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Reversing District Court, 7th Circuit Orders Pooled Trust to Pay SNT Beneficiary's Estate
Finding ambiguity in a pooled special needs trust (SNT) agreement, a federal appeals court overturns a district court decision and determines from extrinsic evidence the settlor’s intent to distribute remaining funds to her children. National Foundation for Special Needs Integrity, Inc. v. Reese(7th Cir., No. 17-1817, Feb. 7, 2018).
In a case we previously covered, the estate of Missouri resident Theresa Givens through her son Devon Reese sought to recover more than $234,000 remaining in her sub-account with National Foundation for Special Needs Integrity. National Foundation is a pooled special needs trust trustee founded by disbarred attorney Kenneth Shane Service. Ms. Givens funded the trust with nearly $255,000 just one month before her death in November 2011. No money was owed the state for reimbursement of costs, leaving almost all the funds in her account.
Shortly after her death, National Foundation notified Ms. Givens’ estate that the money would go to the State of Missouri when, in fact, it kept the money for itself. More than three years later, in early 2015, National Foundation told the family that it would keep the money. By then, National Foundation already had spent all the remaining funds. The trust then sought a declaration from the court that it was entitled to keep funds left in the account and Ms. Givens’ estate replied with a suit seeking distribution of the funds to it.
The trust agreement that Ms. Givens signed contained conflicting provisions. One stated that National Foundation “shall not retain any portion of the Beneficiary’s trust Sub-Account upon his or her death.” However, another stated that money remaining in an account upon death of a beneficiary would go to National Foundation if no contingent beneficiary was named. Ms. Givens had named herself as contingent/remainder beneficiary. National Foundation argued that by naming herself, Ms. Givens intended for the trust rather than her children to receive the remaining funds. Her estate argued ambiguity in the agreement and mistake by Ms. Givens. The district court found in favor of National Foundation. The estate appealed.
The United States Court of Appeals for the Seventh Circuit reverses and remands for entry of judgment. The court finds that the language of the trust agreement is plainly ambiguous. Noting that Mr. Service testified he had intentionally drafted the agreement to be confusing, the court looks beyond the agreement to determine Ms. Givens’ intent regarding distribution of funds after her death. Taking in extrinsic evidence and applying accepted principles of trust construction, the court finds it highly improbable that Ms. Givens intended to give the money to National Foundation, a stranger to her. On remand, the district court is to order National Foundation to pay the estate $234,181.23 plus prejudgment interest.
A roundup of elder law news and practice development articles culled from news sources across the nation during the week of October 29, 2024, to November 4, 2024.
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Reversing District Court, 7th Circuit Orders Pooled Trust to Pay SNT Beneficiary's Estate
Finding ambiguity in a pooled special needs trust (SNT) agreement, a federal appeals court overturns a district court decision and determines from extrinsic evidence the settlor’s intent to distribute remaining funds to her children. National Foundation for Special Needs Integrity, Inc. v. Reese(7th Cir., No. 17-1817, Feb. 7, 2018).
In a case we previously covered, the estate of Missouri resident Theresa Givens through her son Devon Reese sought to recover more than $234,000 remaining in her sub-account with National Foundation for Special Needs Integrity. National Foundation is a pooled special needs trust trustee founded by disbarred attorney Kenneth Shane Service. Ms. Givens funded the trust with nearly $255,000 just one month before her death in November 2011. No money was owed the state for reimbursement of costs, leaving almost all the funds in her account.
Shortly after her death, National Foundation notified Ms. Givens’ estate that the money would go to the State of Missouri when, in fact, it kept the money for itself. More than three years later, in early 2015, National Foundation told the family that it would keep the money. By then, National Foundation already had spent all the remaining funds. The trust then sought a declaration from the court that it was entitled to keep funds left in the account and Ms. Givens’ estate replied with a suit seeking distribution of the funds to it.
The trust agreement that Ms. Givens signed contained conflicting provisions. One stated that National Foundation “shall not retain any portion of the Beneficiary’s trust Sub-Account upon his or her death.” However, another stated that money remaining in an account upon death of a beneficiary would go to National Foundation if no contingent beneficiary was named. Ms. Givens had named herself as contingent/remainder beneficiary. National Foundation argued that by naming herself, Ms. Givens intended for the trust rather than her children to receive the remaining funds. Her estate argued ambiguity in the agreement and mistake by Ms. Givens. The district court found in favor of National Foundation. The estate appealed.
The United States Court of Appeals for the Seventh Circuit reverses and remands for entry of judgment. The court finds that the language of the trust agreement is plainly ambiguous. Noting that Mr. Service testified he had intentionally drafted the agreement to be confusing, the court looks beyond the agreement to determine Ms. Givens’ intent regarding distribution of funds after her death. Taking in extrinsic evidence and applying accepted principles of trust construction, the court finds it highly improbable that Ms. Givens intended to give the money to National Foundation, a stranger to her. On remand, the district court is to order National Foundation to pay the estate $234,181.23 plus prejudgment interest.
For a discussion of the decision by Arizona elder law attorney Robert Fleming, click here.
Reversing District Court, 7th Circuit Orders Pooled Trust to Pay SNT Beneficiary's Estate
<p>Finding ambiguity in a pooled special needs trust (SNT) agreement, a federal appeals court overturns a district court decision and determines from extrinsic evidence the settlor’s intent to distribute remaining funds to her children. <em><a href="https://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2018/D02-07/C:17-1817:J:Hamilton:aut:T:fnOp:N:2104172:S:0" target="_blank">National Foundation for Special Needs Integrity, Inc. v. Reese</a> </em>(7th Cir., No. 17-1817, Feb. 7, 2018). </p>
<p>In a case we <a href="https://attorney.elderlawanswers.com/court-denies-claim-to-reform-pooled-snt-agreement-in-favor-of-deceased-beneficiarys-children-16020" target="_blank">previously covered</a>, the estate of Missouri resident Theresa Givens through her son Devon Reese sought to recover more than $234,000 remaining in her sub-account with National Foundation for Special Needs Integrity. National Foundation is a pooled special needs trust trustee founded by <a href="https://attorney.elderlawanswers.com/legal-woes-for-suspended-snt-attorney-and-the-pooled-trust-he-founded-continue-16374" target="_blank">disbarred attorney Kenneth Shane Service. </a> Ms. Givens funded the trust with nearly $255,000 just one month before her death in November 2011. No money was owed the state for reimbursement of costs, leaving almost all the funds in her account. </p>
<p>Shortly after her death, National Foundation notified Ms. Givens’ estate that the money would go to the State of Missouri when, in fact, it kept the money for itself. More than three years later, in early 2015, National Foundation told the family that it would keep the money. By then, National Foundation already had spent all the remaining funds. The trust then sought a declaration from the court that it was entitled to keep funds left in the account and Ms. Givens’ estate replied with a suit seeking distribution of the funds to it. </p>
<p>The trust agreement that Ms. Givens signed contained conflicting provisions. One stated that National Foundation “shall not retain any portion of the Beneficiary’s trust Sub-Account upon his or her death.” However, another stated that money remaining in an account upon death of a beneficiary would go to National Foundation if no contingent beneficiary was named. Ms. Givens had named herself as contingent/remainder beneficiary. National Foundation argued that by naming herself, Ms. Givens intended for the trust rather than her children to receive the remaining funds. Her estate argued ambiguity in the agreement and mistake by Ms. Givens. The district court found in favor of National Foundation. The estate appealed. </p>
<p>The United States Court of Appeals for the Seventh Circuit reverses and remands for entry of judgment. The court finds that the language of the trust agreement is plainly ambiguous. Noting that Mr. Service testified he had intentionally drafted the agreement to be confusing, the court looks beyond the agreement to determine Ms. Givens’ intent regarding distribution of funds after her death. Taking in extrinsic evidence and applying accepted principles of trust construction, the court finds it highly improbable that Ms. Givens intended to give the money to National Foundation, a stranger to her. On remand, the district court is to order National Foundation to pay the estate $234,181.23 plus prejudgment interest. </p>
<p>To read the court’s full opinion, <a href="https://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2018/D02-07/C:17-1817:J:Hamilton:aut:T:fnOp:N:2104172:S:0" target="_blank">click here.</a> </p>
<p>For a discussion of the decision by Arizona elder law attorney Robert Fleming, <a href="https://elder-law.com/pooled-special-needs-trust-payable-to-estate-on-beneficiarys-death/" target="_blank">click here</a>.</p>
<p> </p>
<p> </p>
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