A U.S. district court holds that a co-guardian of a special needs trust (SNT) beneficiary lacks standing to pursue the beneficiary’s claims against a trustee if there is a potential conflict of interest between the co-guardian and the beneficiary. In re Joyce C. Dalton Trust (E.D. Mo., No. 4:20CV1406JCH, Dec. 23, 2020).
In 1988, Joyce C. Dalton created a revocable living trust. The trust provided for Ms. Dalton during her lifetime and that whenever property passed to her descendants, the trustees had discretion to distribute income or principal to the trustor’s two children but were directed to place the needs of the trustor’s disabled daughter, Andrea, above those of the trustor’s son or his descendants and not to distribute sums that would disqualify Andrea from government assistance unless necessary for her overall benefit.
In 1998, Ms. Dalton died and the trust became irrevocable. After her death, her attorney, David P. Oetting, and Wells Fargo Bank served as co-trustees of a special needs trust that had been created to provide for Andrea’s needs. Wells Fargo resigned as co-trustee effective January 1, 2018. Mr. Oetting then served as sole trustee of the trust. Colleen and David Barringer served as Andrea’s appointed guardians as of May 2008.
In August 2020, Ms. Barringer filed a complaint against Wells Fargo to recover as much as $800,000 in trust assets that it allegedly wrongly disbursed on behalf of Andrea rather than seeking and obtaining government benefits, including Supplemental Security Income and Medicaid. Wells Fargo moved to dismiss the complaint based on a conflict of interest between Ms. Barringer and the trust beneficiaries, arguing that Ms. Barringer had a duty to determine whether Andrea was receiving all the government benefits to which she was entitled and did not. In addition, neither the trust instrument nor the law imposed a duty on Wells Fargo to ensure that Andrea received such benefits. Wells Fargo also moved for the appointment of a guardian ad litem for Andrea.
The U.S. District Court for the Eastern District of Missouri grants Wells Fargo’s motion to appoint a guardian ad litem to represent Andrea’s interests, holding that there is the potential for a conflict of interest between the trust beneficiaries and Ms. Barringer because she admittedly failed to analyze Andrea’s qualification for government assistance or apply for such benefits prior to 2014, the year Mr. Oetting learned Wells Fargo was paying certain expenses for Andrea out of trust assets. In addition, she failed to charge Mr. Oetting with wrongdoing despite the fact that he also had a duty to attempt to secure benefits on behalf of Andrea. Based on the prudential limitations placed on standing, the court rules that Ms. Barringer lacks standing to pursue Andrea’s claims. However, the court denies without prejudice Wells Fargo’s motion to dismiss, finding that the arguments in favor of dismissal are more properly addressed on summary judgment.
To read the full text of the court’s decision, go to: https://casetext.com/case/oetting-v-wells-fargo-bank-na-in-re-joyce-c-dalton-tr