Trustee Misuse & Fraud: Lessons from the Florida Special Needs Trust Scandal
- Randy Narkir, Esq.
- Oct 23
- 7 min read
Introduction: When “Trust” Is Broken
The word trustee implies reliability, integrity, and protection, someone you can rely on to do what’s right. When you name a trustee for your child’s special needs trust, you’re placing enormous faith in that person or institution to manage assets wisely and act in your child’s best interest, often for decades after you’re gone.
But what happens when that trust is betrayed?
In recent years, Florida families have witnessed how devastating that betrayal can be. In one of the largest cases of fiduciary misconduct in the state’s history, two men who managed pooled special needs trust accounts were indicted for misappropriating over $100 million. That money was not theirs; it belonged to hundreds of disabled beneficiaries who depended on those funds for medical care, therapies, housing, and quality-of-life expenses.
Families who thought they had done everything right, establishing trusts, choosing fiduciaries, and planning carefully, suddenly discovered that their children’s futures had been jeopardized by the very people entrusted to safeguard them.
While the scale of that case was extreme, the underlying issue is not unusual. Trustee misuse, ranging from outright fraud to negligent mismanagement, happens more often than most families realize. And in the special needs context, the stakes couldn’t be higher.
This post will help you understand how trustee abuse happens, what legal duties trustees owe under Florida law, how to detect red flags early, and, most importantly, how to build safeguards into your plan to protect your child’s trust from ever being misused.
What Happened in the Florida Scandal and Why It Matters
In the high-profile Florida case, the defendants operated a nonprofit entity that offered pooled special needs trust services, a type of trust that combines funds from multiple beneficiaries for investment and administrative purposes.
Over the course of several years, they allegedly diverted tens of millions of dollars from those pooled accounts for personal use. Investigators discovered that funds meant for disabled individuals were used to purchase luxury items, support unrelated business ventures, and pay for personal expenses.
The key lessons from this case are sobering but crucial:
Size and reputation are not guarantees of integrity. Many families believed that a large organization would offer more protection than an individual trustee.
Lack of oversight allowed misuse to continue undetected for years. Because families did not regularly review accounts or question distributions, irregularities were not caught until significant damage had been done.
Recovery was limited. Even with criminal prosecution and civil litigation, many families were unable to recover the full amounts stolen.
This case is a stark reminder that a trust is only as secure as the oversight behind it. Even the most carefully drafted special needs trust cannot protect your child if the trustee fails to fulfill their legal responsibilities or worse, deliberately violates them.
Trustee Duties Under Florida Law: What They’re Legally Required to Do
Understanding a trustee’s legal obligations is the first step toward recognizing when those duties are being violated. Under the Florida Trust Code (Fla. Stat. § 736.0801–736.0817), trustees owe what are known as fiduciary duties to the beneficiaries of the trust. These duties include:
Duty of Loyalty: The trustee must always act in the best interests of the beneficiary, not themselves or any third party.
Duty of Prudence: They must manage and invest trust assets with care, skill, and caution, as a reasonably prudent person would.
Duty of Impartiality: If there are multiple beneficiaries (e.g., a remainder beneficiary), the trustee must act fairly toward all of them.
Duty to Account and Inform: Trustees must keep accurate records and provide regular accountings to the beneficiaries or their legal representatives.
Duty to Administer the Trust According to Its Terms: The trustee must follow the trust document precisely, including how and when distributions should be made.
A breach of any of these duties, whether through negligence, incompetence, or intentional misconduct, is legally actionable. But many families don’t realize that they have the right to monitor, question, and even remove a trustee if those duties are not being met.
How Trustee Misuse and Fraud Actually Happen
Trustee abuse doesn’t always look like a dramatic embezzlement case. It can range from subtle mismanagement to blatant criminal behavior.
Here are some of the most common forms:
Misappropriation of Funds
The most obvious form of misconduct occurs when a trustee simply steals or “borrows” trust money for personal use. This might involve writing checks to themselves, funneling funds into other accounts, or disguising personal purchases as trust-related expenses.
Commingling Trust and Personal Assets
Trustees are legally required to keep trust property separate from their own. Commingling funds even unintentionally, makes it difficult to track assets and opens the door to misuse.
Negligent Investment or Mismanagement
A trustee who fails to invest prudently or lets trust property depreciate can cause significant financial harm. Even if their actions aren’t intentional, they can still be held liable for losses resulting from mismanagement.
Failure to Account
Trustees must maintain detailed records and provide accountings. Failing to do so or providing incomplete or confusing reports is often a red flag that something is wrong.
Conflicts of Interest
A trustee might make decisions that benefit themselves or other parties instead of the beneficiary. This could include self-dealing (e.g., hiring their own company to provide services to the trust) or investing in businesses they own.
Early Warning Signs of Trustee Misconduct
Most cases of trustee abuse aren’t discovered overnight. They reveal themselves slowly, often after years of small red flags that were dismissed as misunderstandings. Here are some signs families should never ignore:
Delays or refusals to provide financial statements or accounting.
Vague or unexplained transactions in trust reports.
Sudden changes in investment strategies without clear reasoning.
Resistance to oversight, audits, or questions from the family.
Complaints from service providers that invoices aren’t being paid.
Distributions that don’t align with the trust’s terms or the beneficiary’s needs.
If any of these occur, it’s important to act quickly. Waiting can significantly reduce your options for recovery.
How to Protect Your Child's Trust From Misuse
The good news is that trustee fraud and abuse are largely preventable.
Here’s how you can dramatically reduce the risk:
1. Choose the Right Trustee and Consider a Co-Trustee Model
Selecting a trustee is one of the most consequential decisions you’ll make. Factors to evaluate include:
Competence: Do they understand fiduciary responsibilities and government benefit rules?
Capacity: Will they be available and capable of serving long-term?
Integrity: Do they have a clean track record and reputation for honesty?
Neutrality: Are they free from conflicts of interest?
Many families find that using a co-trustee structure, one trusted family member paired with a professional fiduciary, provides both personal understanding and financial accountability.
2. Build Oversight into the Trust Document
A well-drafted trust anticipates potential problems before they happen. Consider including provisions such as:
Mandatory annual accounting to family members or advisors.
Independent trust protector clauses that allow someone other than the trustee to remove or replace them.
Distribution approval requirements for large expenditures or investments.
Bonding requirements to provide financial protection in case of loss.
These tools create an internal system of checks and balances, reducing the likelihood of misconduct.
3. Stay Involved: Oversight Is a Continuous Responsibility
Even the best trustee benefits from accountability. Families should request and carefully review the accounting every year. Ask detailed questions, and don’t accept vague answers. If something seems off, consult with a trusted attorney immediately.
What to Do If You Suspect Misuse
If you believe a trustee is mismanaging or misusing funds, time is critical. Florida law provides several legal remedies:
Demand a formal accounting. You have the right to detailed financial reports.
Petition the court to suspend or remove the trustee. Courts can remove trustees for breach of duty and appoint a successor.
Seek damages. Trustees who breach their duties can be held personally liable for losses.
Pursue criminal charges. If theft or fraud occurred, law enforcement can investigate and prosecute.
An attorney experienced in trust litigation can guide you through these steps and help you protect the trust’s remaining assets.
Final Thoughts: A Trust Without Oversight Is a Risk, Not a Safeguard
A special needs trust is one of the most powerful tools you can create to protect your child, but it’s not self-sustaining. Without careful oversight, the right fiduciary structure, and ongoing vigilance, even the most carefully drafted plan can be undermined by poor management or outright fraud.
The Florida scandal was a harsh reminder of that reality. But it was also a lesson: families who plan proactively, build strong guardrails, and stay involved rarely face these kinds of threats.
Your child’s trust isn’t just a legal document; it’s a promise. And with the right protections in place, it’s a promise you can keep.
Schedule a Special Needs Trust Review
At Legacy Solutions Law Firm, we help Florida families design, fund, and oversee special needs trusts with the safeguards they need to last a lifetime.
We review existing trusts for signs of misuse or risk.
We draft protective clauses that strengthen trustee accountability.
We advise families on trustee selection and oversight best practices.
Schedule a consultation today to ensure your child’s trust is managed with the care, transparency, and integrity they deserve.
Sources & References
U.S. Department of Justice. Florida Nonprofit Founder and Accountant Charged with Stealing Over $100 Million from Special Needs Victims. (June 25, 2025). https://www.justice.gov
Associated Press. Florida Special Needs Trust Managers Charged with Embezzling More Than $100 Million. (June 2025). https://apnews.com
Social Security Administration, Office of the Inspector General. Florida Nonprofit Founder and Accountant Charged with Theft of Special Needs Trust Funds. (June 25, 2025). https://oig.ssa.gov
Margolis & Bloom, LLP. Financial Manager Accused of Looting Special Needs Trusts of $100 Million. (June 2025). https://margolisbloom.com
Florida Statutes § 736.0706 - Removal of Trustee. (2024). https://law.justia.com
Florida Statutes § 736.0813 - Duty to Inform and Account. (2024). https://www.flsenate.gov
Florida Statutes § 736.1001- Remedies for Breach of Trust. (2024). https://law.justia.com
Jimerson Birr, P.A. Fiduciary Duties Under the Florida Trust Code. (May 2022). https://www.jimersonfirm.com
Comiter Singer, P.A. Removing a Trustee in Florida: Legal Grounds and Process. (2023). https://www.comitersinger.com
Zoecklein Law, P.A. Removal of a Trustee in Florida: Understanding Your Rights. (2024). https://www.zoeckleinlawpa.com
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