Court Properly Added Beneficiary To Case Seeking Removal of SNT Trustees

Abbie Dorn, while delivering triplets in 2006, suffered catastrophic injuries and was left permanently disabled. A medical malpractice action yielded a settlement of $6,730,000. A Special Needs Trust was established, which was funded with an initial contribution of $910,275.20. The balance was funded by a $4,333,105 annuity, which was to provide periodic payments of $31,000 per month to the Trust to be paid for the rest of Abbie’s life. This monthly payment was to increase 3.5% per year.

Abbie was the sole beneficiary of the Trust. The children were the remainder beneficiaries. Her parents, Paul and Susan Cohen, were named as Trustees. Due to the fact that she was unable to secure daily visitation with her children, the Cohens relocated Abbie from California to their home in South Carolina.

In 2008, Abbie’s husband, Daniel, informed the Cohens that he wanted to divorce Abbie. A two part petition was filed. The first part, seeking dissolution of the marriage, was resolved quickly. The second part, involving the custody, support and maintenance of the three children ensued until 2011.

In 2010, Daniel filed an emergent application in the probate court in South Carolina seeking to remove the Cohens as Trustees of Abbie’s trust. He alleged that the Cohens had not obtained prior approval to incur counsel fees ($495,326.75 regarding the visitation proceedings) and that the Trust was to be used solely for medical care. The Cohens filed a petition of their own seeking ratification of their expenditures and reformation of some of the Trust’s terms.

Guardians ad litem were appointed to represent the children, as they were minors. Appearances were filed by a court appointed attorney and a guardian ad litem for Abbie. Disputes arose over the nature and the extent of their involvement in these proceedings. Eventually, the trial court added Abbie as a named party to the action. Daniel objected, stating that he as Plaintiff had the sole authority to name defendants to a lawsuit.

The Court of Appeals of South Carolina affirmed the probate court’s ruling. (See Dorn v. Cohen, 2016 S.C. App. LEXIS 93 (S.C. Ct. App. Aug. 3, 2016)) In essence, the Court noted the ability to have intervening parties in a court action.

What is notable about this case is the assertion that a Special Needs Trust beneficiary should be part of an action about its administration. In order for a Special Needs Trust to be valid, it must meet a variety of criteria established by the federal government. This criteria includes that the beneficiary cannot be a trustee nor be able to make any demand from the trustees for payment. In short, the beneficiary cannot assert any control over the trust.

Yet the Court, I believe, properly asserted nevertheless that the voice of a beneficiary should be heard to the extent practical. Although the Cohens apparently had not benefitted personally from the Trust and had provided excellent care to Abbie, the Court felt that what the Cohens thought was in Abbie’s best interest may not be the same as what Abbie or an independent guardian ad litem would determine. The Court rebutted the position of Daniel that Abbie did not need to be named as a party to the action, as the dispute was over the use of the trust funds. The Court asserted that the beneficiary of a trust, even if not in control, should be a party, as said beneficiary is the object and reason for the trust. Thus, in the event one needs to file an action over the administration of a Special Needs Trust, it appears that it would be prudent to name the trust beneficiary as an interested party to insure that he or she has a reasonable voice as to how the trust is administered.

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Thomas D. Begley, III

About the Author

Thomas D. Begley, III is the co-chair of the Trusts & Estates Group at Capehart Scatchard. He is a Certified Elder Law Attorney (CELA) who earned both his undergraduate and law degrees from Georgetown University, located in Washington, D.C. He concentrates his practice in the areas of estate and tax planning, estate administration, small business representation, elder law, and probate litigation. He is an accomplished author and lecturer who has frequently spoken on behalf of the National Academy of Elder Law Attorneys and the New Jersey Institute for Continuing Legal Education as well as other professional organizations. He has been named a “Super Lawyer” as voted by his peers and facilitated by New Jersey Monthly in the area of Trusts and Estate Litigation on numerous occasions. He has attained the prestigious AV rating by Martindale-Hubbell.

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