Court delays approval of first annual accounting after trust funds used to buy family home

At a hearing in Lenawee County Probate & Juvenile Court, the judge continued review of the first annual accounting for a supplemental needs trust after questioning whether trust assets were used in a manner authorized by the court.

The petitioners — parents and co-trustees of the trust created for their son — had filed the first annual account showing investment activity, bank fees, closing costs and legal fees, and reporting that the overall value of the trust had grown by more than $32,000. Attorney Jessica Kelly, representing the petitioners, told the court the trust was established with settlement proceeds and approved by the court on June 7, 2023, and that the account includes a house, a MiABLE account and Morgan Stanley investments.

The judge focused on whether the court’s earlier order authorized the liquidation or use of trust assets to purchase a home. The order filed June 7, 2023, the judge noted, authorized the petitioners to use trust assets as collateral for a line of credit to purchase a home (petition ¶7), not to withdraw and spend trust funds outright for a family residence. The judge summarized the concern: “So what we have here, unfortunately, Miss Kelly, looks like maybe a violation of, what was approved.”

Caitlin Hassell, the beneficiary’s mother and the trustee, testified that the family initially sought court authority to use a line of credit backed by trust assets so the trust itself would not be liquidated to buy the home. She said timing and closing needs prevented using the line of credit and that, at her attorney’s suggestion, the home was purchased with trust funds. She described the current arrangement as the parents making payments back to the trust instead of using a line of credit. In explaining the mechanics she said, “So then we are not able to do that because the the how to explain it. The trust is invested in a stock portfolio. You're not able to take liquidity access line and put that into a stock portfolio because that's ultimately what is backing, like the liquidity access line…so we're not able to take the trust money. So we're basically gonna just be paying back the trust instead of utilizing that line of credit.”

Jessica Kelly told the court all interested parties had received notice and that no objections had been filed. The trust accounting filed with the court lists four expense categories and two income sources across the reported period; the filing shows the legal fees of $3,500 previously approved to Darren Findlay’s law firm for trust setup.

The judge directed counsel to file clearer documentation that explains the transaction and the present financial arrangements between the trust and the family — for example, a lease or written repayment agreement or other itemization that shows what the trust paid for and what the parents are now paying. The judge set the matter for further review on March 6 at 9:30 a.m. “What I'd like to do…is adjourn this for a month and ask you to put something together with your clients that accurately reflects what occurred as the use of the authority that was granted,” the judge said.

The court did not enter an approval of the first annual accounting at the hearing. The judge asked the petitioners to submit papers ahead of the next appearance so the court can determine whether trustees acted within the scope of the authority previously granted or whether further action is required.