We recently handled a matter involving a variety of claims pertaining to special needs trusts and a guardianship established for the benefit of an individual who became incapacitated after a tragic car accident. The Court was presented with a myriad of issues stemming from the conduct of the trustee and professional guardian and her controversial billing practices in those dual roles. Several lessons can be learned from such cases.
An individual who is both a guardian and the trustee of a trust established for the ward’s benefit may collect fees for services performed in both roles, however the trustee/guardian must be very careful to ensure they are billing appropriately. The Probate Court has jurisdiction to review and approve (or disapprove) fees to professional guardians, and trustee compensation when the trust is subject to judicial oversight (such as a special needs trust). Trustee/guardians should keep detailed records reflecting work they performed for the benefit of the ward, keeping in mind that such records may either make or break a claim for fees.
Many trusts allow a trustee to receive a “reasonable rate” of compensation. Depending on the circumstances, this amount may be substantially higher than the fees collectible as a professional guardian, which are limited to $60 per hour by Administrative Order 2014-64, absent good cause or exceptional circumstances. It should go without saying that a professional guardian who charges in excess of the allowed rate may not reclassify their time from “guardian fees” to “trustee fees” in order to receive a higher rate of pay. Unfortunately, there have been instances where tasks were billed as guardian fees until January 1, 2015 when AO-2014-64 went into effect, and were thereafter billed as trustee fees. In such instances, the Court may approve the change if warranted (after testimony by the trustee/guardian), disallow the fees entirely, or reduce the trustee fees to the lower, guardian fee rate.
The Court will also examine itemized time entries to identify the nature and extent of the tasks performed for the benefit of the ward. If essentially identical tasks are billed in both capacities as guardian and trustee during the same time period, the Court will likely disallow the duplicative fees.
The Court will also evaluate whether time entries reflect ministerial or clerical tasks, and whether they appear to be automated entries that reflect a general description of activities that may or may not have been performed on the date billed, i.e. billing for “review and pay bills” on the first and last day of every month, as both trustee and guardian. Such billing practices will be closely scrutinized and are generally impermissible, particularly if the trustee/guardian cannot assure the Court that such work was in fact performed.
A trustee/guardian must also take care not to pursue complicated legal actions for the benefit of the ward without advice of counsel, and should be wary of proceeding with a legal action if they cannot find a lawyer to take the case. A cost/benefit analysis should be performed before a trustee/guardian pursues a challenging legal claim with no legal training or oversight. If the remedy sought is denied and the action unsuccessful, and the fees charged to the ward exceed the desired recovery, do not be surprised if the fees are disallowed as unreasonable.
The trustee/guardian should also exercise careful judgment in determining whether to establish a second special needs trust when one is already in place. The Court will evaluate the reasoning and circumstances that purportedly justify establishing a second trust. If it appears to have been established as an additional vehicle for billing purposes, or if there is simply no good reason justifying its existence, the Court may order reimbursement of fees collected from the second, unnecessary trust.
Trustee/guardian fees charged in excess of the amount expended for the benefit of a ward are a red flag for the Court. Trustee/guardian fees should not so materially deplete a ward’s assets, and the Court will be greatly concerned to see such billing practices.
A trustee/guardian who engages in billing practices akin to those described above may be ordered to refund their fees to the ward’s trust or estate. For example, the Probate Court in our case ordered the (non-client) trustee/guardian to return approximately $20,000 in improperly collected compensation. Such cases serve as a reminder of the fiduciary duties owed by a trustee/guardian and the necessity of Court oversight to ensure those duties are properly exercised by those entrusted to care for our most State’s most vulnerable citizens.
