Judge: H. Jay Ford, III, Case: 20STCV48114, Date: 2024-09-26 Tentative Ruling

Case Number: 20STCV48114    Hearing Date: September 26, 2024    Dept: O

Guardado v. Cedars-Sinai Medical Center, Case no. 20STCV48114

Petition to Trust Issues in Compromise Petition

Hearing Date:  9/26/24

PLAINTIFF:

Vanessa Guardado, age 32, Disabled

PETITIONER:  Hisela Rauda, parent and GAL (Appointed 12/24/20)

TENTATIVE RULING

The Court orders the hearing continued to _____________________________ for Petitioner to give proper 15 days’ notice by mail of the Amended Proposed Order  to the state agencies.

            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).). A proof of service indicates service of this the petition upon the state agencies.  There is also a proof of service for an “amended” proposed order submitted on 9/18/24 and attaching a proof of service showing service on the state agencies on 9/17/24.  Petitioner is changing the relief requested in the petition by filing the “amended” proposed order that contains updated figures for the medical expenses and net settlement proceeds (see the Gross and Net Settlement below).  The service of the “amended” proposed order on 9/17/24 was only nine days prior to the hearing on this petition.  To the extent that the “amended” proposed order presents a new request for relief, new notice to the state agencies was required and service only nine days prior to the hearing was not sufficient.  (See subsection (a) of CRC rule 7.35: An amended pleading or an amendment to a pleading requires the same notice of hearing (including publication) as the pleading it amends.)  The court may wish to continue the hearing for proper notice to the state agencies, which is 15 days by mail. 

The Court intends to approve the settlement, subject to the corrections notice below.

GROSS AND NET SETTLEMENT (Petition, p. 6, sections 15 and 16f):  APPROVED 

Gross $7 million, Net $4,543,408.83 (as stated in the 7/25/24 petition and proposed order)

Gross $7 million, Net $4,740,150.21, as stated in a 9/18/24 “amended” proposed order submitted without a new petition – reimbursement of medical expenses are reduced, compare orders at p. 2, section 8.  See also the declaration of counsel filed on 9/17/24 regarding lien issues, including a request to grant the petition and resolve the lien issues later (a common practice).

Petitioner also states at petition, p. 3, section 8b(3): “The negotiations with regards to the Medi-Cal lien are ongoing. The current amount of the Medi-Cal lien, i.e., $70,395.22 will be held in the Law Offices of Michael Oran client trust account pending these negotiations. Once resolved, Medi-Cal will be paid. The net of any further reduction will be transferred to the Vanessa Guardado Supplemental Needs Trust.”

PROPOSED RECIPIENT OF SETTLEMENT PROCEEDS (Petition, pp. 8-9, sec. 18): APPROVED

Petitioner proposes to fund $1,543,408.83 cash into a SNT for plaintiff’s benefit and use the remaining $3 million to purchase annuities that would pay into the SNT at:

Commencing 01/01/2025, $13,500.00 per month for 10 years,

guaranteed; (final guaranteed payment on 12/01/2034).

Commencing 01/01/2035, $14,000.00 per month for 10 years,

guaranteed; (final guaranteed payment on 12/01/2044).

Commencing 01/01/2045, $17,177.67 per month for the lifetime of

Vanessa Guardado with the first 15 years guaranteed;

(final guaranteed payment on 12/01/2059).

Additional details regarding the annuity and annuity company are set forth at Attachment 18b(3), court’s pdf at p. 87.

Question re Medi-Cal Eligibility, SSI benefits :

An SNT is often 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 funds held in a valid SNT 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, like SSI, did not change.  Is there a need to create and fund a SNT to maintain these benefits?

PROPOSED TRUST INSTRUMENT:  APPROVED

Petitioner provides the proposed trust instrument at Exhibit A to Attachment 18b(4), court’s pdf at p. 107.

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 trust instrument meets those requirements and is ready for approval for creation and/or funding.

ADDITIONAL REQUESTS FOR RELIEF:

Petitioner makes the following additional requests for relief that are beyond those fundamental to the approval and funding of a settlement trust:

1.     Petitioner requests authority for trustee to invest in mutual funds and bonds with maturity dates greater than five years to provide for diversification and a higher rate of investment return.  (Attachment 18b(4), court’s pdf at p. 103.)  This request would provide for a broader investment authority than the statutory baseline but is common when the trust assets will be large and/or the investment horizon is long (where plaintiff is fairly young): GRANTED.

2.     Petitioner requests authority to pay $4,000 fees to trust specialist counsel, the Dale Law Firm, for tasks relating to the minor’s settlement trust including drafting of the trust instrument and related portions of this petition.  (Attachment 18b(4), court’s pdf at p. 105.)   GRANTED.

3.     Petitioner requests authority for trustee to spend up to $110,000 of trust assets to purchase a vehicle that will be used to transport the trust beneficiary and to accommodate her special needs.  (Attachment 18b(4), court’s pdf at p. 104.  Vehicle proposal provided at Exhibit C, court’s pdf at p. 126.)  The vehicle would be titled in the name of petitioner/plaintiff’s mother, and the trust would have a lien on the vehicle to secure the trust’s interest in the purchase price.  The trust would pay for ongoing registration, insurance, and major maintenance or repairs.  These terms are typical for purchases of vehicles from a SNT.  GRANTED. 

4.     Petitioner requests authority for trustee to pay petitioner up to 40 hours per week at $25/hr as trust beneficiary/plaintiff’s primary caregiver.  (Attachment 18b(4), court’s pdf at p. 105.)  Though not mentioned, trustee would need to engage a third party to employ petitioner which would add expenses for payroll taxes, insurance, and administrative fees.  These requests are common when a parent is a primary caregiver of a trust beneficiary and the trust funding is significant. GRANTED.   

FINDINGS WHEN THE PROPOSED TRUST IS AN SNT: GRANTED

The Court makes 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):

• 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.

TRUSTE AND BOND: IS REQUIRED (order, p. 4, section 11).

The proposed initial trustee(s) is Mia Ehsani, a private professional fiduciary (PPF) in El Dorado Hills, California. 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.)  A PPF does not meet the definition of a corporate fiduciary and bond is required. 

A proper bond calculation based upon the assets to be funded into the trust, plus anticipated annual income from investments and annuity, plus an additional amount required for the costs of any recovery on the bond, would be $1,890,000.  The Court requires a  $1,890,000 bond be  submitted by trustee to this department (which will later be resubmitted to the Probate court in any trust supervision action).    

ORDERS/PROPOSED ORDER:  APPROVED WITH CORRECTIONS

Proposed Order received stamp date:  “Amended” proposed order 9/18/24

General trust orders at Attachment 13, order pdf, p. 7.

When the petition is approved, this court should require 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 (a general statement in the order on the compromise petition that the PRO 044 must be filed in 60 days, or an actual stated calendar date in 60 days, is okay either way).  It is this filing that will pass jurisdiction over the trust to the Probate department of this court to provide for court supervision of the trust over the years.  It is in that Probate case that accountings will be filed periodically by trustee, as well as any other petitions involving the trust.  The proposed order fails to state this requirement and correction is needed. 

The Court notes the proposed trustee is a PPF in El Dorado Hills, California which is in El Dorado County.  Sometime between the filing of the PRO 044 in the Probate division of this court and the first accounting after a year, the trustee will likely need to transfer the action to El Dorado County as the proper venue for ongoing trust supervision.  (Probate Code section 17005.) 

When the petition is approved, this Court must make an order 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.  It is that actual date that will be picked up by the Probate filing window when the trust supervision action is filed and an OSC/compliance date re the first accounting will be set.  The proposed order fails to state this requirement and correction is needed. 

When the petition is approved, the Court will set an OSC in this Department O in approximately 60 days to ensure the funding of the settlement, submission of bond if required, purchase of annuity if relevant, and the filing of LASC Form PRO 044 to open a trust supervision action in probate.  The proposed order fails to state this OSC and correction is needed. 

The order states that no bond is required (order p. 3, section 11), when the recommendation is that $1,890,000 bond should be required.  Correction is needed.