Judge: Steven A. Ellis, Case: 22STCV18952, Date: 2023-10-10 Tentative Ruling

Case Number: 22STCV18952    Hearing Date: April 3, 2024    Dept: 29

Petition to Approve Compromise of Jesse Contreras, an adult with a disability

TENTATIVE 

The Court excuses the personal appearance of the claimant and the guardian ad litem.  Counsel may appear by telephone or video conference call.

The Petition is GRANTED, with one modification to the proposed order.

Background

Claimant Jesse Louis Contreras (“Claimant”), an adult with a disability, by and through his guardian ad litem, Erica Elizabeth Cordero (“Petitioner”), has agreed to settle his claims against Defendant Franklin Feng (“Defendant”) in exchange for $500,00, subject to court approval. 

Petitioner filed a petition to approve the settlement on August 14, 2023.  While the proposed settlement was under review, Petitioner filed an Amended Petition on November 16 and a Second Amended Petition on January 18, 2024.  As set forth in the Second Amended Petition, the proposed distribution of settlement funds is as follows: $95,000 for medical expenses; $125,000 for attorney’s fees; $49,948.63 for non-medical expenses; and the balance of $230,051.37 for Claimant, to be placed into a new Special Needs Trust (“SNT”).

Discussion 

Court approval is required for all settlements of claims by an adult with a disability.  (Probate Code §§ 3500, 3600, et seq.; Code of Civ. Proc. § 372.)  The Court finds that the settlement amount is fair and reasonable and that the requested attorney’s fees of 25 percent are also fair and reasonable.

The Court cannot approve the Amended Petition at this time, however, because of numerous issues relating to the creation of the proposed SNT.  These issues are summarized below.

Petitioner proposes to fund all net settlement proceeds into a special needs trust (SNT).  An SNT is 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, a person receiving Medi-Cal or SSI benefits could have only up to $2,000 in non-exempt assets, and any additional non-exempt assets over $2,000 would cause the loss of benefits eligibility under the relevant federal and state law.  Funds held in a valid SNT, however, 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, such as SSI, did not change and therefore there might remain a reason for creation and funding of an SNT to maintain other benefits.

Notice

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).). The required notice has been provided.

Proposed Trust Instrument

Petitioner provides the proposed trust instrument at Attachment 18b(4) (court’s pdf at p. 49).  The main requirements for court created or funded trusts are set forth at California Rules of Court, rule 7.903(c), and LASC rule 4.116(b). 

The Court has carefully reviewed the revised proposed trust instrument and finds that it meets all applicable requirements and is ready for creation and funding.

Findings When Proposed Trust is an SNT

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):

• 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.

Based on the evidence in the record, the Court makes each of these findings.

Trustee and Bond

The proposed initial trustee is Michelle Ruiz.  The Court previously stated that a bond in the amount of $266,000 would be required; Petitioner reports that this bond has been secured.

The bond in the amount of $266,000 bond to be submitted to this Department by the trustee (and the bond will later be resubmitted to the Probate court in any trust supervision action). 

Proposed Order

The proposed order (received 1/18/24) is appropriate, complete, and meets all applicable requirements, with one exception.

On page 2, lines 24-28, paragraph B states, “The assets of The 2024 Irrevocable Special Needs Trust FBO Jesse Luis Contreras shall be deemed unavailable to Jesse Luis Contreras, and shall not constitute a resource to Jesse Luis Contreras, for determination of his financial eligibility for Medi-Cal, SSI, or any other program of public benefits.”

The Court determines that it is not appropriate at this time to make a finding or order regarding the effect of the assets in the SNT on claimant’s eligibility for benefits.  The Court will strike this language and, with this language stricken, will approve the proposed order.

Conclusion

The Court GRANTS the petition, with one modification to the proposed order.

The Court STRIKES the following provision of the proposed order filed on 1/18/24: “The assets of The 2024 Irrevocable Special Needs Trust FBO Jesse Luis Contreras shall be deemed unavailable to Jesse Luis Contreras, and shall not constitute a resource to Jesse Luis Contreras, for determination of his financial eligibility for Medi-Cal, SSI, or any other program of public benefits.”

The Court sets the OSC in Paragraph L of the Proposed Order in Department 29 of the Spring Street Courthouse in approximately 70 days.

With these modifications, the proposed order is APPROVED.

Moving party is ORDERED to give notice.