The following case was argued by Jay J. Sangerman, Esq. An article written by Jay J. Sangerman was published in the New York Law Journal shortly after the issuance of the decision, which pertains to many of the same issues discussed by Judge Katz in the decision below.
This decision is one of the few decisions pertaining to the substantive provisions in the drafting of a supplemental needs trust.
See article: Supplemental Needs Trusts: The Next Decade
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Published in the New York Law Journal
Decision of Interest
Summary From Law Journal.
Cano v. Shmonie Corp.
New York State Supreme Court, County of Bronx
Justice Bertram Katz
THE INFANT plaintiff's personal injury action was settled for $2.19 million. Plaintiff sought an order permitting the placement of settlement proceeds in a "portable" supplemental needs trust (SNT). The court - which determined that its supervisory and protective role with respect to the infant plaintiff, who remains a ward of the court, superceded the assertion by the Department of Social Services (DSS) that supplemental needs trusts should not be "micro-managed" by courts - rejected the assertions by the DSS that a portability provision within the SNT would violate Estate, Powers and Trusts Law §7-1.9, with the result that the SNT might be considered a revocable trust, rendering the plaintiff ineligible for Medicaid. The court determined that to permit an SNT to be constructed in a way to prevent the family of a disabled person to move freely to another state without jeopardizing the disabled's ability to receive entitlement payments would violate public policy.
Cano v. Shmonie Corp.
New York State Supreme Court, County of Bronx
IA Part 4
Motion by plaintiffs for an order permitting settlement of this matter pursuant to an infants compromise order incorporating The Rosie Cano Supplemental Needs Irrevocable Trust ("SNT") and for the placement of the net proceeds of the negligence action and payments from the structured settlement annuities in accordance with the schedule annexed as exhibit 3 to the affirmation [sic], and deeming the failure of the Department of Social Services ("DSS") to appear in opposition a waiver of its objections to said SNT and a non-assertion of its lien to the proceeds of Rosie Cano's personal injury lawsuit, and for other relief, is decided as follows:
The personal injury claim of the infant plaintiff Rosie Cano has been settled, subject to an infant's compromise order and approval by DSS of a Supplemental Needs Trust, for the sum of $2,190,000. The infant plaintiff and her mother were seen by the Court on June 7, 2004, and this settlement was approved by this Court subject to the resolution of the instant motion, which was submitted to the Court for decision on June 28, 2004. After this motion was brought on, by letter dated June 21, 2004, DSS agreed not to assert a lien against the proceeds of this lawsuit, aside from the issue of the SNT to be resolved herein.
The plaintiff's counsel and DSS have identified a host of disputed items with respect to the negotiation of the SNT. Chiefly, these issues concern the involvement of the Court in the expenditures to be made by the Supplemental Needs Trustee, especially anticipated major expenditures for housing and for a van. The position of DSS is that such matters are exclusively within the province of the Trustee, and that the Court should not intrude in this area except to prevent an abuse of discretion by the Trustee. DSS would have the Court's role limited to passing on DSS's potential objections to the accounts filed by the Trustee. However, this Court has previously required, and will continue to require, the appointment of a Court Examiner to review the accounts to be filed by the Trustee in all of these case. This Court has also required, and will continue to require, that application be made to the Court for major expenditures out of the infant's assets, including housing and vehicles, with notice to DSS, although the Court rejects DSS's position that all such purchases be contingent on DSS's approval.
A second major area of opposition by DSS concerns the plaintiff's wish to make the SNT "portable," i.e. subject to amendment to comply with potential objections of the local DSS offices in other States, in the event that the plaintiff and her family move out of New York State. DSS asserts that such a portability provision would violate EPTL Section 7-1.9, that the SNT might be considered a revocable trust, rendering the infant ineligible for medicaid. However, the Court is constrained to agree with the plaintiffs that EPTL Section 7-1.9, which requires that amendments be consented to by the settler and all those beneficially interested in the trust, is not capable of strict application to a trust established for the benefit of a party incapable of providing such consent. Moreover, it would violate public policy to permit a Supplemental Needs Trust to be constructed in such a way as to prevent the family of a disabled person from moving freely to another state without jeopardizing the disabled's ability to receive entitlement payments.
DSS also objects to those provisions permitting the Trustee to retain third party professionals, including those with expertise in the field of preserving government benefits, although all such secondary appointments, and any and all fees payable to such professionals, must in any event be subject to prior Court approval. Once again, however, it is difficult to understand how a blanket prohibition against such appointments can possibly be in the best interest of the infant, or how permitting such retentions would harm DSS given the Court's supervisory role.
Although the Court is sympathetic with the assertion that Supplemental Needs Trusts should not be micro-managed by the Court, there is a competing and superseding interest implicated herein, which is the Court's supervisory and protective role with respect to an infant plaintiff. Valdimer v. Mount Vernon Hebrew Camps Inc., 9 N.Y. 2d 21. Although funds which are held in a supplementary needs trust for an infant can no longer be technically considered assets of a guardianship, the Court's responsibility to the infant does not disappear merely because the proceeds are deposited in a supplemental needs trust. The infant remains a ward of the Court, no matter what form the investment of the fiduciary funds takes. Nor can the Court accept the interpretation of DSS that the Court is somehow unconcerned with the protection of DSS's right of recoupment of its lien, while a Trustee is automatically more protective of the interests of DSS.
The Court also cannot delegate its oversight responsibilities to the Trustee, or to DSS for that matter, relying solely on DSS's examinations of accounts, and on its discretionary decisions to challenge specified conduct by the Trustee - based on its limited concerns with the protection of its right of recoupment - decisions which the Court may not agree with in its broader role of protecting the best interests of the infant. The position of DSS with respect to its apparent belief that the Court should exercise no such oversight, except in response to applications brought by DSS, must be vehemently rejected. Just as a Supplemental Needs Trust may not be used to abrogate or circumvent the protections of a guardianship, Matter of Greenstein [Hope Graham] 195 Misc 2d. 628, it cannot be used to abrogate the Court's responsibility to its infant wards. See DiGennaro v. Community Hospital of Glen Cove, 204 AD 2d 258 (Second Dept, 1994) [the Court approving a Supplemental Needs Trust must provide for Court approval of withdrawals by the Trustees, and require accountings to the Court on an annual or biannual basis].
The plaintiffs' counsel has consented, or has not opposed two of the objections raised by DSS, i.e. the inclusion of a provision that the trustee file the Oath and Designation and Consent to Act on DSS, and a provision to provide DSS with an additional 30 days to review the accountings. The Court agrees that both provisions should be included, and the SNT amended accordingly.
Beyond this, the Court finds that the objections of DSS to the SNT, as amended herein, are without merit, and the SNT as so amended, in the form annexed to the moving papers as exhibit 2, is herewith approved. The Court has also signed herewith an infant compromise order providing for the appointment of a Court Examiner in accordance with the rules of the Appellate Division, First Department.
This will constitute the order of this Court.
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JAY J. SANGERMAN, ESQ.
JAY J. SANGERMAN, PLLC
171 East 84th Street, Unit 21B
New York, New York 10028
212-439-0056 - facsimile