Judge: Daniel M. Crowley, Case: 19STCV46135, Date: 2022-09-22 Tentative Ruling
Case Number: 19STCV46135 Hearing Date: September 22, 2022 Dept: 28
Petition to Approve Compromise of Pending Action on Behalf of Claimant Kevin Weissbach filed by Petitioner Marilyn Weissbach
Having considered the petitioning and motioning papers, the Court rules as follows.
BACKGROUND
On December 20, 2019, Plaintiff Kevin Weissbach (“Plaintiff” or “Claimant”) filed this action against Defendant Granada Post Acute, LP (“Granada”) for medical malpractice/elder abuse. Plaintiff later amended the complaint to include Defendant Salah Rubayi, M.D. (“Rubayi”).
On November 2, 2021, the Court dismissed Rubayi, with prejudice, purusant to Plaintiff’s request.
On August 24, 2022, Petitioner Marilyn Weissbach (“Petitioner”) filed a Petition to Approve Compromise of Person with a Disability to be heard on September 22, 2022.
PARTY’S REQUESTS
Petitioner Marilyn Weissbach asks the Court to approve the compromise of the pending action on behalf of Plaintiff Kevin Weissbach.
DISCUSSION
Probate reviewed the SNT instrument attached to the application and found that it does not meet the legal requirements and is not ready for approval. (See discussion below.)
CONCLUSION
Petition to Approve Compromise of Pending Action on Behalf of Claimant Kevin Weissbach filed by Petitioner Marilyn Weissbach is CONTINUED to October 27, 2022, at 8:30 a.m. in Department 28 of the Spring Street Courthouse.
Petitioner is ordered to give notice of this ruling.
Petitioner is ordered to file the proof of service of this ruling with the Court within five days.
The parties are directed to the header of this tentative ruling for further instructions.
REVIEW OF SPECIAL NEEDS TRUST
Petitioner did not provide any briefing regarding the SNT issues. The proposed SNT instrument is provided at Attachment 18a(3)(e) (court’s pdf at p. 29). The SNT instrument does NOT meet legal requirements and it is NOT ready for approval:
Payback Provision
A cornerstone requirement of an SNT instrument is that it have a “payback provision” whereby any trust assets remaining upon termination of the SNT by death of the beneficiary (or any other reason), the remaining trust assets shall be “paid back” to the state to the extent of benefits received by the beneficiary. The idea is that the assets in a SNT are deemed to be exempt from counting toward the asset limits for purposes of calculating benefits eligibility, but then that fiction ends upon beneficiary’s death and the state recovers those funds before they are distributed to beneficiary’s heirs. The existence of this payback provision is the most basic requirement of a SNT instrument. Without that provision, the SNT beneficiary would almost immediately lose benefits eligibility. Put another way, the SNT assets would not qualify as exempt and instead they would be counted toward beneficiary’s qualifying asset limit.
The SNT instrument here contains a defective payback provision in Article Nine, Section 2 of the proposed SNT instrument (court’s pdf at p. 47). As written, the SNT instrument would not maintain plaintiff’s benefits eligibility. Specifically, the payback provision provides for notice to, and payback to, California only for Medi-Cal benefits received. A valid payback provision must provide that Medicare/Medi-Cal benefits are repaid to any state that has provided the benefits, that payback will be on a pro rata basis if there are insufficient assets to pay back all states, etc. A typical provision reads:
Reimbursement to State. Upon the death of the Beneficiary, the Trustee shall pay to the states (or local Medicaid agencies of the states) that have made Medicaid payments on the Beneficiary’s behalf during his lifetime, the lesser of: (i) the total amount of Medicaid payments made on the Beneficiary’s behalf to the extent required by law; and (ii) the entire balance of the trust estate, with each state getting a pro rata share equal to the state’s Medicaid payments made on the Beneficiary’s behalf over the total of all states’ Medicaid payments made on the Beneficiary’s behalf.
CRC Rule 7.903(c) and LASC Rule 4.116 Requirements
The main requirements for court created or funded trusts are set forth at California Rules of Court (CRC), Rule 7.903(c) and LASC Rule 4.116(b). The proposed SNT instrument meets most of those requirements. The proposed SNT instrument, however, does not appear to have a provision required by LASC Rule 4.116(b)(4) which requires the following provision:
(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.)
FINDINGS
When ultimately approving the establishment or funding of a SNT from settlement proceeds, the court must make the following findings pursuant to Probate Code section 3604(b) (there are factual allegations in the Petition to Approve Compromise and its attachments supporting the settlement that generally cover the requisite findings):
TRUSTEE AND BOND
The SNT instrument indicates that petitioner will be the SNT trustee. 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.) Petitioner does not meet that requirement and the court should require bond.
Petitioner does not address bond in the petition or proposed order. A proper bond calculation appears to be $117,000 based upon the SNT funding amount, anticipated annual investment income (2%), and an additional amount required for the costs of any recovery on the bond (10% for this principal amount).
NOTICE
When seeking approval of a 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).) There is no proof of service for the three state agencies and notice is defective. Suggest court continue mater for proper notice. For purposes of setting a continuance date, required notice to the state agencies is 15 days by mail, not extended for the mailing.
THE PROPOSED ORDER
A proposed order for this petition bearing a 8/24/22 Received stamp was reviewed in eCourt. The following requirements apply to an order on the SNT issues:
General Orders
The order approving the SNT must include a copy (or the terms) of the proposed SNT instrument to capture the text of the trust being approved. The text can be attached to the Judicial Council form order approving the Petition to Approve Compromise. Not satisfied.
The order also should include any additional orders made, including bond requirements, and any allowed fees or rulings on special requests for relief. Not satisfied. The JC form order for the compromise petition does not include any attachments to address SNT issues.
Housekeeping Orders
The proposed order should address the general findings set forth in the Findings section of this memo above. Not satisfied.
When the funding of a SNT is allowed, the court order should include language requiring petitioner to file an accounting within a year, with a specific 14 month date specified to allow time for drafting and filing. Not satisfied.
An order establishing an SNT also should include language requiring the submission of a Notice of Commencement of Proceedings for a Court Supervised Trust on LASC Form PRO 044 within 60 days. It is that filing that will hand the case off to start the trust administration for the SNT that will host the future SNT accountings and any bond issues or other trust issues. Not satisfied.
The order should also state that the civil court has set an OSC in its own department in 60 days to ensure that the probate case has been opened and that any required bond has been submitted. At the OSC, if those requirements have been met then the civil court can wrap-up its case. Not satisfied.