Judge: Jill Feeney, Case: 21STCV09251, Date: 2022-08-01 Tentative Ruling

Case Number: 21STCV09251    Hearing Date: August 1, 2022    Dept: 30

Department 30, Spring Street Courthouse
August 1, 2022
21STCV09251
Petition for Compromise with a SNT for A Disabled Person (Veronica Corona)

DECISION

The petition will be granted pending the appearance of the GAL and a submission of a corrected order as set forth below.

The parties are ordered to appear at the hearing to discuss a continued hearing date with the Judicial Assistant.

A corrected order is to be filed at least 10 court days in advance of the continued hearing date.

Judicial Assistant is to notify the Probate Attorney of the continued hearing date. Moving party is ordered to provide notice.

Discussion

A revised proposed SNT instrument has been provided.  The net settlement proceeds have increased from $274,272.84 to $286,996.53.  There is an apparent typo at Section 18b(4) of the petition (where the funding amount of the SNT is stated) that lists the old net settlement figure, but the new net settlement figure is calculated at Section 16.  The new proposed order for this petition that was submitted on 7/14/22 also indicates the new, higher net settlement figure at Section 8b. It is the new higher figure that governs.  

The Proposed SNT Instrument

The proposed SNT instrument is provided at Attachment 20 (PDF at p. 97).  The SNT instrument meets legal requirements and is approved.

I. 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 $2,000 asset limit 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 $2,000 asset limit.  The SNT instrument here contains an adequate payback provision in Section 6.02 of the proposed SNT instrument (court’s pdf at p. 111).  

II. 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 those requirements.  

Findings 

The Court makes the following findings pursuant to Probate Code section 3604(b) based on the filings presented to the Court.

1. 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;
2. The SNT beneficiary is likely to have special needs that will not be met without the trust; 
3. 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.

Trustee and Bond

The SNT instrument indicates that petitioner will be the SNT trustee.  (Section 1.05(b), court’s pdf at p. 102.)  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 did not provide briefing regarding SNT issues and therefore petitioner does not address or calculate bond.  A proper calculation appears to be $322,000, including the updated SNT funding amount, anticipated annual investment income, and an additional amount required for the costs of any recovery on the bond.

The Court requires a $322,000 bond.  

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 a separately filed proof of service in the file for the state agencies and notice is complete.  

The Proposed Order  

A proposed order for this petition bearing a 7/14/22 Received stamp has been reviewed  The following requirements apply.  

I. 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.  It appears that petitioner forgot to attach the terms because there is language at Attachment 13, paragraph 4 of the proposed order referring to attached SNT instrument terms, even though they are not present.  Need attachment of the SNT instrument terms.  

The order also should include any additional orders made, including bond requirements, and any allowed fees or rulings on special requests for relief. Generally satisfied at Attachment 13 of the proposed order, although there is no reference to bond.  The bond requirement and amount of $322,000 must be added.


II. Housekeeping Orders

The proposed order should address the general findings set forth in the Findings section of this memo above.  Satisfied at Attachment 13 of the proposed order.

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.  Generally satisfied at Attachment 13 of the proposed order, paragraphs 7-8, however a specific 14-month calendar date as a due date for the first SNT accounting in probate should be added.  

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.  Satisfied at Attachment 13 of the proposed order.

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.  Generally satisfied at Attachment 13 of the proposed order, paragraph 6, but a 60-day date for the OSC in Department 30 should be added.