Elder Law

Parents Of Disabled Child Removed As Trustees of Child?s Special Needs Trust After Commingling Funds

By dvanar

A Rhode Island court removed the co-trustees of a special needs trust established for the co-trustees’ son after the parents, who were getting divorced, commingled trust funds with their own bank accounts and spent trust funds on alcohol and their own rent and groceries.

Matthew Goodness was born with cerebral palsy and received a deferred annuity as part of a settlement agreement resulting from a medical malpractice lawsuit filed on Matthew?s behalf. The annuity payments began on Matthew’s 18th birthday and were deposited into a special needs trust established by his parents for his sole benefit. His parents, Mary and Francis Goodness, were named as co-trustees of the trust, and Fleet Bank (now Bank of America) was named as successor trustee.

As soon as the annuity payments began, both parents, who were separated and seeking a divorce, started withdrawing the annuity payments from the trust and placing the funds into their separate bank accounts. Mrs. Goodness, who lived next door to Matthew, used funds from the trust to pay for her rent and grocery bills, while Mr. Goodness spent trust funds on beer. Neither parent coordinated Matthew’s care with the other, although they did succeed in paying Matthew’s necessary expenses. Mrs. Goodness eventually filed a petition to remove Mr. Goodness as co-trustee, and Mr. Goodness filed a counterclaim to remove Mrs. Goodness. At the court hearing, both parents testified that they had not kept records of the trust’s activities.

The Rhode Island Superior Court removed both parents as trustees and appointed Bank of America as successor trustee. The court concluded that “both Francis and Mary have (1) breached their duty of loyalty to the Trust; (2) impermissibly co-mingled Trust funds with their personal funds; (3) wasted and depleted Trust fund assets; and (4) breached their fiduciary duty to the Trust.”

The In Re Matthew W. T. Goodness Trust case is annexed here - in-re-matthew-w-t-goodness-trust

Full post as published by Law Office of Donald D. Vanarelli Blog on May 29, 2009 (boomark / email).