A Washington State appeals court finds that a trial court should not consider the state's loss when deciding whether to modify an existing trust to create a special needs trust. Trust Of George X. Riddle & Irene A. Riddell (Wash. Ct. App., No. 05-4-00250-5, May 8, 2007).
Ralph Riddell's parents left the residue of their estate in trust for Mr. Riddell. Upon Mr. Riddell's death, the trust would distribute the principal to Mr. Riddell's son and daughter. Mr. Riddell's daughter, Nancy Riddell, suffers from schizoaffective and bipolar disorders and does not live independently.
Mr. Riddell petitioned the court to modify the trust to put Ms. Riddell's portion in a special needs trust instead of distributing the trust principal to her. The trial court refused to modify the trust, finding that the purpose of the trust was to provide for medical care and the modification would permit the family to immunize itself from reimbursing the state for Ms. Riddell's medical costs. Mr. Riddell appealed.
The Washington Court of Appeals remands the case back to the trial court to determine if equitable deviation was appropriate based on the settlor's intent and the changed circumstances. The court holds that the trial court should not have considered the state's loss when deciding whether an equitable deviation is allowed. According to the court, "the law invites, rather than discourages, the creation of special needs trusts in just this sort of situation."
Subscribe to the Knowledge Bank.
