New York DA Says Parents Stole from Son's Special Needs Trust

Posted By Steven Adler || 1-May-2012

A New York couple is accused of stealing more than $1 million from their disabled son's trust after his death. The boy was born disabled because of negligent medical care during his delivery. His supplemental needs trust was established when the hospital paid $2 million after a lawsuit.

Supplemental needs trusts are often created to ensure special needs children still qualify for public assistance programs. These trusts are highly beneficial because the child will be protected even after the parents' death. Supplemental needs trusts are also advantageous because the parents can designate a trustee to ensure the assets are used to help the child. Sadly, the parents in this case outlived their child, and allegedly misused the funds.

The trust allowed the boy to qualify for Medicaid, but it was supposed to reimburse New York's Human Resources Administration after his death for the medical expenses. The parents were named as joint trustees and received $150,000 immediately after the lawsuit. They would receive any remaining funds after paying HRA back.

The grand larceny charges allege that the state made repeated efforts to collect the $1.8 million spent on the boy's medical care. No withdrawals were made during the boy's 15 years, which were spent in an institution. Between the boy's death in 2008 and the parents' arrest, more than $1 million was removed from the account.

Stories like this are an unfortunate occurance because supplemental needs trusts help many good people. While there are the rare cases of misuse, such as in this instance, the reporting of it in the media may skew the perception that people abuse this kind of trust. In fact, it is most often used as intended and highly beneficial.

Source: The Wall Street Journal, " NYC DA: Parents stole from disabled son's trust," April 17, 2012

Categories: Trust Administration