Judge: Anne Hwang, Case: 20STCV34789, Date: 2024-04-10 Tentative Ruling

Case Number: 20STCV34789    Hearing Date: April 10, 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 filed on March 27, 2024 by Petitioner Erez Illouz (Petitioner) on behalf of Claimant Natalie Illouz, age 39. The Court continues the hearing to May 8, 2024 at 1:30 p.m. in Department 32 to permit Petitioner time to address or resolve the issues set forth below.

On December 16, 2022, the Court granted Plaintiff Natalie Illouz’s motion to substitute Erez Illouz as Plaintiff’s new guardian ad litem. Petitioner states that Claimant was injured after being hit by a motor vehicle while crossing an intersection as a pedestrian. Claimant suffers permanent injuries and requires caregiver services. (Attach. 8.)

The Court finds the following defects in the petition:

The difference between the total medical expenses in item 12a(1) and the reductions in item 12a(3) is $235,785.40, which is different than the amount sought to be paid from the proceeds. As a result, it is unclear if the amount in item 12(a)(4) is accurate. Similarly, the amounts sought to be reimbursed throughout item 12b (including attachment 12b(2)) do not equal the sum in item 12(a)(4).

The amount in item 12b(5)(a)(ii) must equal the amounts in 12b(5)(b). Based on the values provided, it appears the lienholders have agreed to accept the sum of $26,463.41, not $26,658.41.

In the proposed order (MC-351), Petitioner must state his name in item 2.

Petitioner proposes to deposit the entire net settlement proceeds ($283,691.72) into a pooled SNT for the benefit of Claimant.

The Court finds 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).). Here, there is no proof of service to all three state agencies (only to the Dept. of Health Care Services).

·         The proposed trust instrument meets the requirements of CRC rule 7.903(c). However, the proposed trust instrument does not contain the following terms as set forth in LASC rule 4.116(b), labelled by the quoted subsection.

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.)

·         The Joinder Agreement, which provides terms by which plaintiff would participate in the pooled SNT, contains improper estate planning for an incapacitated adult.  Specifically, it names two individuals who would be 50% residual beneficiaries of remaining trust assets upon plaintiff’s death.  (Court’s pdf at p. 189.)   A proper trust term would state that any remaining trust assets, after payback to the state(s), should be paid to the trust beneficiary’s “heirs at law.”  And at most, the trust instrument would provide a power of appointment for plaintiff whereby plaintiff could designate trust beneficiaries in a will if plaintiff has mental capacity to do so.  Moreover, one of the named beneficiaries is petitioner which creates a conflict of interest. Petitioner must supply a revised Joinder Agreement.

·         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 of a corporate fiduciary.  Petitioner does not request or calculate bond in the petition but states a $283,691.72 bond at Section 11 of the proposed order. A proper bond calculation based upon the assets to be funded into the trust, plus anticipated annual income from investments and any annuity, plus an additional amount required for the costs of any recovery on the bond, would be $328,000.  

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

Item 8b(3) fails to provide for satisfaction of state liens.

Order fails to require first trust accounting in one year and sets 14-month calendar due date.

Order fails to require filing of a Notice of Commencement of Proceedings for a Court Supervised Trust on LASC Form PRO 044 within 60 days.

Order fails to set OSC in this civil department in approximately 60 days to ensure funding of settlement, submission of bond if required, purchase of annuity if relevant, and filing of LASC Form PRO 044 to open trust supervision action in probate.

Bond amount must be corrected in item 11.

Revised Joinder Agreement to be attached when corrected pursuant to requirements set forth above. 

The Court notes that on January 1, 2024, the Medi-Cal asset qualification limit was eliminated and there is no longer a means test for Medi-Cal. However, to the extent that Petitioner continues to pursue the creation and funding of a SNT to maintain other benefits, Petitioner must correct the above deficiencies.

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

Accordingly, the Court continues the hearing to May 8, 2024 at 1:30 p.m. in Department 32 of the Spring Street Courthouse. A revised petition must be filed and served by April 16, 2024.

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