Comment
[1] Reasonable communication between the lawyer and the client is necessary for the client
effectively to participate in the representation.
Communicating with Client
[2] If these Rules require that a particular decision about the representation be made by the
client, paragraph (a)(1) requires that the lawyer promptly consult with and secure the client's
consent prior to taking action unless prior discussions with the client have resolved what action
the client wants the lawyer to take. For example, a lawyer who receives from opposing counsel
an offer of settlement in a civil controversy or a proffered plea bargain in a criminal case must
promptly inform the client of its substance unless the client has previously indicated that the
proposal will be acceptable or unacceptable or has authorized the lawyer to accept or to reject the
offer. See Rule 1.2(a).
[3] Paragraph (a)(2) requires the lawyer to reasonably consult with the client about the means to
be used to accomplish the client's objectives. In some situations — depending on both the
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importance of the action under consideration and the feasibility of consulting with the client —
this duty will require consultation prior to taking action. In other circumstances, such as during a
trial when an immediate decision must be made, the exigency of the situation may require the
lawyer to act without prior consultation. In such cases the lawyer must nonetheless act
reasonably to inform the client of actions the lawyer has taken on the client's
behalf. Additionally, paragraph (a)(3) requires that the lawyer keep the client reasonably
informed about the status of the matter, such as significant developments affecting the timing or
the substance of the representation.
Explaining Matters
[5] The client should have sufficient information to participate intelligently in decisions
concerning the objectives of the representation and the means by which they are to be pursued, to
the extent the client is willing and able to do so. Adequacy of communication depends in part on
the kind of advice or assistance that is involved. For example, when there is time to explain a
proposal made in a negotiation, the lawyer should review all important provisions with the client
before proceeding to an agreement. In litigation a lawyer should explain the general strategy and
prospects of success and ordinarily should consult the client on tactics that are likely to result in
significant expense or to injure or coerce others. On the other hand, a lawyer ordinarily will not
be expected to describe trial or negotiation strategy in detail. The guiding principle is that the
lawyer should fulfill reasonable client expectations for information consistent with the duty to
act in the client's best interests, and the client's overall requirements as to the character of
representation. In certain circumstances, such as when a lawyer asks a client to consent to a
representation affected by a conflict of interest, the client must give informed consent, as defined
in Rule 1.0(e).
Rule 1.6 Confidentiality of Information
(a) A lawyer shall not reveal information relating to the representation of a client unless the
client gives informed consent, the disclosure is impliedly authorized in order to carry out the
representation or the disclosure is permitted by paragraph (b).
(b) A lawyer may reveal information relating to the representation of a client to the extent the
lawyer reasonably believes necessary:
(1) to prevent reasonably certain death or substantial bodily harm;
(2) to prevent the client from committing a crime or fraud that is reasonably certain to result in
substantial injury to the financial interests or property of another and in furtherance of which the
client has used or is using the lawyer's services;
(3) to prevent, mitigate or rectify substantial injury to the financial interests or property of
another that is reasonably certain to result or has resulted from the client's commission of a crime
or fraud in furtherance of which the client has used the lawyer's services; ...
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(c) A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure
of, or unauthorized access to, information relating to the representation of a client.
Comment
[1] This Rule governs the disclosure by a lawyer of information relating to the representation of
a client during the lawyer's representation of the client. See Rule 1.18 for the lawyer's duties with
respect to information provided to the lawyer by a prospective client, Rule 1.9(c)(2) for the
lawyer's duty not to reveal information relating to the lawyer's prior representation of a former
client and Rules 1.8(b) and 1.9(c)(1) for the lawyer's duties with respect to the use of such
information to the disadvantage of clients and former clients.
[2] A fundamental principle in the client-lawyer relationship is that, in the absence of the client's
informed consent, the lawyer must not reveal information relating to the representation. See Rule
1.0(e) for the definition of informed consent. This contributes to the trust that is the hallmark of
the client-lawyer relationship. The client is thereby encouraged to seek legal assistance and to
communicate fully and frankly with the lawyer even as to embarrassing or legally damaging
subject matter. The lawyer needs this information to represent the client effectively and, if
necessary, to advise the client to refrain from wrongful conduct. Almost without exception,
clients come to lawyers in order to determine their rights and what is, in the complex of laws and
regulations, deemed to be legal and correct. Based upon experience, lawyers know that almost all
clients follow the advice given, and the law is upheld.
[3] The principle of client-lawyer confidentiality is given effect by related bodies of law: the
attorney-client privilege, the work product doctrine and the rule of confidentiality established in
professional ethics. The attorney-client privilege and work product doctrine apply in judicial and
other proceedings in which a lawyer may be called as a witness or otherwise required to produce
evidence concerning a client. The rule of client-lawyer confidentiality applies in situations other
than those where evidence is sought from the lawyer through compulsion of law. The
confidentiality rule, for example, applies not only to matters communicated in confidence by the
client but also to all information relating to the representation, whatever its source. A lawyer may
not disclose such information except as authorized or required by the Rules of Professional
Conduct or other law. See also Scope.
[4] Paragraph (a) prohibits a lawyer from revealing information relating to the representation of
a client. This prohibition also applies to disclosures by a lawyer that do not in themselves reveal
protected information but could reasonably lead to the discovery of such information by a third
person. A lawyer's use of a hypothetical to discuss issues relating to the representation is
permissible so long as there is no reasonable likelihood that the listener will be able to ascertain
the identity of the client or the situation involved.
Authorized Disclosure
[5] Except to the extent that the client's instructions or special circumstances limit that authority,
a lawyer is impliedly authorized to make disclosures about a client when appropriate in carrying
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out the representation. In some situations, for example, a lawyer may be impliedly authorized to
admit a fact that cannot properly be disputed or to make a disclosure that facilitates a satisfactory
conclusion to a matter. Lawyers in a firm may, in the course of the firm's practice, disclose to
each other information relating to a client of the firm, unless the client has instructed that
particular information be confined to specified lawyers.
Disclosure Adverse to Client
[6] Although the public interest is usually best served by a strict rule requiring lawyers to
preserve the confidentiality of information relating to the representation of their clients, the
confidentiality rule is subject to limited exceptions. Paragraph (b)(1) recognizes the overriding
value of life and physical integrity and permits disclosure reasonably necessary to prevent
reasonably certain death or substantial bodily harm. Such harm is reasonably certain to occur if it
will be suffered imminently or if there is a present and substantial threat that a person will suffer
such harm at a later date if the lawyer fails to take action necessary to eliminate the threat. Thus,
a lawyer who knows that a client has accidentally discharged toxic waste into a town's water
supply may reveal this information to the authorities if there is a present and substantial risk that
a person who drinks the water will contract a life-threatening or debilitating disease and the
lawyer's disclosure is necessary to eliminate the threat or reduce the number of victims.
[7] Paragraph (b)(2) is a limited exception to the rule of confidentiality that permits the lawyer
to reveal information to the extent necessary to enable affected persons or appropriate authorities
to prevent the client from committing a crime or fraud, as defined in Rule 1.0(d), that is
reasonably certain to result in substantial injury to the financial or property interests of another
and in furtherance of which the client has used or is using the lawyer’s services. Such a serious
abuse of the client-lawyer relationship by the client forfeits the protection of this Rule. The client
can, of course, prevent such disclosure by refraining from the wrongful conduct. Although
paragraph (b)(2) does not require the lawyer to reveal the client’s misconduct, the lawyer may
not counsel or assist the client in conduct the lawyer knows is criminal or fraudulent. See Rule
1.2(d). See also Rule 1.16 with respect to the lawyer’s obligation or right to withdraw from the
representation of the client in such circumstances, and Rule 1.13(c), which permits the lawyer,
where the client is an organization, to reveal information relating to the representation in limited
circumstances.
[8] Paragraph (b)(3) addresses the situation in which the lawyer does not learn of the client’s
crime or fraud until after it has been consummated. Although the client no longer has the option
of preventing disclosure by refraining from the wrongful conduct, there will be situations in
which the loss suffered by the affected person can be prevented, rectified or mitigated. In such
situations, the lawyer may disclose information relating to the representation to the extent
necessary to enable the affected persons to prevent or mitigate reasonably certain losses or to
attempt to recoup their losses. Paragraph (b)(3) does not apply when a person who has
committed a crime or fraud thereafter employs a lawyer for representation concerning that
offense.
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Detection of Conflicts of Interest
[14] Any information disclosed pursuant to paragraph (b)(7) may be used or further disclosed
only to the extent necessary to detect and resolve conflicts of interest.
[16] Paragraph (b) permits disclosure only to the extent the lawyer reasonably believes the
disclosure is necessary to accomplish one of the purposes specified. Where practicable, the
lawyer should first seek to persuade the client to take suitable action to obviate the need for
disclosure. In any case, a disclosure adverse to the client's interest should be no greater than the
lawyer reasonably believes necessary to accomplish the purpose. If the disclosure will be made
in connection with a judicial proceeding, the disclosure should be made in a manner that limits
access to the information to the tribunal or other persons having a need to know it and
appropriate protective orders or other arrangements should be sought by the lawyer to the fullest
extent practicable.
[17] Paragraph (b) permits but does not require the disclosure of information relating to a
client's representation to accomplish the purposes specified in paragraphs (b)(1) through (b)(6).
In exercising the discretion conferred by this Rule, the lawyer may consider such factors as the
nature of the lawyer's relationship with the client and with those who might be injured by the
client, the lawyer's own involvement in the transaction and factors that may extenuate the
conduct in question. A lawyer's decision not to disclose as permitted by paragraph (b) does not
violate this Rule. Disclosure may be required, however, by other Rules. Some Rules require
disclosure only if such disclosure would be permitted by paragraph (b). See Rules 1.2(d), 4.1(b),
8.1 and 8.3. Rule 3.3, on the other hand, requires disclosure in some circumstances regardless of
whether such disclosure is permitted by this Rule. See Rule 3.3(c).
Former Client
[20] The duty of confidentiality continues after the client-lawyer relationship has terminated.
See Rule 1.9(c)(2). See Rule 1.9(c)(1) for the prohibition against using such information to the
disadvantage of the former client.
INTENTIONAL DECISION MAKING
Professor Roberta FlowersStetson University College of Law
ETHICAL AND PROFESSIONAL CONDUCT REQUIRES INTENTIONAL DECISION MAKING
• Competency—MRPC 1.1• Communication—MRPC 1.4• Confidentiality—MRPC 1.6• Conflicts—MRPC 1.7, 1.8, 1.9• Capacity—MRPC 1.14
TRUSTEESDuties—
Avoid self-dealingImproper delegationDeal Impartially with beneficiariesPrudently invest trust assetsKeep accurate recordsFile Tax returns and/or accountingsComply with the Terms of trust documents
LAWS APPLYING TO
TRUSTEES-GENERALLY
UNIFORM TRUST CODE
• Default provisions that trust document can override• Mandatory Rules• Requirements for creating a trust• Duty to act in good faith• Purpose of trust is for benefit of its beneficiaries/lawful purpose/not violate public policy• Powers of Court to modify or terminate trust• Power of Court to require a bond• Effect of spendthrift provisions and rights of creditors to reach the assets of the trust
UNIFORM TRUST CODE
• Provide more flexibility to modify and terminate trusts• Treats revocable trust as a Will equivalent• Presumption that trust is revocable unless trust says otherwise.• State Laws!!!!!!
UNIFORM PRUDENT INVESTOR ACT
• Prudence standard applies to total portfolio not as to individual investments• Primary consideration is balancing all investing between risk and return• Does not restrict the types of investments• Requirement of diversification is under prudent investment definition• May Delegate with proper supervision
UNIFORM PRINCIPAL AND INCOME ACT
• Most provision can be waived by language in trust instrument
• Allocation of assets to principal and income
• Governs distribution to beneficiaries
SPECIAL NEEDS TRUSTS• Understand public benefits programs• Understand how distributions from trust
may effect eligibility• Coordinate with legal guardians,
parents, advocates• Trust advisors
ROLE OF THE ATTORNEY
• EDUCATION/EDUCATION/EDUCATION
• Engagement -- in writing• Who is Client?• What happens if Trustee acts
improperly? • Analyze Trust instrument—Every
word counts• Is it a valid trust document• Investigate whether it has been
revoked/amended• Advise as to
investments?/disbursements
CLIENT-CENTERED
• The goal of the trust should be to consider the entire person and their quality of life.
• In addition, the trust should be an effective partner with the beneficiary in building a better life looking to critical areas that often have been overlooked in the past.
• The trust should have a process to regularly engage all beneficiaries in developing their plan for a quality life in critical areas.
OFFICE POLICIES
• Confidentiality • Beneficiary Budgets • Distributions • Communications • Assessments • Providing Additional Services to Beneficiaries • Contracting with 3rd Parties and the Use of Agents
NON-ROUTINE DISTRIBUTIONS
• Client Centered--Primary benefit of the beneficiary
• Not be based on values of trustee
• Religious distribution—Tithing?
• Best Interests of the beneficiary/substituted decision-making
ALWAYS REMEMBERINGWHY WE DO THIS!!!!
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