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The recent case of JP Morgan Chase NA v. Marie H. should be wake-up call to trustees to educate themselves about the obligations they have to the beneficiaries of the trusts
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they administer, especially when they know or should know that those beneficiaries have special needs.
In this case, upon learning of her terminal cancer, Marie took appropriate steps to set up a plan for the care of her two children. When Marie died she left her $12 million estate to her revocable trust that created two trusts for the benefit of her sons, Charles and Mark, then 17 and 16 years old, respectively. Since her two children were minors and since Mark suffered from severe disabilities, it was especially important for Marie that her estate plan honor her wishes.
Marie’s sister, Betty was named as executor of her estate, guardian of the person and property of Charles and Mark, and as co-trustee of Mark’s Trust. However, since Betty predeceased Marie, Marie’s attorney and JP Morgan Chase were named as co-trustees of Mark’s multi-million dollar trust.
Despite all of Marie’s planning and efforts to provide for the care of her severely disabled and vulnerable son, Mark remained an institutional setting for several years without receiving any benefits of the multi-million dollar trust his mother left him.
After uncovering the neglect Mark had suffered, New York County Surrogate’s Court Judge Kristin Booth-Glen found that the co-trustees of Mark’s trust breached their fiduciary obligations by failing to visit Mark, inquire about his needs or apply any of the trust income towards improving his condition. Accordingly, the co-trustees were subject to denial or reduction of commissions, among other remedies.
The court found that the trustees failed to exhibit a reasonable degree of diligence toward the beneficiary. It was not enough that the trustees prudently invested and safeguarded the trust’s assets. The court found that the co-trustees were affirmatively charged with applying trust assets to Mark’s benefit.
Had the co-trustees been fully informed of Mark’s needs, steps could have been taken to vastly improve his quality of life. It is not enough that trustees take care of the trust assets, they need to make sure they are educating themselves about the needs of the trust’s beneficiaries, and providing for those needs accordingly.