There are many reasons a trustee may hold real estate in a special needs trust (SNT), but there are also many pitfalls a trustee must be aware of to avoid liability and protect the interests of the trust beneficiary. With the limited housing options available for individuals with disabilities, a home purchased by an SNT may be the option that best meets the trust beneficiary’s housing needs. The trust also may hold nonresident real property for investment purposes or perhaps a partial interest in real estate used as a family vacation home or for a family business. In any of these situations, the trustee must carefully manage the real estate to protect the interests of the beneficiary and to limit liability for the trustee. Litigation against
trustee fiduciaries is a fast-growing area of law, and trustees of SNTs can be especially vulnerable. Trustees must be cognizant of their powers, duties, and responsibilities in administering trust property not only to protect the interests of the trust beneficiary but also to protect themselves against this increased exposure to liability. This article analyzes the challenges and risks trustees of SNTs must consider before holding real property in a trust.
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