What Can a Remainder Beneficiary Do If the Trustee is Overspending?

 In Special Needs Planning

Question:

I am a remainder beneficiary of an irrevocable trust that was set up for my younger brother with cerebral palsy. The trustee is not giving my best interests in mind at all. He is paying my brother’s wife a salary as well as paying for a companion for my brother.

Response:

A trustee’s role is not an easy one. The trustee must balance the needs of the current beneficiary with those of future ones. In addition, the trustee must balance current needs with potential future ones. In most cases, the trust itself provides little guidance.

Some special needs trust state explicitly that the trustee is only to look at the needs of the special needs beneficiary and not those of the remainder beneficiaries, the idea being that the trust is primarily for the benefit of the individual with special needs and the provision for people to get distributions at his death is only there because the funds have to go somewhere.

Your argument, were you to challenge the trustee’s actions, would be that the trustee is wasting the trust by profligately spending the trust money beyond what your brother needs and what the grantor of the trust intended. Unfortunately, unless matters are really egregious, if the trustee is taking proper care — overseeing the trust distributions, visiting your brother, consulting with professional advisors, such as care managers — any court is likely to defer to the trustee’s judgment. If the trustee is asleep at the switch, you would have a better chance of getting court oversight or a change of trustees.

In any event, by having a lawyer begin to ask question could make the trustee pay more attention and perhaps limit the outflow of funds.

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