Judge: Melvin D. Sandvig, Case: BC720058, Date: 2023-09-15 Tentative Ruling

Case Number: BC720058    Hearing Date: September 15, 2023    Dept: F47

Dept. F47

Date: 9/15/23

Case #BC720058

MINOR’S COMPROMISE

Petition filed on 8/10/23.

MINOR: Dareh Haghvirdi

GAL: Sevana Davidian (parent)

Defendant: County of Los Angeles

SUMMARY OF ACTION: This action arises out of the birth of Plaintiff/Minor Dareh Haghvirdi to his parents, Plaintiffs Sevana Davidian and Sevada Haghvirdi on 7/5/17.  Dareh Haghvirdi was born with serious permanent birth defects to his legs and lower spine.  Plaintiffs were advised by staff at Children’s Hospital on or about 7/20/17 that Dareh Haghvirdi’s condition was observable in prenatal tests and scans that had been performed during Sevana Davidian’s pregnancy.  Plaintiffs claim that Defendant County of Los Angeles negligently failed to diagnose Dareh’s condition for which there is no cure.

SETTLEMENT: County of Los Angeles to pay $4,250,000.00

MEDICAL BILLS: $421,134.38 (total); $74,077.45 paid by Medi-Cal which was reduced to $42,035.75 to be paid from the settlement

ATTORNEY FEES: $700,616.67

EXPENSES: $44,910.72

AMOUNT TO BE PAID TO MINOR: $3,462,437.00 to be placed in a Special Needs Trust

RULING:

On 6/21/23, the hearing on the Petition to Approve Compromise of Dispute Claim of Minor was continued to 8/24/23 due to defects in the petition and accompanying Special Needs Trust.  (See 6/21/23 Minute Order).  Thereafter, petitioner rescheduled the hearing to 9/15/23.  On 8/10/23, petitioner filed a new petition.

The defects that existed in the petition document as noted in the Court’s 6/21/23 Minute Order have been corrected. 

Please see the attached memorandum with regard to the Special Needs Trust. 

MEMORANDUUM

Dept:    F47

Re:       Haghvirdi v. County of LA (BC720058)

Date:   September  15, 2023

Hearing re Minor’s Compromise and Approval of Special Needs Trust

PRELIMINARY ISSUES

The original version of this petition was heard on June 21, 2023.  The court continued the hearing to August 24, 2023 for petition to correct defects.  A new petition was filed on August 10, 2023 and set for hearing on September 15, 2023. 

FACTS

In this civil action, plaintiff Dareh Haghvirdi is six years old.  Petitioner, Sevana Davidian, now brings a Petition to Approve Compromise as parent and GAL.  The parties tentatively have settled the action for a gross $4.25 million, with a net of $3,462,437 payable to plaintiff after deduction for fees, costs, etc.  Petitioner now proposes to distribute the net settlement proceeds into a special need trust (SNT) for the benefit of plaintiff. 

THE PROPOSED SNT TRUST INSTRUMENT

Petitioner provided briefing regarding the SNT at Attachment 18b(4) (court’s pdf at p. 22).  The proposed SNT instrument is provided at Exhibit A thereto (court’s pdf at p. 27).  The SNT meets legal requirements and is ready for approval as detailed below:

I.        Payback Provision

A cornerstone requirement of a 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 asset limit.  The SNT instrument here contains adequate payback provisions in Article Seven, Section 2 of the proposed SNT (court’s pdf at p. 49).

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 meets the requirements of CRC rule 7.903(c) and LASC rule 4.116(b).

ADDITIONAL REQUESTS FOR RELIEF:

Petitioner has made the following additional requests for relief that are beyond those fundamental to the approval and funding of a SNT:

• Petitioner requests authority to employ a broader range of investment authority than the statutory baseline, to include investments in mutual funds and bonds with maturity dates greater than five years.  (Court’s pdf at p. 24.)  This request is common with sizeable settlement trusts and the court grants this request. 

• Petitioner requests authority to pay $3,973.50 fees to the trust specialist counsel, The Urbatsch Law Firm, for tasks relating to the minor’s settlement trust including drafting of the trust instrument and related portions of this petition.  (Court’s pdf at p. 25.)  This request is normal with sizeable trusts and is within the range normally requested for trust counsel.  The court grants this request.

• Petitioners seek permission to spend up to $1 million to purchase a primary residence and $150,000 for accessibility modifications for plaintiff.  (Court’s pdf at pp. 22, 24.)  Petitioner states that the family’s current two story condominium is unsuitable for various reasons and that petitioner seeks to reside in Los Angeles County to take advantage of the school district there.  The court denies this request without prejudice to trustee’s ability to seek this relief from the Probate Court in the later trust supervision action.  There, trustee can make a specific, supported petition to request this authority for consideration by the court. 

• Petitioner requests authority to purchase a new vehicle (with accessibility modifications, including a lift) of up to $85,000 for plaintiff’s transportation needs.  (Court’s pdf at p. 25.). Petitioner states that plaintiff will require wheelchair transportation as he grows.  Petitioner adds that the vehicle will be titled in plaintiff’s parents’ names, with the SNT as lienholder to secure the trust’s interest in the vehicle, and with the SNT paying for the vehicle’s registration, car insurance, and major maintenance.  This arrangement is common when there is need for such a vehicle and the funding of the SNT is sufficient to support it and the court will grant this request when the petition is approved. 

FINDINGS

When 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, and these findings will be made when the petition is approved):

1. The SNT beneficiary has a disability which substantially impairs the individual’s ability to provide for his 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

Petitioner proposes that Mia Ehsani, a private professional fiduciary (PPF) in El Dorado Hills, California (El Dorado County), shall act as the SNT trustee.  (Proposed SNT instrument, Article Five, Section 1, court’s pdf at p. 43.)  Normally, bond must be required of a trustee unless they are a corporate fiduciary.  (California Rules of Court, Rule 7.903(c)(5), Probate Code section 2320.)  A PPF does not meet that requirement and therefore bond will be required. 

In the SNT briefing, petitioner calculates bond as $3,727,636.31(rounded up to $3,728 ,000), including the amount funded into the trust, anticipated annual income, and an additional amount necessary for costs of recovery on the bond.  That calculation appears sufficient.  The court requires $3,728,000 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).)  Proofs of service on file in this case indicate this service and notice appears to be complete. 

THE PROPOSED ORDER

A proposed order for this petition bearing a 8/10/23 Received stamp is in the court’s file.  The following requirements apply to an order on the SNT issues: 

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.  Satisfied. 

The order also should include any additional orders made, including bond requirements, and any allowed fees or rulings on special requests for relief.  General orders are made at Attachment 13 of the proposed order (order pdf at p. 6).  There is an ambiguity because bond is stated there as $3,728,000, which is correct (order pdf at p. 6, para. C), yet bond is stated in the Judicial Council portion of the order as “not required” (order pdf at p. 4, para. 11).  Need correction.  Other additional orders are sufficient. 

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. 

The proposed order includes rulings on the additional requests for relief described in that section, above.  At Attachment 13, paragraph K, the order purports to deny the request to purchase a home, and other requests for additional relief are granted, which appears sufficient.

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.  Satisfied in part at paragraph G of the proposed order, with the court to add an actual 14 month calendar due date for the accounting in the blank provided. 

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. 

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.  Satisfied, with the court to add the SC date at order pdf at p. 7, para. O. 

RULINGS

1. The Court will address the settlement issues - approval of the settlement terms, plaintiff’s attorney fees, etc. - in a separate text.
2. The proposed SNT instrument is approved for creation and funding. 
3. The court requires $3,728,000 bond to be submitted by trustee.
4. The court approves the requests for additional investment authority, payment of $3,973.50 fees to trust specialist counsel, and authority to spend up to $85,000 on a vehicle as set forth above. 
5. The court denies the request to spend $1 million on a residence, without prejudice to trustee’s ability to seek that relief from a court supervising trust administration. 
6. The court sets a due date for the first trust accounting to be filed by trustee in the trust supervision action for November 14, 2024.
7. The court sets an OSC on November 14, 2023,  re the funding of the settlement and filing of the Notice of Commencement of Proceedings for a Court Supervised Trust on LASC Form PRO 044 to open a trust supervision action in the probate division of this court. 
8. Court or petitioner to correct bond orders and add an accounting due date and OSC date to the proposed order.