Judge: Anne Hwang, Case: 20STCV10499, Date: 2024-10-24 Tentative Ruling

Case Number: 20STCV10499    Hearing Date: October 24, 2024    Dept: 32

PLEASE NOTE:   Parties are encouraged to meet and confer concerning this tentative ruling to determine if a resolution may be reached.  If the parties are unable to reach a resolution and a party intends to submit on this tentative ruling, the party must send an email to the Court at sscdept32@lacourt.org indicating that party’s intention to submit.  The email shall include the case number, date and time of the hearing, counsel’s contact information (if applicable), and the identity of the party submitting on this tentative ruling.  If the Court does not receive an email indicating the parties are submitting on this tentative ruling and there are no appearances at the hearing, the Court may place the motion off calendar or adopt the tentative ruling as the order of the Court.  If all parties do not submit on this tentative ruling, they should arrange to appear in-person or remotely.  Further, after the Court has posted/issued a tentative ruling, the Court has the inherent authority to prohibit the withdrawal of the subject motion and adopt the tentative ruling as the order of the Court. 

TENTATIVE RULING

The Court has reviewed the petition for approval of compromise for a person with a disability filed on September 3, 2024 by Petitioner Ernesto G. Martinez, Jr. (Petitioner) on behalf of Claimant Kimberly Martinez, age 33. The Court denies the petition without prejudice for the following reasons:

Petitioner requests $166,666 in attorney fees which represents 33.33% of the gross settlement. Petitioner’s attorney must provide a declaration in attachment 13a explaining a basis for the request and discussing the factors in California Rules of Court, rule 7.955(b).

Petitioner must also complete and file a proposed order (MC-351).

Next, Petitioner proposes to deposit the entire net settlement proceeds ($315,196.41) into a SNT for the benefit of Claimant.¿An SNT is used to receive the settlement funds in these situations so that plaintiff does not lose benefits eligibility for Medi-Cal, SSI, and other benefits.  Historically, a person receiving Medi-Cal or SSI benefits could have only up to $2,000 in non-exempt assets, and any additional non-exempt assets over $2,000 would cause the loss of benefits eligibility under the relevant federal and state law.  Funds held in a valid SNT, however, are exempt assets that do not count toward the $2,000 asset limit for purposes of calculating benefits eligibility.  On January 1, 2024, the Medi-Cal asset qualification limit was eliminated and there is no longer a means test for Medi-Cal. The asset qualification for other benefits, such as SSI, did not change and therefore there might remain a reason for creation and funding of a SNT to maintain other benefits.¿To the extent that Petitioner continues to pursue the creation and funding of a SNT, Petitioner must correct the following defects pertaining to the proposed trust instrument:¿ 

·       When seeking approval of a special needs trust (SNT), notice of the hearing and service of the petition must be made upon three state agencies including the Dept. of Mental Health, Dept. of Developmental Services, and Dept. of Health Care Services.  (Probate Code sections 3602(f), 3611(c).). The agencies require 15 days’ notice by mail. Here, there is no such proof of service indicating service upon the state agencies and service is incomplete. 

·       The proposed SNT instrument should contain the following terms traditionally required by LASC rule 4.116(b):

o   (b)(2) Any purchase of a personal residence for a beneficiary may be made only if authorized by the court pursuant to the rules applicable to conservatorships and guardianships. (See Prob. Code, § 2571);

o   (b)(3) Any sale of a personal residence of the beneficiary may be made only if authorized by the court pursuant to the rules applicable to conservatorships and guardianships. (Prob. Code, § 2540(b).) Such sales must be returned to court for confirmation. (See Prob. Code, § 10300 et seq.); and

o   (b)(4) The trustee may not borrow money, lend money, give security, lease, convey, or exchange any property of the estate without prior authorization of the court. (Prob. Code, § 2550.)

·       Normally, bond must be required of a trustee unless the trustee is a corporate fiduciary.  (California Rules of Court, Rule 7.903(c)(5), Probate Code section 2320.)  The proposed trustee does not meet the definition, and therefore the Court requires bond. Petitioner did not calculate bond.  A proper bond calculation based upon the assets to be funded into the trust, plus anticipated annual income from investments, plus an additional amount required for the costs of any recovery on the bond, would be $358,000. If the petition is approved, the Court will require a $358,000 bond submitted by trustee to this department.   

The Court makes the following findings pursuant to Probate Code section 3604(b):

• The SNT beneficiary has a disability which substantially impairs the individual’s ability to provide for her own care or custody and constitutes a substantial handicap;
• The SNT beneficiary is likely to have special needs that will not be met without the trust;
• The money to be paid to the trust does not exceed the amount that appears reasonably necessary to meet the SNT beneficiary’s special needs.

The following deficiencies are present in the Proposed Order (MC-351):¿ 

As stated before, no proposed order was filed. The discussion below addresses requirements that will apply to an order when submitted, which should occur when an amended petition is filed with a corrected trust instrument as discussed above. 

General trust orders should be made (e.g., approval of creation and funding of the trust, appointment of trustee, etc.)

Trust terms should be included in the order.

The required Probate Code 3604(b) findings should be made in order.

The order should provide for the satisfaction of any state Medi-Cal liens (Order p. 3, sec. 8b(3)).

The order should provide for court jurisdiction over the trust.

The order should state that the Court requires the filing of a Notice of Commencement of Proceedings for a Court Supervised Trust on LASC Form PRO 044 in the Probate division of this court within 60 days.

The order should state that the trustee’s first accounting is due filed in the Probate case within a year, and an actual 14-month calendar due date should be stated. 

The order should also include an OSC in Department 32 of the Spring Street Courthouse in approximately 60 days to ensure the funding of the settlement, submission of bond, and the filing of LASC Form PRO 044 to open a trust supervision action in probate.

The proposed order should state bond.   

To the extent a SNT is no longer requested, Petitioner must correct the above deficiencies regarding the petition.¿ 

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Accordingly, the Court continues the hearing to November 22, 2024 at 1:30 p.m. in Department 32 of the Spring Street Courthouse. A revised petition must be filed and served by October 31, 2024.¿ 

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Petitioner shall give notice and file a proof of service of such.¿ 

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