Judge William A. Crowfoot, Case Number: 21STCV23340, Date: 2024-02-16 Tentative Ruling

Judge: William A. Crowfoot, Case: 21STCV23340, Date: 2024-02-16 Tentative Ruling

Claimant Callum Leonard (“Claimant”), a minor, by and through their Guardian Ad Litem, Emily Leonard (“Petitioner”), has agreed to settle their claims against Defendants Kristen Rose Uquillas, M.D, and University of Southern California in exchange for $1.85 million. If approved, $53,778.19 will be used for medical expenses, $322,922.49 will be used for attorney’s fees, and $231,049.55 will be used for non-medical expenses, leaving a balance of $1,232,249.77 for Claimant. $547,249.77 would be transferred to a Special Needs Trust (“SNT”) and the remaining $685,000 will be used to purchase an annuity that would pay into the SNT.

There are various deficiencies within the petition and the proposed SNT which prevent the Court from approving the petition.

First, there is no proof of service showing that the Department of Mental Health, Department of Developmental Services, and Department of Health Care Services have received the required 15 days’ notice. (Probate Code sections 3602(f), 3611(c).).

Second, the trust instrument submitted as Attachment 18b(4) was executed on October 30, 2023, even though a trust instrument should not be executed until the court orders the creation and funding of the trust. Petitioner’s counsel must clarify whether the proposed trust has been funded in advance of a court order.

Third, the proposed trust instrument is deficient because it does not meet the requirements of California law, including California Rules of Court rule 7.903 and LASC rule 4.116. Instead, it appears to have been drafted to meet Missouri legal requirements.

Specifically, the proposed trust instrument does not meet the following requirements of CRC rule 7.903(c), labelled by quoted subsection:

(c)(4) Prohibit investments by the trustee other than those permitted under Probate Code section 2574;

(c)(5) Require [trustee] to post bond in the amount required under Probate Code section 2320 et seq.;

(c)(6) Require the trustee to file accounts and reports for court approval in the manner and frequency required by Probate Code sections 1060 et seq. and 2620 et seq.;

(c)(7) Require court approval of changes in trustees and a court order appointing any successor trustee; and

(c)(8) Require compensation of the trustee, the members of any advisory committee, or the attorney for the trustee, to be in just and reasonable amounts that must be fixed and allowed by the court. The instrument may provide for periodic payments of compensation on account, subject to the requirements of Probate Code section 2643 and rule 7.755.

Additionally, the proposed trust instrument does not contain the following terms as required by 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.)

Moreover, the trust instrument provides for improper estate planning for a minor because it names plaintiff’s parents as the residual beneficiaries of the trust assets in the event of plaintiff’s death rather than containing the usual term that plaintiff’s heirs at law are the residual beneficiaries. (Section 4.05.) The trust instrument purports to provide for trust actions which are foreign to a SNT, including distribution to a resulting trust in the event of early termination of the SNT (Section 3.04) and authority to merge or sever trusts (Section 6.07). Sections 6.13 through 6.16 regarding estate powers, residence powers, retention/abandonment powers, and settlement powers are also not appropriate in a SNT; these terms appear to be boilerplate borrowed from other types of trust instruments.

Fourth, with respect to the proposed trustee, Continental Trust Services, it is not clear whether it qualifies as a corporate fiduciary and whether bond should be required. Petitioner must address this issue and calculate the amount of the bond, if necessary, with the revised petition.

Based on the foregoing, the Court continues the hearing on this to _______ so that an amended petition with a corrected proposed trust instrument may be submitted (as well as a proof of service showing proper notice on the state agencies as required).

Per California Rules of Court, Rule 7.952, Petitioner and Claimant must appear at the hearing, unless the Court finds good cause to excuse their appearance. The Court finds that Claimant’s appearance is not necessary, but will require Petitioner’s counsel to appear.

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.