Louisiana Case: SNT Beneficiary Bound by Trustee’s Arbitration Agreement

La!  How exciting to see a Louisiana case make the Special Needs Planning news.  No new ground is broken here, however, as this case was over whether the beneficiary must abide by the arbitration agreement signed by his trustee when a bank account was opened up for the trust. 

The full background is not available in the court’s decision, but it would appear that the trustee mismanaged the funds and the beneficiary is attempting to hold the bank responsible in court.  That is probably the beneficiary’s best hope of actually getting any of the bungled trust’s money back.  Nonetheless, even though the trustee failed in his duties to protect the beneficiary’s interest in the trust, he was legally authorized to enter into agreements like the one in dispute here, where he agreed on behalf of the trust to use private arbitration to settle any disputes with the bank over the trust, rather than suing them in court.  The take-away for observers of special needs planning is this: be careful who you choose for your trustee!

So here’s the story:

A Louisiana appeals court rules that a beneficiary of a special needs trust who is suing the trust’s bank and financial advisor for breach of contract is bound by arbitration clauses signed by the trustee when he opened the trust accounts.  Green v. Regions Bank (La. Ct. App., No. 2013 CA 0771, March 19, 2014)(unpublished).

Erica Green was seriously injured in a car crash in 1998, when she was still a minor.  Ms. Green’s $443,240.38 personal injury settlement was deposited into a special needs trust that named her father, Eric Green, as trustee.  In 2006, Mr. Green opened a bank account in his name at AmSouth (later Regions) Bank and deposited an unknown amount of trust funds into the account.  Mr. Green also deposited $300,000 of trust funds into an investment account in the name of the trust with Morgan Keegan, a financial advisor.  Mr. Green signed customer relationship agreements with both entities containing binding arbitration provisions at the time that he set up the original accounts. When Mr. Green passed away in 2008, the trust funds had been almost completely exhausted.  (The opinion does not say what the funds were used for.)  In 2009, the new trustee of the trust filed suit against Regions Bank and Morgan Keegan, claiming that they were liable for breach of contract, negligence, breach of a duty of reasonable care and negligent misrepresentation.  The trial court dismissed the case, claiming that the new trustee was bound by the arbitration agreements signed by Mr. Green.  In 2012, Ms. Green, now an adult and acting as a beneficiary of the trust, filed a similar lawsuit against both entities.  Regions Bank and Morgan Keegan both filed motions to dismiss based on the arbitration clauses, but Ms. Green argued that the clauses did not apply to her because she was a trust beneficiary and not the trustee.  The trial court granted the motions to dismiss and Ms. Green appealed. The Louisiana Court of Appeal, First Circuit, upholds the trial court’s decision.  The court finds that “[t]o the extent Ms. Green’s claims are based on breach of the agreements Mr. Green had with Regions Bank and Morgan Keegan, she cannot hold these parties to certain terms of the agreements but not to others.  If a non-signatory seeks to enforce the terms of a written agreement containing an arbitration provision, he must accept all of the terms of the agreement, including the arbitration provision. . . The non-signatory cannot have it both ways; he cannot rely on the agreement when it works to his advantage and then repudiate the agreement when it works to his disadvantage.”   To read the full text of this decision, go to: http://www.la-fcca.org/opiniongrid/opinionpdf/2013%20CA%200771%20Decision%20Appeal.pdf

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Bill to Increase SSI Resource, Income Limits Starts Climb in Senate

On March 7, Senators Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) introduced a bill that would dramatically increase Supplemental Security Income (SSI) resource limits and income exclusions, as well as eliminate penalties for applicants who receive in-kind food and shelter.  These increased limits would add a degree of flexibility in special needs planning, along with helping recipients to potentially avoid accidental overages that can lead to loss of services.  Louisiana’s Medicaid resource limits follow the federal SSI limits. The Supplemental Security Income Restoration Act of 2014, S. 2089, calls for an $8,000 increase to SSI’s longstanding $2,000 individual resource limit, making the new resource ceiling $10,000, and it would also raise a couple’s resource limit from the current cap of $3,000 to $15,000. Under current law, the first $20 of an individual’s unearned income does not count towards his monthly SSI income limit.  The proposed legislation would increase this monthly general income exclusion to $110.  In addition, the earned income exclusion would rise from $65 per month to $357.  Both the resource limits and the income exclusions would be indexed for inflation beginning in 2016. Finally, the bill would also eliminate the penalty on beneficiaries who receive in-kind support and maintenance, commonly known as the one-third reduction rule, so beneficiaries can live rent-free in someone else’s home without seeing their SSI awards reduced.   In a press release, Sen. Brown explained that “inflation has significantly decreased the ability to qualify for SSI benefits, hurting seniors, the disabled and blind, and more than one million children.”  Sen. Brown’s office argues that the current resource and income limits prevent people from saving and leave many SSI beneficiaries below the poverty line. To read the full text of the Supplemental Security Income Restoration Act of 2014 (S. 2089), click here.]]>