Judge: Lisa R. Jaskol, Case: 23STCV28843, Date: 2025-02-26 Tentative Ruling
Case Number: 23STCV28843 Hearing Date: February 26, 2025 Dept: 28
Having considered the petitioning papers, the Court rules as follows.
BACKGROUND
On November 27, 2023, Plaintiff Xavier Rivas (“Plaintiff”), a minor, by and through his legal guardian Carla Martinez, filed this action against Defendants First Student, Inc., Salvin Special Education Center, Los Angeles Unified School District, and Does 1-100 for negligence, negligence and statutory liability, and negligent entrustment, hiring, retention, and/or supervision.
On October 14, 2024, the Court appointed Carla Martinez to serve as Plaintiff’s guardian ad litem.
On November 14, 2024, Petitioner Carla Martinez filed a petition to approve the compromise of Plaintiff’s action. The petition was set for hearing on January 8, 2025. The Court continued the hearing to February 26, 2025.
PETITIONER’S REQUESTS
Petitioner asks the Court to grant the petition to approve the compromises of the claims of minor Plaintiff Xavier Rivas and to approve the funding of a special needs trust with the net settlement proceeds.
A. The petition to approve minor’s compromise
Section 12a(1) of the petition states that total medical expenses were $4,244.12. Section 12a(2) of the petition states that $366.59 of the medical expenses were paid. The Court assumes that this payment of $366.59 reflects the Medi-Cal payment for which the Department of Health Care Services has agreed to accept reimbursement of $274.95. Section 12a(3) of the petition states that the medical expenses were reduced by $91.64. This should mean that the remaining amount of medical expenses ($3,785.89) will be paid or reimbursed from the settlement proceeds. However, Section 12a(4) of the petition states that only $274.95 of the medical expenses will be paid or reimbursed from the settlement proceeds. As a result, the petition does not account for $3,510.94 of the medical expenses. The Court cannot approve a petition unless it shows that all medical expenses that have not been waived or reduced will be paid or reimbursed from the settlement proceeds.
In the first line of Section 12b(4), Petitioner should include the amount of medical expenses that Medi-Cal paid ($366.59).
Petitioner should fill out Section 12b(5)(b) of the petition.
Section 13b of the petition requests costs including $200.00 for "mobile intake service." Petitioner should explain what this means and whether it constitutes an allowable cost under Code of Civil Procedure section 1033.5, subdivision (a). Section 13b also lists $300.00 in costs for mailing, copies, storage, and office supplies. Petitioner should show that counsel incurred these costs in connection with Plaintiff's case and should explain why they are recoverable costs under Code of Civil Procedure section 1033.5, subdivision (a).
B. The request to place the settlement proceeds in a special needs trust
1. Notice to State agencies
A party seeking approval of a special needs trust must give notice of the hearing and serve the petition on three state agencies: the Department of Mental Health, the Department of Developmental Services, and the Department of Health Care Services. (See Prob. Code, § 3611, subd. (c).)
Petitioner does not appear to have satisfied this requirement. The petition does not include a proof of service. The Court continues the hearing to allow Petitioner to give the required notice of hearing (15 days by mail).
a. LASC rule 4.116(b)
California Rules of Court, rule 7.903(c) and LASC rule 4.116(b) provide the main requirements for court-created or funded trusts. The proposed trust instrument meets the requirements of California Rules of Court, rule 7.903(c).
However, the proposed trust instrument does not contain the following terms traditionally required under LASC rule 4.116(b), labelled by quoted subsection:
(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);
(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
(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 Court continues the hearing for a new proposed special needs trust instrument which contains these terms.
b. Purchase of vehicle and residence
The proposed trust instrument contains a term that permits the purchase of a vehicle for Plaintiff’s benefit. (Trust instrument at p. 4, paragraph J, court’s pdf at p. 72.) The inclusion of this term is typically permitted only after Petitioner requests this relief and provides support including potential vehicles to purchase. Here, however, Petitioner has not requested this relief or provided support for a request. Petitioner should submit a revised proposed trust instrument that omits this term. The trustee may seek this relief later from the probate court which supervises the administration of the trust.
The proposed trust instrument also contains a term (at page 4, paragraph H, court’s pdf at p. 72) that allows the trust to purchase and maintain a residence for Plaintiff. Petitioner should remove this term because it is inconsistent with the LASC rule cited above. The purchase of a residence by a trust requires a separate petition with details regarding the proposed purchase. The trustee can submit a petition to purchase a residence for Plaintiff in the Probate case which will supervise the administration of the special needs trust.
c. Distribution of trust assets after beneficiary’s death
The proposed trust instrument provides that upon Plaintiff/trust beneficiary's death, and after repayment of Medi-Cal benefits to the State, any remaining trust assets shall be distributed to Plaintiff’s “estate.” (Trust instrument at p. 3, paragraph E, court’s pdf at p. 71.) The term “estate” is incorrect because the residual beneficiary should be Plaintiff’s “heirs at law.” Use of the term “heirs at law” would permit distribution directly to those heirs without opening a probate estate for Plaintiff. Petitioner should submit a revised proposed trust instrument with this modification.
d. References to Plaintiff
The trust instrument refers to Plaintiff as “X.R.” and does not include other identifying information. For example, the trust instrument lists “XXXXX” in the spaces for Plaintiff’s date of birth and Social Security number. The petition, which is not sealed, contains Plaintiff’s name. Therefore, it is unclear why the proposed trust instrument does not include Plaintiff’s name. The lack of a name in the trust instrument could create issues with third parties during administration of the trust. Petitioner should submit a revised trust instrument that includes Plaintiff’s name and identifying information where requested.
e. Findings under Probate Code section 3604, subdivision (b)
When approving the establishment or funding of a special needs trust from settlement proceeds, the Court must make the following findings under Probate Code section 3604, subdivision (b):
• The special needs trust 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 special needs trust 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 special needs trust beneficiary’s special needs.
The petition and its attachments generally support these findings.
f. Trustee and bond
The proposed initial trustee is Petitioner/parent Carla Rivas.
Normally, bond is required of a trustee unless the trustee is a corporate fiduciary. (Cal. Rules of Court, rule 7.903(c)(5); Prob. Code, § 2320.) The proposed trustee does not meet that definition and bond is required.
The trust instrument purports to require a bond. However, the proposed order language provided by petition indicates that bond would be waived. (Petition at p. 81, 11/14/24 proposed order at p. 1:26.) The Court is not aware of a basis for waiving the bond.
A proper bond calculation based on 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, is $80,000. If the Court approves the petition, the Court will require the trustee to submit a bond of $80,000 to this department. The bond will later be resubmitted to the Probate Court in any trust supervision action.
3. Proposed order
Petitioner should correct the proposed order as follows:
· To include or attach the trust terms as required to provide clarity regarding the trust instrument.
· To include the required Probate Code section 3604, subdivision (b) findings.
· To provide for Court jurisdiction over the trust.
· To omit the three “Further Ordered” paragraphs at page 2 of the special needs trust portion of the order. These paragraphs describe rights and obligations under the trust. However, the trust terms, when later attached, should speak for themselves on those issues.
· To correct the statement that the bond is waived. Once the Court approves the petition and special needs trust, the trustee must provide a bond of $80,000.00.
· To state that, when the Court approves the petition, the Court will require the filing of a Notice of Commencement of Proceedings for a Court Supervised Trust on LASC Form PRO 044 in the Court’s Probate division within 60 days.
· To state that, when the Court approves the petition, the Court will order that the trustee’s first accounting is due in the Probate case within one year and will set a 14-month calendar due date.
· To state that, when the Court approves the petition, the Court will set an Order to Show Cause in approximately 60 days to ensure the funding of the settlement, submission of the bond, and filing of the LASC Form PRO 044 to open a trust supervision in Probate.
CONCLUSION
The Court CONTINUES the hearing on Petitioner Carla Martinez’s petition to approve the compromise of minor Plaintiff Xavier Rivas’s claims and to fund a special needs trust with the net settlement proceeds to a date to be provided at the February 26, 2025 hearing. At least 5 court days before the continued hearing, Petitioner is ordered to submit a revised petition, special needs trust instrument, and proposed order that address the issues raised in this ruling.
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.