A divided North Carolina Supreme Court rules that the trustee of a special needs trust was properly removed for violating his statutory fiduciary duties, regardless of his obligations under the trust instrument. In re Estate of Skinner (N.C., No. 277A16, Sept. 29, 2017).
In April 2010, Cathleen Bass, born in 1951, was diagnosed with seizure disorder and early stages of dementia, was found incompetent by a court. In August 2010, she married and took the name of her long-time friend Mark Skinner. He was appointed legal guardian of Ms. Skinner’s person in August 2011.
Following the death of Ms. Skinner’s mother in August 2012, Mr. Skinner sought to serve as guardian of Ms. Skinner’s estate so that she could receive a significant monetary distribution from her mother’s estate. Ms. Skinner’s brother and sister opposed Mr. Skinner’s appointment as guardian, claiming that he had used her funds for his own personal gain. After a hearing, the assistant clerk of the Superior Court concluded that Mr. Skinner would be appointed guardian of the estate if he posted bond, set up a special needs trust (SNT) for Ms. Skinner with no proceeds spent except pursuant to the terms of the trust, and the trust provided for annual reports to Ms. Skinner’s sister. Mr. Skinner complied, set up an SNT for which he was trustee, and was appointed guardian of Ms. Skinner’s estate in April 2014.
On June 16, 2014, more than $170,000 was deposited into the trust from Ms. Skinner’s mother’s estate, but by July 31, 2014, only $10,313.66 remained in the account. Ms. Skinner’s siblings petitioned the court to have Mr. Skinner removed as trustee, alleging his non-compliance with a trust provision. Following an evidentiary hearing, the assistant clerk found as fact, inter alia, that Mr. Skinner had utilized funds from the trust to pay for his own personal expenses and that he had used trust assets to purchase a house, new furniture, and new appliances for the Skinners’ use. The assistant clerk concluded that Mr. Skinner breached his fiduciary duty by converting the trust’s assets to his own use. Mr. Skinner was removed as trustee and guardian of Ms. Skinner’s estate.
When the trial court affirmed the order, Mr. Skinner appealed again, arguing that there were no findings that he abused his discretion as trustee, had a dishonest motive, or violated the trust agreement. The Court of Appeals agreed and reversed the assistant clerk’s order. Ms. Skinner’s siblings appealed to the North Carolina Supreme Court, arguing that the Court of Appeals failed to limit its review to whether there was a clear abuse of discretion.
The Supreme Court of North Carolina reverses the decision of the Court of Appeals. The proper standard of review is whether the assistant clerk committed an error of law, the court holds. The court concludes that the assistant clerk’s finding that Mr. Skinner spent more than 90 percent of the money deposited in the SNT within 60 days of controlling those funds for purposes that benefitted him supports his removal as trustee and guardian. In dissent, three justices write that the assistant clerk misinterpreted the “essence” of an SNT. They conclude that there was no finding that Mr. Skinner violated any provision of the trust.
For the full text of this decision, click here.
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