MATTER OF GRILLO, 0341317/2007 (2-20-2008)
2008 NY Slip Op 30532(U)
In the Matter of the Application of MARK A. GRILLO and LYNN H.
SWANSON-GRILLO, as Co-Administrators of the Estate of MARK S. GRILLO,
Deceased, to Determine the Validity and Enforceability of a Claim
Against the Estate.
Surrogate's Court of the City of New York,
February 20, 2008.
[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.]
JOHN B. RIORDAN, Judge.
This is a proceeding brought by Mark A. Grillo and Lynn H.
Swanson-Grillo (the Grillos), in their capacity as co-administrators of
the estate of Mark S. Grillo (Mark), their deceased son, to determine
the validity and enforceability of a claim by the Nassau County
Department of Social Services (DSS) for repayment of Medicaid assistance
rendered to Mark during his lifetime. Before the court are the Grillos'
motion and DSS's cross-motion for summary judgment. Specifically, the
Grillos seek an order striking DSS's answer to the petition and
determining that the amount of the lien is limited to Medicaid
assistance expended after the creation and funding of a supplemental
needs trust for Mark's benefit. DSS seeks an order dismissing the
petition and determining that DSS's claim is valid and enforceable in
Mark was born a triplet on July 4, 1995. As a result of a procedure he
underwent at the age of three months at Long Island Jewish Medical
Center, he suffered from severe cerebral palsy and required
twenty-four-hour-a-day assistance for all of his daily living
activities. The Grillos, individually and as Mark's parents and natural
guardians, sued Long Island Jewish Medical Center and Steven J.
Schneider, M.D. in Supreme Court, Queens County. The action was settled
for a total of $4,000,000 pursuant to an infant's compromise order
signed on September 29, 2003
by the Honorable Alan LeVine and entered in the office of the Queens
County Clerk on October 15, 2003. According to the terms of the order,
the Grillos, as Mark's parents and natural guardians, were directed and
authorized to create the Mark Grillo Supplemental Needs Trust (SNT) and
appointed as its co-trustees. The order also directed the Grillos to pay
the net settlement funds in the amount of $2,412,698.55[fn1] to the SNT
jointly with Charles Schwab & Co., Inc., in an account held at Charles
Schwab & Co., Inc. Further, the infant's compromise order directed the
payment of $500,000 of the settlement proceeds to DSS "as and for
payment and satisfaction" of an existing medicaid lien in the amount of
$845,218.49 asserted by DSS. The sum of $500,000 was paid to DSS on
March 15, 2004.
The Grillos,[fn2] as the parents and guardians of Mark, are the
grantors, as well as the trustees of the SNT. The trust agreement was
signed on December 16, 2003. According to its terms, the SNT was to
terminate on Mark's death and the trustees were to distribute any
principal and accumulated interest, in relevant part, as follows:
The New York State Department of Social Services,
or other appropriate Medicaid entity within New
York State[,] shall be reimbursed for the total
Medicaid Assistance provided to MARK GRILLO
during his lifetime (less a credit for any
amounts previously paid in satisfaction or
partial satisfaction of any social services
lien), as consistent with Federal and State
Law. . . .
All remaining principal and accumulated interest
shall be paid to the legal representative of the
Estate of the Beneficiary [Mark] (SNT ¶ 3.1).
Mark died on January 27, 2006, a resident of Nassau County. He was ten
years old. Letters of administration issued to the Grillos on April 18,
2006. DSS has made a claim against Mark's estate in the amount of
$708,410.34, which DSS asserts is the amount due and owing for unpaid
Medicaid benefits paid to Mark during his lifetime.
The total amount of Medicaid benefits paid on behalf of Mark is
$1,272,790.34. Of that amount, $845,218.49 in benefits was expended
prior to the funding of the SNT, with $500,000 of that amount having
been paid to DSS pursuant to the infant's compromise order, leaving a
balance, according to DSS, of $345,218.49 at the time the SNT was
created. An additional $358,191.85 in Medicaid benefits was paid for
Mark's benefit after the SNT was created, leaving a balance due,
according to DSS, of $703,410.34.
The Grillos admit that $358,191.85, the amount disbursed after the SNT
was created, is due and owing. Citing Social Services Law § 369 (2) (b)
(I) (B), they assert that DSS is entitled to recover previously paid
Medicaid benefits from an estate only if the individual was fifty-five
years old or older when the assistance was rendered. Thus, they contend
that the $345,218.49 balance at the time of the creation of the SNT is
not owed to DSS because DSS's sole right of recovery stems from the
terms of paragraph 3.1 of the SNT, which states that such recovery must
be in accordance with federal and state law.
DSS asserts that the entire amount of the claim is due and owing from
the SNT. DSS draws the court's attention to the fact that Congress
allows the creation of supplemental needs trusts provided such trusts
contain a provision that the state in question will "receive all amounts
remaining in the trust upon the death of the individual up to an amount
equal to the total medical assistance paid on behalf of the individual
under a State plan under this subchapter" (42 USC ﾧ 1396p [d]  [A];
see Social Services Law § 366  [b]  [iii]). DSS states that
"[w]ithout the enabling act of Congress, with its payback provision, all
Medicaid Benefits paid because of this trust would have been paid
improperly and thus owing to the State."
The court agrees. New York State's
right to reimbursement of all Medicaid expended
on a beneficiary's behalf flows from the terms of
the SNT agreement itself an agreement voluntarily
entered into by the beneficiary or his or her
agent in order to obtain the significant
advantage of preserving Medicaid eligibility
while at the same time benefitting from the funds
contained in the trust (Matter of Abraham
XX, 36 AD3d 1085,1088 [3d Dept 2007], citing
42 USC ﾧ 1396p [d]  [A]; Social Services Law
§ 366  [b]  [iii]; EPTL 7-1.12 [a] ).
Matter of Abraham XX, (36 AD3d 1085,1088 [3d Dept 2007]), is a case on
which both the Grillos and DSS rely. In that case, the Third Department
stated that 42 USC ﾧ 1396p [d]  [A] allows an individual qualified
under EPTL 7-1.12 [a]  to establish a supplemental needs trust
exempting the corpus and income thereof from inclusion as available
resources provided the trust agreement contains a provision specifying
that the "`[s]tate will receive all amounts remaining in the trust upon
the death of [the] individual up to an amount equal to the
total medical assistance paid on behalf of the individual under a State
[Medicaid] plan' (42 USC ﾧ 1396p [d]  [A] [emphasis added];
see Social Services Law § 366  [b]  [iii])" (Matter of Abraham
XX, 36 AD3d 1085,1089 [3d Dept 2007]). The Third Department explained
that 42 USC ﾧ 1396p "does not direct recovery of Medicaid funds"
(id.). Instead, a state's right to be repaid from a supplemental needs
trust arises from the trust agreement, which names the state as
the primary remainderman (id.). "[S]ubsection (d) (4) (A) makes
total reimbursement a condition of preserving Medicaid eligibility
through an SNT. . . ." (id.). Thus, the words "as consistent with
Federal and State Law" contained in the SNT in question do not provide
the Grillos a basis by which to avoid repaying the $345,218.49 balance
on the Medicaid lien that existed at the time the SNT was created.
The infant's compromise order dated September 29, 2003 states that the
$500,000 later paid to DSS on March 14, 2004 was "as and for payment and
satisfaction" of the medicaid lien in the amount of $845,218.49 that
existed at the time. However, DSS claims that the $500,000 payment was
in partial satisfaction of the existing lien. The Grillos conceded that
claim in paragraph 13 of their Verified Petition sworn to on April 7,
2004 in support of their petition to be named as Mark's co-guardians
under Article 81 of the New York Mental Hygiene Law wherein they aver
that "the sum of $500,000 was paid to the NCDSS as and for partial
payment and satisfaction of social services/Medicaid lien. The balance
of the lien will be deferred until termination of the SNT (i.e., upon
the demise of the AIP)." The Verified Petition was filed with Supreme
Court, Nassau County.
Accordingly, the Grillos' motion is denied, and DSS's cross-motion is
granted to the extent that the court finds that DSS's total claim for
$703,410.34 is valid and payable to DSS from the SNT.
[fn1] As part of the settlement, the Grillos received $500,000 for their
derivative cause of action. Their attorneys received $545,855.39 in
legal fees and $41,446.06 for costs and disbursements.
[fn2] At some point prior to the creation and funding of the SNT, the
Grillos were appointed by Supreme Court, Nassau County, as co-guardians
of Mark's person and property under Article 81 of the New York Mental