Clarence Gaines, as the Executor of the Estate of Janie Gaines, Deceased, Respondent,v.City of New York, et al., Defendants, Department of Social Services of the City of New York, Appellant.

Brief

N.Y.May 30, 2017

ZACHARY W. CARTER Corporation Coun.<;el THE CITY OF NEW YORK LAW DEPARTMENT . 100 CHURCH STREET NEW YORK, NY 10007 ERIC LEE Phone: (212) 356-4053 Fax: (212) 356-2509 Email: erlee@law .nyc. gov November 18, 2016 Hon. John P. Asiello Chief Clerk and Legal Counsel to the Court New York State Court of Appeals 20 Eagle Street Albany, New York 12207-1095 Re: Gaines v. City of New York APL-2016-000161 Dear Mr. Asiello: In response to this Court's August 24, 2016 letter inviting submissions under Rule of Practice 500.11, I submit this letter brief on behalf of the appellant Department of Social Services of the City of New York (HRA). Under Rule 500.ll(c)(2), HRA notes its position that the question presented here warrants full briefing and argument because the decision below raises a novel issue of public importance under state and federal law. HRA appeals from the decision and order of the Appellate Division, First Department, which affirmed the order of Supreme Courtl Bronx County holding the Janie Gaines Irrevocable Supplemental Needs Trust invalid and denying HRA's motion to compel distribution of the trust remainder to HRA. This Court should reverse. A supplemental needs trust is a special vehicle for estate planning authorized under federal and state law. It shields a disabled person's assets from being counted against eligibility for vital government benefits like Medicaid. Because the trust preserves Medicaid eligibility for a disabled person who otherwise would be ineligible, it diverts scarce resources that could be used to provide benefits to other individuals. To compensate, Medicaid law requires a disabled person who uses this trust to make a bargain with the government: (1) the funds held in the trust may be applied to supplement her care during her lifetime (subject to certain restrictions), (2) yet will be disregarded in determining her continuing eligibility for Medicaid, (3) as long as, in exchange, the government is granted a remainder interest allowing it to offset Medicaid benefits spent on her behalf with any funds remaining in the trust at the time of her death. Since 1990, Janie Gaines received more than $1.3 million in Medicaid benefits through HRA. In 2010, she petitioned Supreme Court, Bronx County, to create a supplemental needs trust to receive funds from a substantial settlement in a tort action against the City of New York and other defendants. Mter reviewing the terms of the proposed trust, Supreme Court (Walker, J.) issued an order establishing the trust, incorporating the trust agreement by reference, appointing the trustee, and directing the settlement funds to the trust. The court further directed additional, ministerial steps to implement the trust. Relying on the order, HRA kept Gaines on Medicaid. Gaines died several months later. HRA then asserted its right to the trust remainder to recoup a portion of the Medicaid benefits spent for Gaines.. Gaines's estate opposed the motion, asserting that the trust had never come into ~xistence due to an alleged failure of certain formalities, and thus HRA had no remainder interest. A different Justice of Supreme Court, Bronx County (Sherman, J .), and a panel of the First Department, accepted the Estate's contention. The courts below erred in holding that Gaines's supplemental needs trust was never established, even though Justice Walker issued an order-at Gaines's request-doing exactly that. The state and federal Medicaid statutes expressly allow courts to create these trusts for disabled individuals. The failure of Gaines's lawyer and the trustee to comply with Justice Walker's order before her death does not nullify the trust. Nor is the trust invalid because it did not feature the 2 formalities required by statute for defined lifetime trusts. Court-created trusts like Gaines's are expressly excluded from having to satisfy those formalities. If allowed to stand, the First Department's refusal to recognize the trust's existence would destabilize this trust device, to the detriment of both disabled persons and social-services districts such as HRA. The court's holding would impose additional, unnecessary requirements on disabled persons who, under Medicaid law, cannot establish a supplemental needs trust on their own and must ask a court to do so on their behalf. The court's holding would inject uncertainty into a mechanism designed to ensure continuity of life-saving benefits, calling into question the validity of numerous trusts that have been formed by judicial ruling. STATEMENT OF THE CASE A. The Statutory Framework for Supplemental Needs Trusts 1. The bargain offered by the supplemental needs trust A jointly administered program of the federal and state governments, Medicaid serves as a vital lifeline for millions of low- income New Yorkers, including many with severe disabilities. Because Medicaid eligibility depends in part on a person's assets, a Medicaid recipient can lose her benefits if her income or assets go above the statutory limits. I To preserve eligibility for government programs like Medicaid, New York courts, starting in 1978, sanctioned the use of "discretionary trust[s] to supplement the care of severely disabled persons without jeopardizing the individual's right to government-provided medical 1 As of September 2016, 2.03 million New York City residents are enrolled in Medicaid. See HRA, HRA Administered Medicaid Enrollees 2012-2016, https://www1.nyc.gov/assetslhra/downloads/pdf/facts/charts/hra_admin_med_eru·olle e.pdf (last visited Nov. 18, 2016). The eligibility limits for most New York residents are tied to the federal poverty level. See Medicaid in New York State, http://www.health.ny.gov/health_care/medicaidl#income (last visited Nov. 18, 2016). 3 care." Matter of Abraham XX., 11 N.Y.3d 429, 434 (2008). In 1993, the Legislature codified these trusts "to provide clarity and uniformity." Id. Also in 1993, Congress authorized the use of supplemental needs trusts to enable disabled individuals to maintain Medicaid eligibility. ld. at 434-35; see 42 U.S.C. § 1396p(d)(4)(A). The Legislature then amended New York law governing these trusts to ensure conformity with federal law. Matter of Abraham XX., 11 N.Y.3d at 435. Federal and conforming state laws thus authorize supplemental needs trusts. In exchange for overlooking the trust assets, these laws require any such trust funded with the assets of the disabled individual to provide a remainder interest to the State. 42 U.S.C. § 1396p(d)(4)(A); Social Services Law (SSL) § 366(2)(b)(2)(iii)(A). This remainder interest affords the State the possibility of recouping Medicaid benefits paid for the person from whatever assets are left in the trust when the person dies. The supplemental needs trust thus represents a "bargain struck between the [trust's] beneficiary and the State." Matter of Abraham XX., 11 N.Y.3d at 436. 2. Procedures for creating a supplemental needs trust The beneficiary of a supplemental needs trust cannot initiate its formation. Federal law provides that "[trust] assets of an individual under 65 who is disabled" do not count toward Medicaid eligibility if the trust "is established for the benefit of such individual by a parent, grandparent, legal guardian or a court." 42 U.S.C. § 1396p(d)(4)(A). State law imposes the same requirements. SSL § 366(2)(b)(2)(iii)(A). The relevant Estates, Powers and Trusts Law (EPTL) provisions align with these provisions of the federal and state Medicaid statutes. Like those statutes, the EPTL provides that a trust beneficiary may fund the trust with her own assets-in the EPTL's terms, may serve as the trust's "creator"-only if the trust meets the requirements of SSL § 366(2)(b)(2), including the remainder-interest requirement. EPTL § 7- 1.12(a)(5)(v); see id. § 1-2.2 (defining "creator" as "a person who makes a disposition of property"). Nonetheless, as noted, the trust's beneficiary, even if she is the trust's creator, cannot establish the trust for herself. 4 EPTL § 1-2.20 defines a lifetime trust as a trust created other than by will. Lifetime trusts can be validly established only with certain formalities: a written trust instrument must be executed and acknowledged by the person establishing the trust and, unless this person is the sole trustee, by at least one trustee. EPTL § 7-1.17(a). Although a supplemental needs trust, which is created during a disabled individual's lifetime, would otherwise fall within the definition of a lifetime trust and thus be subject to the formality requirements, the EPTL expressly provides that certain trusts created during a person's lifetime are not lifetime trusts. These excluded trusts include any "trust created by the judgment or decree of a court." Id. § 1-2.20. Any supplemental needs trust established by a court-like the Gaines trust here-comes within this exclusion. Supplemental needs trusts play an important role in the administration of the Medicaid program, which, in New York City, is administered by HRA under the supervision of the State Department of Health. See SSL §§56, 363-a. Although the recovery from an individual trust is often a fraction of the decedent's Medicaid costs, HRA recovers a substantial amount of money collectively each year. Those funds return to the Medicaid budget to provide for the medical needs of other low- income individuals. B. Supreme Court's Establishment of Gaines's Supplemental Needs Trust Janie Gaines, who suffered from diabetes and blindness, received $1.32 million in Medicaid benefits from 1990 until her death in November 2010 (Record on First Department Appeal ("R.") 107 ~ 4, 133 ~ 4). In 2003, she brought a personal-injury action in Supreme Court, Bronx County, against the City of New York and other defendants after she was injured while riding on a transit bus (R. 133 ~ 3, R. 134 , 5). In early 2010, she settled the action for $600,000 (R. 108). Gaines recognized that the settlement could jeopardize her continued eligibility for Medicaid (R. 130 , 7). In February 2010, before she received the settlement payment, Gaines, through Jacoby & Meyers, the law firm representing her in the tort action, informed HRA 5 of her wish to form a supplemental needs trust (R. 108, 7). The letter enclosed a copy of the proposed trust agreement for HRA's review (id.). Two months later, Gaines submitted a notice of unopposed motion and accompanying verified petition to the court overseeing the personal- injury action. She asked the court to issue an "Order ... approving and authorizing the creation of a supplemental needs trust for my benefit" (R. 130-31). She explained: "I do not want to lose my benefits. I depend on my benefits to live" (R. 130 , 7). She also asked the Court to "appoint[] an appropriate independent Trustee" (R. 131), stating, "I currently do not have any family member nor an acquaintance who I would trust to assume this responsibility" (R. 130, 9). In an affirmation supporting the petition, Gaines's counsel confirmed that the petition was "brought under Social Service [ s] Law § 366(2)(b)(iii)(B) [sic] which provides for the establishment by a Court of competent jurisdiction" a supplemental needs trust (R. 135 , 10). She explained that the attached trust agreement reflected HRA's revisions, which Gaines agreed to accept (R. 135 ~ 15). Her counsel requested that Supreme Court establish the trust, order that the net proceeds of Gaines's settlement be paid to the trust, and direct the appointment of a trustee (R. 136). On July 26, 2010, Supreme Court, Bronx County (Walker, J.), granted Gaines's petition after finding that establishing the trust was in her "best interests" (R. 121). Justice Walker's order directed that six things be done. The first three portions of the order established the trust. The order provided that (1) the "Janie Gaines Irrevocable Supplemental Needs Trust ... is hereby established"; (2) Lorraine Coyle, Esq. is "hereby appointed Trustee"; and (3) the settlement proceeds (incorrectly listed as $300,000 instead of $600,000)2 "shall be paid" to the trustee after payments of attorneys' fees, disbursement, and liens (R. 122). 2 Later, Justice Sherman recognized, as does the Estate's attorney (R. 210), that the $300,000 figure is a typographical error (R. 13). 6 The other three portions of the order were directions to perform ministerial tasks and directives on Medicaid reimbursement. The order (1) "incorporated" the proposed trust agreement "by reference" and directed that an executed agreement "shall be filed" with the clerk of the Court; (2) ordered that payment of any HRA lien "be deferred" until Gaines's death; and (3) commanded that all remaining income "be paid" to Gaines's estate upon the trust's termination and the payment of any HRA liens (id.). The trust agreement that was incorporated by reference in Justice Walker's order stated that the trust "is established pursuant to the Order of the Supreme Court of the State of New York, County of Bronx" (R. 139). It provided that the trust would terminate upon Gaines's death (R. 142). And it stated that, upon Gaines's death, the trustee "shall distribute any principal and accumulated interest" to HRA to reimburse it for the total medical assistance paid for Gaines's benefit (id.). C. HRA's Unsuccessful Attempts to Enforce Gaines's Trust Mter Justice Walker established the trust in July 2010, Gaines continued to receive Medicaid benefits. In September 2010, Gaines received a check for half of her settlement award; she endorsed the check, and Jacoby & Meyers deposited the money into an escrow account (R. 264 ~ 6).3 Gaines died in November 2010. Neither Jacoby & Meyers nor the trustee informed HRA or the Court of her death (R. 109 ~~ 11-12). In February 2011, after learning that Gaines had died, HRA informed Jacoby & Meyers that it was entitled to Medicaid reimbursement (R. 152). Jacoby & Meyers refused to release the funds. Gaines's counsel told HRA that Gaines "died before the trust was funded" and that Coyle, despite her appointment as trustee, "never qualified [as trustee] because of Ms. Gaines's death" (R. 188 ~ 15 (quotation marks omitted)). Her attorneys offered no explanation for 3 Gaines's estate received the other half of the settlement fi·om another defendant after her death (R. 15). 7 failing to comply with Justice Walker's order ih the months before Gaines's death. HRA brought a motion in Supreme Court for an order directing distribution in accordance with Justice Walker's order and the terms of the trust. A different Justice (Sherman, J.) ruled on the motion. He concluded that Gaines's trust was not enforceable because Gaines and the trustee had failed to execute the trust agreement and the trustee had not qualified (R. 200). HRA appealed, and the First Department vacated the order for lack of jurisdiction because no party had been substituted for the deceased Gaines (R. 203). On remand, Gaines's estate moved to substitute Clarence Gaines, her father, as plaintiff (R. 27 ~~ 7 -8). HRA cross-moved for an order directing Jacoby & Meyers to pay the net settlement proceeds to the trustee and directing the trustee to reimburse HRA from the trust (R. 118-19). Justice Sherman denied HRA' s. cross-motion. Relying on state statutes applicable only to lifetime trusts, the court held that the trust was invalid because Gaines and Coyle never executed the trust agreement and the trust was nevetfunded (R. 18). The First Department affirmed. Gaines v. City of New York , 137 A.D.3d 673, 673 (1st Dep't 2016). The court held that Gaines's trust was a lifetime trust and thus invalid because Gaines and the trustee never completed the required formalities. Id. The court further held that although EPTL § 1-2.20 exempts a trust "created by [a] judgment or decree of a court" from the formality requirements, Gaines's trust did not meet this exception because Justice Walker's order did not "create" the trust and was not a "judgment or decree." Id. (quotation marks omitted). The First Department granted HRA leave to appeal to this Court. ARGUMENT Justice Walker's order plainly intended to bring the Gaines trust into existence. Gaines herself asked the court to issue an order doing just that. The First Department held, however, that the trust was 8 invalid because Gaines and the trustee failed to later fulfill the formalities set forth in statute for lifetime trusts. But Gaines's trust was not subject to those requirements; EPTL § 1-2.20, which defines a lifetime trust, expressly excludes trusts "created by the judgment or decree of a court." The First Department's misguided interpretation of the terms "created" and "judgment or decree" in this exception finds no basis in the EPTL or New York law more generally. Its reading would nullify the exception entirely. The First Department's mistaken interpretation would have serious consequences for HRA's ability to administer benefits for Medicaid recipients with supplemental needs trusts, would put disabled persons at risk of losing their Medicaid benefits through error or exploitation, and would threaten the validity of numerous existing court-created trusts. Justice Walker's order validly created Gaines's trust, and HRA is entitled to reimbursement from the trust remainder. A. Gaines's Trust Was Valid Without the Formalities of a Lifetime Trust Because It Was "Created by the Judgment or Decree of a Court." In holding that Gaines's trust was not a trust "created by [a] judgment or decree of a court," the First Department erred in two fundamental respects. Gaines, 137 A.D.3d at 673 (1st Dep't 2016) (quoting EPTL § 1-2.20). First, contrary to the court's reasoning, Justice Walker's order "created" the trust-that is, it brought the trust into existence. The First Department apparently adopted the Estate's position that trust formation requires a separate act of trust "creation" after a court establishes the trust. But New York law does not recognize any distinction between "establishing" and "creating" a trust; the terms are used interchangeably, consistent with their ordinary usage. The Estate simply invented the purported distinction between the two synonyms. Second, Justice Walker's order constituted a "judgment or decree" within the meaning of the statute because New York law does not maintain a rigid boundary between rulings denominated as orders and 9 those denominated as judgments when, as here, there is no basis to distinguish between them. 1. Justice Walker's order "created" the trust. a. No distinction between creating and establishing a trust exists in New York law. The First Department's holding relies on a distinction between "establishing" and "creating" a trust that has no basis in New York law. Rather, as common sense would suggest, trust law uses both terms in their ordinary sense as synonyms for the act of forming a trust. If the proposed distinction were to exist, one would expect to see it in the case law. Courts would be careful to reserve the word "establish" and the word "create" for different actions. But courts do no such thing. Instead, they use the words interchangeably to describe the formation of a trust. Most significantly, this Court has used the terms interchangeably. In Matter of Abraham XX. , this Court referred to the formation of a disabled child's supplemental needs trusts alternately as a "creat[ion]" and an "establishment." 11 N.Y.3d at 438-39. In dissent, Judge Smith did so as well, referring throughout his opinion to the "creation" or "establish[ment]" of the trust-without any indication that he was using these terms in a technical manner to describe different acts. ld. at 439, 441. The lower courts similarly use the terms interchangeably. See, e.g., Sanango v. N.Y. City Health & Hosp. Corp. , 6 A.D.3d 519, 520 (2d Dep't 2004) (using both "creation" and "establishment"); Matter of Rappaport, 21 Misc. 3d 919, 922-25 (Sup. Ct. Nassau Co. 2008) (agreeing to construe the decedent's will to "create a third-party supplemental needs trust" after alternately stating that EPTL § 7.1-12 permits the "establishment" or "creation" of a supplemental needs trust); Matter of Miller, 20 Misc. 3d 1lll(A), 2008 N.Y. Misc. LEXIS 3843, at *1, *8 (Sup. Ct. Queens Co. June 30, 2008) (granting "Order 10 creating a supplemental needs trust" because a "properly established" trust could have been created earlier). 4 And treatises do too. In a section titled "Who Can Create Supplemental Needs Trust," a leading New York treatise provides that these trusts "may be established by a parent, grandparent, legal guardian, or court of competent jurisdiction." 12-211 Warren's Heaton on Surrogate's Court Practice § 211.04 (2015). b. Gaines's conduct before Supreme Court belies the purported distinction between creating and establishing a trust. Gaines also used the terms "create" and "establish" interchangeably before Justice Walker. Her petition asked the court to "enter an Order" to "creat[e] ... a supplemental needs trust" (R. 130-31). In an accompanying affirmation, her attorney explained that Gaines was bringing her petition under state and federal law, which sanctioned the court's "establishment" and "creation" of the trust (R. 135 ~~ 10-11). And Justice Walker's order, which Gaines likely proposed, notes that Gaines wanted a trust to be "creat[ed]," and ordered that the trust be "hereby established" (R. 121, 122). These words were intended to mean the same thing. Even more telling is how Gaines's attorneys conducted themselves in Supreme Court. If her attorneys had believed that the formality requirements applied to her court-created trust, they would have acted immediately to ensure that those formalities were completed. By their own logic, Justice Walker's order never caused the trust to come into existence, and thus their client would have lost her eligibility for Medicaid unless the trust formalities were promptly completed. Yet 4 Neither case cited by the First Department, see Gaines, 137 A.D.3d at 674, supports its interpretation of EPTL § 1-2.20; neither case even involves a supplemental needs trust. See Matter of Bishop v. Maurer, 73 A.D.3d 455 (1st Dep't 2010); Fasano u. DiGiacomo, 49 A.D.3d 683 (2d Dep't 2008). Instead, they involve lifetime trusts and apply the rules applicable only to those trusts. They do not concern the situation here: a trust that under EPTL § 1-2.20 is not a lifetime trust. 11 they did nothing for months, which-under their own theory-exposed their client to the needless risk of losing her Medicaid benefits. c. The Legislature did not distinguish between creating and establishing a trust by defining the term "creator." The First Department apparently accepted the Estate's argument that creation is a distinct step in trust formation because "creator'' is a defined term in the EPTL. See Stack Br. at 13-17.5 The EPTL defines "creator'' as the person whose assets are used to fund the trust. EPTL § 1-2.2. Thus, the argument goes, only the trust's creator can create the trust. This claim is incorrect: while the noun "creator" is a term of art in the EPTL, the verb "create" is not, and it is nowhere distinguished from its common-usage synonym "established." The Estate's interpretation finds no support in the EPTL. If it were correct, it would render the exception in EPTL § 1-2.20 a nullity. If courts can only establish trusts, no trust could ever be created by a judicial ruling, unless the court were itself the source of the funds. This exception thus would never come into play for any lifetime trust. Because statutory interpretation must give "meaning and effect ... to all language of a statute," the First Department's interpretation IS untenable. Cohen u. Lord, Day & Lord, 75 N.Y.2d 95, 100 (1989). The Legislature has already instructed courts not to read the narrow, technical definition of "creator" into every provision of the EPTL that uses some variation of the word "create." The Legislature's 2010 clarifying amendment to EPTL § 7-1.17, which specifies the requirements for creating a lifetime trust, makes this clear and further confirms that the verbs "create" and "establish" are interchangeable in this context as they are generally. Before the amendment, EPTL § 7-1.17 stated that a lifetime trust had to be executed by the "initial creator." Bill Jacket, L. 2010, ch. 451 ~ "Stack Br." refers to the brief flied in the First Department by Ms. Stack on behalf of the Estate. 12 at 6. The Legislature came to realize that this provision "inadvertently invoke[d]" a defined term and strangled the statute's meaning. Id. "[U]nder a literal reading" of the provision, only the person who contributed property to a lifetime trust (the creator) could execute the trust documents and form the trust. Id. This literal reading made no sense: "well established" law provided that "a trust may be created by a person other than" the creator. Id. To address this unintended limitation, the Legislature replaced the phrase "initial creator" in the statute with a synonym that avoided the term's narrow, technical meaning: "person establishing such trust." Id. at 6. In making this change, the Legislature explained that the amendment did not change the law, but clarified it, providing a necessary fix to "carryO out the intention of the 1997 legislation." Id. EPTL § 7-1.17 still describes how to form a lifetime trust-but now as an act of "establish[ment]" instead of an act of creation.s In short, the 2010 amendment clarified that when the Legislature reformed the law on lifetime trusts, it intended that even the word "creator"-despite its express technical def~nition-would have its common-sense meaning, namely, a person who establishes (brings into existence) a trust. Importantly, the Legislature initially enacted EPTL § 7-1.17 in the same bill as EPTL § 1-2.20, the statute with the exception in dispute here. See Bill Jacket, L. 1997, ch. 139 at 7. The Legislature's clarification that "creator" carried its common meaning in § 7-1.17, as the "person establishing [the] trust," should guide the interpretation of § 1-2.20 as well. In fact, the legislative flx has even more significance for § 1-2.20, which contains the verb "create" rather than the defined noun "creator." The First Department's misguided distinction between establishing and creating a trust renders other provisions of the EPTL nonsensical too. EPTL § 7-1.4 provides that "[a]n express trust may be created for any lawful purpose." And in EPTL § 1-2.20-the statute in 6 EPTL § 7-1.17 (a) now reads: "Every lifetime trust shall be in writing and shall be executed ... by the person establishing such trust." 13 dispute-a lifetime trust is defined as, subject to exceptions, "an express trust ... created other than by will." Under the First Department's interpretation, because the word "created" is used in both statutes, only creators could form express trusts or lifetime trusts. But that interpretation makes no sense: state law allows any qualified person to form an express trust or a lifetime trust, not just the person whose assets fund the trust. 7 See EPTL § 7-1.14. The First Department's interpretation of EPTL § 1-2.20 is thus the very sort of crabbed reading that the Legislature rejected when it amended EPTL § 7-1.17 in 2010. The use of "created" in EPTL § 1-2.20 is simply another example of the widespread understanding-on the part of the Legislature, this Court, lower courts, and treatise writers alike-that "creating" a trust and "establishing'' a trust describe the same thing. d. The First Department's interpretation conflicts with the federal and state Medicaid statutes. The First Department's distinction between establishing and creating a trust is also unsound because it would produce conflicts between the EPTL and the relevant provisions of state and federal Medicaid law. That outcome would thwart the Legislature's demonstrated intention to ensure consistency among the statutes and Congress's intent to ensure uniformity in Medicaid law. Both federal and state law permit supplemental needs trusts to be "established" only by a disabled person's parent, grandparent, or legal guardian, or by a court. See 42 U.S.C. § 1396p(d)(4)(A); SSL § 366(2)(b)(2)(iii)(A). These restrictions thus prohibit disabled persons 7 The First Department's reading also renders the execution requirement for lifetime trusts incomprehensible. EPTL § 7-1.17 requires that a lifetime-trust instrument be ''executed ... by the person establishing such trust." In the case of a supplemental needs trust established by a court, that "person" is the court. See EPTL § 1-2.12 (defming "person" to include a court). If the execution requirement applied to court-created supplemental needs trusts, the judge or justice would have to sign, and thereby become a party to, the trust instrument. 14 from establishing trusts on their own behalf. Under the First Department's reasoning, however, a valid supplemental needs trust could not come into existence under New York law unless, after the court's order, the disabled person "created" the trust by executing the trust documents and fulfilling the other formalities of a lifetime trust. The trust would be brought into existence by the disabled person's actions, not the court's order. But "[s]tatutes that relate to the same subject are in pari materia and should be construed together unless a contrary intent is clearly expressed by the Legislature." Matter of Albany Law School v. N.Y. State Off of Mental Retardation & Dev. Disabilities, 19 N.Y.3d 106, 121 (2012) (citation and quotation marks omitted). This principle applies with particular force here because Medicaid is a coordinated federal- state program where consistency between state and federal law is particularly important; under federal law, state law must "comply with the provisions of section 1396p of this title with respect to ... treatment of certain trusts." 42 U.S.C. § 1396a(a}(18). The enactment history of relevant state legislation confirms that the Legislature intended to ensure that state law governing these trusts would harmonize with federal law. See Matter of Abraham XX., 11 N.Y. 3d at 435; Bill Memorandum for A. 11854 at 37-38, reprinted in Bill Jacket, L. 1994, ch. 170 (explaining that the bill enacts "federal changes regarding Medicaid trusts"). Not surprisingly, even Gaines's counsel acknowledged before Supreme Court that New York law governing supplemental needs trusts "conforms with federal law" (R. 135 ~ 12). 2. Supreme Court's ruling was a "judgment or decree" under the statute. The First Department's opinion also rests on the faulty conclusion that Justice Walker's ruling was not a "judgment or decree" under EPTL § 1-2.20. This interpretation arbitrarily distinguishes between trusts created by functionally equivalent orders and judgments. Regardless of its label, any trust established by a binding judicial edict is exempt from the formalities of a lifetime trust. By exempting trusts "created by the judgment or decree of a court," the Legislature did not intend to narrow the set of binding 15 judicial edicts that would obviate the need for lifetime-trust formalities. Instead, the phrase "judgment or decree" reflects the Legislature's broad intent to exempt any court-created trust originating in the courts with authority to create them: both Supreme and Surrogate's Courts. Neither the Estate nor the First Department identified any reason to differentiate between trusts established by a court based on whether the ruling creating them is denominated an "order" or a "judgment," and there is none. The Legislature reasonably expected that a judicially created trust generally would be embodied in one documents denominated as "judgments" or "decrees." This expectation reflects the fact that most court-created trusts arise from new proceedings initiated solely to create the trust; those proceedings naturally culminate in a judgment (in Supreme Court) or decree (in Surrogate's Court) forming the trust. See, e.g., In re Zhou Ping Li, 2005 N.Y. Misc. LEXIS 3592, *24 (Sup. Ct. Kings Co. Nov. 1, 2005) ("decision, order, and judgment" establishing supplemental needs trust); In re Fiorillo, 2005 N.Y. Misc. LEXIS 4 704, at *3 (Sur. Ct. N.Y. Co. Oct. 12, 2005) (decree creating supplemental needs trust). The situation here, where a court overseeing a tort action is asked to create the trust, does not present the typical case envisioned by the Legislature. But there is no reason to conclude that the Legislature intended that such an order, which is final to the trust, would have a different status. The clear legislative intention reflected In EPTL § 1-2.20 is confirmed in New York law more broadly, which generally takes a functional approach to distinguishing judgments from other forms of judicial edicts, rather than relying on the labels attached to them. For example, in 1997 the Legislature amended CPLR 550l(c) to clarify that the notice of appeal from an order directing summary judgment "shall be deemed to specify a judgment upon said order," enabling parties to appeal from the order just as they could a later judgment having the same effect. The Legislature concluded that this "technical change" was necessary because a decision of this Court, by holding that the entry of judgment can terminate a direct appeal from an intermediate order, had created a "procedural trap" for parties, forcing them to take the inefficient step of filing an additional notice of appeal after entry of judgment. Bill Jacket, L. 1997, ch. 474 at 4. The Estate's interpretation 16 of EPTL § 1-2.20 relies on the same sort of overly narrow construction of the term "judgment" that the Legislature rejected in amending CPLR 5501(c). Not surprisingly, courts have "treated orders as tantamount to judgments depending on the particular circumstances." Matter of N.Y. State Crime Victims Bd. v Gordon, 66 A.D.3d 1213, 1216 (3d Dep't 2009). A "court order that fully resolves the claim" has been "treated as tantamount to a judgment" for purposes of the Son of Sam law. Id. And the filing of a so-ordered stipulation "effectively discontinuing the action" has been held "tantamount to the filing of a judgment." DiBella v. Martz, 58 A.D.3d 935, 937 (3d Dep't 2009); see also State v. Wolowitz, 96 A.D.2d 47, 54 (2d Dep't 1983) ("The paper being appealed from, while labeled an order, is, in fact, an order and a final judgment."). The ruling's substance, not the label placed upon it, is what controls. This Court takes a similar approach to assessing finality for purposes of its appellate jurisdiction. In certain situations, the Court regards orders made in ongoing proceedings as final where they finally resolve a separate or distinct issue. See Arthur Karger, Powers of the New York Court of Appeals §§ 3:3, 5:21-5:28 (rev. 3d ed. 2005). Thus, "[t]he mere fact that [an] order was made on a motion in a pending action does not impair its finality." Merrill Lynch, Pierce, Fenner & Smith Inc. v. Griesenbeck, 21 N.Y.2d 688, 690 (1967). By the same reasoning, an order that finally establishes a trust, like Justice Walker's here, is functionally indistinguishable from a judgment rendered in a separate proceeding initiated solely for that purpose. Conduct by Gaines and her attorneys confirms that they understood the ruling they sought as tantamount to a judgment. Gaines proceeded by notice of motion, but supported the motion with · a "Verified Petition," and the papers repeatedly referred to her as the "Petitioner" instead of the plaintiff, which was her party designation in the tort action (R. 128-36). Gaines could have filed the very same petition to commence a formally separate proceeding to create the trust, rather than presenting it, as a matter of convenience and efficiency, as an application within her pending tort action. If she had done so, there would be little doubt that the resulting ruling would have been exempt from the statutory requirements for lifetime trusts. There is no basis to 17 treat Justice Walker's ruling differently from any judgment or decree that Gaines would have received had she filed her petition under a new index number in the courtroom next door. A court should reject a formalistic construction of the term "judgment" that excludes a functionally equivalent order when "legislative history reveals no such intent and no cogent reason has been advanced for such an exclusion." Gordon, 66 A.D.3d at 1215; cf Williams v. Williams, 23 N.Y.2d 592, 599 (1969) ("If the statute is so broadly drawn as to include the case before the court, yet reason and statutory purpose show it was obviously not intended to include that case, the court is justified in making an exception through implication."). That is the case here. Neither the First Department nor the Estate has pointed to any evidence that the Legislature intended the term "judgment" in EPTL § 1-2.20 to refer only to rulings denominated as such rather than encompassing all binding rulings establishing trusts. Nor have they advanced a plausible explanation why it might have intended to draw such a distinction. Courts establishing supplemental needs trusts have done so by rulings denominated as orders, without suggesting that, because the ruling was not labeled a judgment, the trusts would come into existence only after another party completed the trust formalities. See, e.g., Miller, 2008 N.Y. Misc. LEXIS 3843, at *1 (agreeing to issue an "Order creating a Supplemental Needs Trust"); In re Smith, 2006 N.Y. Misc. LEXIS 4340, at *1 (Sur. Ct. Suffolk Co. Dec. 18, 2006) (granting order establishing supplemental needs trust); In re Self-Petition of Gillette, 195 Misc. 2d 89, 91 (Sur. Ct. Broome Co. 2003) (establishing trust after reviewing petitioner's proposed order). And when appellate courts have reviewed these rulings, they have not questioned the trusts' validity or treated them differently based on the label placed on the rulings creating them. 8 s See, e.g. , Calvanese v. Calvanese, 93 N.Y.2d 111, 116 (1999) (affirming reversal of "the Supreme Court orders establishing supplemental needs trusts" because all settlement proceeds are available to satisfy Medicaid liens); Sanango, 6 A.D.3d at 520 (reversing a provision in lower court's order establishing a supplemental needs Continued ... 18 Ultimately, it is so common for courts to create these trusts by ruling denominated an "order" that practitioners have developed a model proposed order for the practice. See 39-EPTL 7-1.12 Bender's Forms for the Civil Practice Form No. EPTL 7-1.12:2 (2015). The First Department's interpretation creates a distinction that has not previously been recognized, and that would cast doubt on the validity of an unknown number of existing trusts created this way. 3. The concerns animating the formalities for lifetime trusts do not apply when a court creates the trust. The First Department's interpretation also cannot be squared with the underlying function of the formality requirements. The Legislature imposed these requirements to bring a "degree of formality'' to lifetime trusts to "help[] the parties involved realize the serious nature of the instrument being executed and reduceD substantially the potential for foul play." Bill Jacket, L. 1997, ch. 139 at 8. New York courts, however, created the first supplemental needs trust long before the Legislature decided to reform the law on lifetime trusts. In light of the courts' longstanding role in the creation of these trusts, it should come as no surprise that the Legislature expressly excluded court- created trusts from the lifetime-trust formalities. For supplemental needs trusts created by a disabled person's family, the formality requirements help to curb any potential for misunderstanding or fraud. But that policy concern has minimal relevance when a court creates the trust. The judicial process, ·which demands candor and clarity from the parties, sufficiently substitutes for the formality requirements. The signatures of Gaines and the trustee on the trust instrument would have provided little more. A court-created trust also provides an additional layer of protection that obviates the need for formalities. When a party petitions a court to establish a trust, the court must review the proposed trust to ensure that it complies with the law. It may also consider, as Justice trust because the provision directed any future annuity payments after the infant's death to the estate instead of the trust, in violation of SSL § 366(2)(b)(2)(iii)). 19 Walker did here, whether the trust is in the disabled beneficiary's "best interest." Legal Service ex rel. Thomas C. v. Bishop, 298 A.D.2d 644, 64 7 (3d Dep't 2002). With this inquiry, there is no reason to hinge the trust's validity on the completion of formalities . B. The First Department's Interpretation Would Undermine the Legislative Scheme, Harming Both the Public Fisc and Persons with Disabilities. The Firs.t Department's holding also contravenes the public policy behind supplemental needs trusts-for parties at both ends of the bargain. By holding that certain court-created trusts must meet additional requirements that the Legislature expressly declined to impose, the First Department has reintroduced uncertainty into this area of the law. Under the First Department's holding, social-services districts responsible for enforcing Medicaid laws could no longer rely on orders issued by courts as evidence that a valid trust exists. This uncertainty would add significant complexity to the administration of Medicaid benefits, requiring case workers (who are not lawyers) to attempt to determine whether the lifetime-trust formalities had been met. HRA would have to demand prompt proof that the formalities had been satisfied, and would have to discontinue benefits if the disabled person fails to submit sufficient evidence. The First Department's statutory interpretation would also call into question the validity of numerous supplemental needs trusts that have been established by courts in the past. If the creators of those trusts failed, as Gaines did, to complete the formalities required of a lifetime trust, the trusts would not ensure their continued Medicaid eligibility and would not provide HRA with a remainder interest. HRA would have to demand proof of those formalities for every existing trust, or else jeopardize its ability to recover money that could be used to help other disabled individuals. Persons with disabilities also could no longer rely on court rulings denominated as orders that establish trusts for their benefit. They would face discontinuation of benefits unless they, their trustees, and 20 their lawyers completed formalities following the court's order and provided documentation confirming that they had done so. If any of those parties failed to take the required steps, the trust would be invalid and the trust assets would count against the beneficiary's Medicaid eligibility. C. All Other Requirements for Creation of the Trust Were Satisfied. Because the statutory formality requirements of lifetime trusts do not apply to court-created supplemental needs trusts, traditional principles of trust law govern whether Gaines's trust is valid. By law, a valid trust requires four components: (1) a designated beneficiary, (2) a designated trustee, (2) property sufficiently identified to enable title of the property to pass to the trustee, and ( 4) legal assignment or actual delivery of the property, with the intention of vesting legal title in the trustee. Estate of Judith N. Doman, 2008 N.Y. Misc. LEXIS 6314, at *7 (Sur Ct. Suffolk Co. Oct. 6, 2008) (citing Brown v. Spohr, 180 N.Y. 201, 209 (1904)), aff'd sub. nom. Matter of Doman, 68 A.D.3d 862, 863 (2d Dep't 2009). All four components are present here. Gaines was designated as beneficiary and Coyle, who was properly served with Justice Walker's order (R. 123), was designated as trustee. The net settlement amount is the property. Because Gaines sought a supplemental needs trust to shelter her assets, she agreed to assign her assets to the trust. Justice Walker ordered that that property "shall be paid" to Coyle as trustee (R. 122). Justice Walker thereby established a valid trust on her behalf. * * * Gaines asked for, and received, a ruling establishing a supplemental needs trust that would allow her to enjoy the substantial proceeds of her tort settlement while retaining her Medicaid benefits. The only true requirements for the establishment of that trust were satisfied. The First Department erred in holding that additional formalities were needed for the trust to come into existence. 21 CONCLUSION The First Department's decision and order should be reversed. Richard Dearing Claude S. Platton of Counsel cc: Tamara Stack 355 Lexington Avenue Suite 401 New York, New York 10017 22 y submitted, Eric Lee Assistant Corporation Counsel CERTIFICATE OF COMPLIANCE I hereby certify that this letter brief was prepared using Microsoft Word 2010, and according to that software, it contains 6,977 words in the body of the submission. Eric Lee Cited As of: November 18, 2016 12:43 PM EST Matter of Miller Supreme Court of New York, Queens County June 30, 2008, Decided 23717/06 Reporter 20 Misc. 3d 1111(A) *; 867 N.Y.S.2d 376 **; 2008 N.Y. Misc. LEXIS 3843 ***; 2008 NY Slip Op 51314(U) ****; 240 N.Y.L.J. 13 [****1] In the Matter of the Application of New York City Health and Hospitals Corp., Elmhurst Hospital Center for the Appointment of a Guardian of Robert Miller, A Person Alleged to be Incapacitated. Notice: THIS OPINION IS UNCORRECTED AND WILL NOT BE PUBLISHED IN THE PRINTED OFFICIAL REPORTS. Core Terms Guardian, incapacitated, nunc pro tunc, retroactive, Medicaid, appointed, competent person, incapacity, transfers, planning Headnotes/Syllabus Headnotes [*1111A] [**376] Trusts--Supplemental Needs Trust-- Retroactive Approval. Counsel: [***1] Robert Kruger, Esq., Attorney for Petitioner, New York, NY. Petal Martindale, Esq., Michael A. Cardozo, Corporation Counsel, New York, NY. Grovine Y. Mattone, Esq., Property Management Guardian, Bayside, NY. Judges: Charles J. Thomas, J.S.C. Opinion by: Charles J. Thomas Opinion Charles J. Thomas, J. Grovine Matone, Esq. the Guardian of the property, applies to the Court for an Order creating a Supplemental Needs Trust hereafter (SNT) for the benefit of her ward Robert Miller. The Guardian requests that the proposed medicaid planning be approved and that the proposed SNT submitted on behalf of Robert Miller be approved nunc pro tunc to July 1, 2005 in accordance with the findings of incapacity and the decision of this Court rendered April 19, 2007. A petition was commenced on October 27, 2006 by the New York City Health and Hospitals Corp. to appoint a Guardian for Robert Miller, an allegedly incapacitated person. The Petition states that Mr. Miller suffered from several serious physical ailments including pneumonia and a collapsed lung. The Petition requested that standard powers be given to the Guardian appointed including the application for Medicaid benefits on behalf of Mr. Miller. There was nothing in the Petition [***2] to advise the Court that Mr. Miller had funds which required Estate Planning or the establishment of SNT. No request was made by the City in the Petition for the appointment of a Temporary Guardian to marshal Mr. Miller's assets for the purpose of Estate Planning, other than a standard vague reference to prevent financial exploitation due to the increased vulnerability of the alleged incapacitated person. After several adjournments, the Court was unable to conduct a hearing at Regal Heights Rehabilitation Center until April 19, 2007. At that time the Court made a finding that Mr. Miller was incapacitated and that that incapacity had commenced prior to July 1, 2005. At the conclusion of the hearing, the Court immediately appointed a Property Management Guardian and directed her to marshal the assets and submit to the Court an Estate [****2] Plan for the benefit of Robert Miller, including but not limited to the establishment of an SNT, nunc pro tunc to July 2005. In marshaling the Incapacitated Person's assets and debts the Guardian Page 2 of 3 Eric Lee determined that Mr. Miller's hospitalization was not paid by Health Insurance and that he had an outstanding bill. The Property Guardian now submits to the Court, [***3] for approval, a First Party SNT and requests that the Trust be approved nunc pro tunc to July 1, 2005. New York Human Resource Administration opposed the SNT on three grounds: (1) that the Court lacks the authority to create an SNT nunc pro tunc; (2) that the Order creating the SNT must direct the Trustee to obtain a bond sufficient to cover the assets contained in the Trust; and (3) that, as part of any SNT, HRA be notified before the expenditure of any transactions "tending to substantially deplete the principal of the Trust", where the Trust is valued at more than $ 100,000.00. or "involving transfers from the Trust for principal for less than fair market value" in accordance with 18 NYCRR Section 360.4.5(b)(5)(iii). HRA's opposition to nunc pro tunc approval is twofold. First, that the Court can not grant such relief nunc pro tunc claiming that a court can only nunc pro tunc a fact that is already in existence. To support its position HRA cites three cases: See Mtr. of Rolland, 13 Misc. 3d 230, 818 NYS2d 439; Mtr. Of Gillette, 756 NYS2d 835 [195 Misc 2d 89]; and Mtr. of Hagerdorn, 9 Misc 3d 560, 800 N.Y.S.2d 338. Second, HRA complains that if a Supplemental Needs Trust is created, it would make the incapacitated person's [***4] assets unavailable for Medicaid eligibility and budgeting purposes, and would require the Medicaid program to pay for hospital care provided the incapacitated person. The latter is, of course, the whole intention of legal Medicaid planning. HRA relies upon three of these above stated cases to support its position opposing it's creation in this case. Each case is clearly distinguishable from the one before this Court. In the Mtr. of Gillete, (756 NYS2d 835 [195 Misc 2d 89]). The Surrogate of Broome County refused to approve the retroactive establishment of a SNT claiming that the disabled person's agent-in-fact had established a Supplemental Needs Trust pursuant to a duly executed Power of Attorney. The court would not create what it considered to be essentially a second trust, even though the disabled person would be adversely affected, as the SNT was ineffective since it had been created by the incapacitated person's agent- in-fact rather than by order, as required by Federal Statute. The Gillete court, however, did hold that "[o]rdinarily, a court can enter an order nunc pro tunc when no person will be prejudiced thereby." It simply would not establish a second trust when one was already [***5] in effect. The right to nunc pro tunc relief, while frequently granted is usually done so in ministerial matters not "involving new exercises of discretion or a further turn of the fact finding wheel." Siegel, New York Practice 4th Ed. Par. 420, p. 716. The restriction is usually directed at preventing a trial court from exercising appellate review over itself "to correct by amendment error in substance affecting the judgment." Kiker v. Nassau County, 85 NY2d 879, 649 N.E.2d 1199, 626 N.Y.S.2d 55. Rather, nunc pro tunc relief "should be permissible for any judgment [or order] when the right sought to be retroactivated was a right at the earlier time…, and when all that is now sought is a paper -- a judgment or order -- saying so. That a substantial right may be affected by giving nunc pro tunc effect is better cited to support than to oppose the step." Siegel, supra 717. Unlike the Court in Gillette, Siegel acknowledges the fact that "litigation is designated to affect substantial rights", [****3] (supra ). The Appellate Division, Second Department dealt with the issue of retroactively in matrimonial cases. In Jayson v. Jayson (83 Misc 2d 417, 373 N.Y.S.2d 497) a matrimonial action had been commenced by Hazel Jayson, the second wife of Robert [***6] Jayson. The second wife had obtained a decision of a divorce but Robert Jayson died prior to the entry of the judgment. Erica Jayson, Robert Jayson's first wife, commenced an action for an Order granting the entry of the judgment nunc pro tunc to protect the rights of her and her children to receive Social Security benefits. The trial court in Jayson, relying on Johnson v. Johnson, (198 Misc. 691, 692, 98 N.Y.S.2d 336 affd. 277 App. Div. 1143, 101 N.Y.S.2d 936), held that retroactivity is limited "where the rights of the parties of record are not impaired or prejudiced in any conceivable degree". On appeal, the Appellate Division, reversed, holding that a judgment can be entered nunc pro tunc in a divorce action after the death of one of the parties, if such party was entitled to have had the judgment entered when both parties were living. Jayson, supra, at 688, 387 N.Y.S.2d 274, emphasis added. In the Mtr. of Hagerdorn, (9 Misc 3d 560, 800 N.Y.S.2d 338) the court was asked by a guardian to grant an application to transfer the incapacitated person's funds retroactive to the date of the incapacitated person's 20 Misc. 3 1111 , *1111 867 N.Y.S.2 376, **376 2008 N.Y. Misc. LEXIS 3843, ***2 2008 NY S i 1314 , ****2 Page 3 of 3 Eric Lee admission to a facility in order to be eligible for medical funding. In that case, the Guardian had been appointed prior to his admission into a nursing [***7] facility but failed to make any provisions prior thereto. The Watson court acknowledged that the parties did not dispute the court's ability to approve such transfers retroactively but the County disputed that date to which the transfers could be made retroactive. The court in Watson approved the retroactive transfers to the date of the application rather than the earlier date of the incapacitated person's admission to the facility. In doing so the court viewed a Guardian, duly appointed, in the same light as a competent person. The court reasoned: [s]ince the Court does not have authority to grant an application to a competent person to make a desired gift retroactive by several months to avoid the medicaid consequences, neither does it have the authority to grant the same relief to a guardian for the benefit of her incompetent. The premise behind MHL Sec. 81.21 in approving medicaid transfers was to give the guardian the same rights, that the incompetent would have had if not incompetent, but no greater. Relying on the Mtr. of Lauda, the Court noted… [g]oing back to the noted underlying rationale for permitting Medicaid planning in the first place, we do not believe greater restrictions [***8] should be placed on a competent person except to the extent required by the former's incapacity. (N.Y.L.J., July 2, 1996, p.25 (Sup. Ct. Nassau Co.)). See also NY Law Rev. Comm. Comments to MHL 81.03)". Here Mr. Miller was incapacitated at the time he was admitted to the facility and had neither a Guardian or agent authorized to act on his behalf in the creation of an SNT. While an incapacitated person, who has a Guardian to act on his or her behalf should not have a benefit greater than a competent person, an incapacitated person without the aid of a Guardian should not be given any lesser rights simply because he is incapacitated. Just as the Court in Watson, tried to equalize the restrictions between a competent person [****4] and a Guardian, this Court will not penalize an Incapacitated Person for the very incapacity this Court is charged with protecting. Robert Miller was clearly entitled to a judgment which contained a properly established SNT. Such judgment would have been timely established but for his incapacity in 2005 and the failure by the City of New York to request such relief in its Petition which would have been immediately granted in the Order to Show Cause commencing the proceeding [***9] and if authorized, the Guardian would have acted prior to the critical date. The Court notes that there is an inherent conflict of interest when one municipal agency commences a guardianship petition which may require a different municipal agency to pay for the hospital costs and care of an individual. Therefore, the court must grant the guardian's application. To hold otherwise would create an incentive for the agency charged with bringing such Petitions to delay the commencement of such proceedings and refrain from requesting relief to which a respondent may be entitled. As to the remaining objections raised by HRA, the language request by HRA in item (3) is not unreasonable and therefore shall be included in the final Order. As to the second objection raised by HRA, it is the Court's custom, as it will be in this case, that the order shall contain language that the Guardian shall be bonded for the entire guardianship which shall include the amounts included in the SNT. Charles J. Thomas, J.S.C. End of Document 20 Misc. 3 1111 , *1111 867 N.Y.S.2 376, **376 2008 N.Y. Misc. LEXIS 3843, ***6 2008 NY S i 1314 , ****3 Eric Lee Cited As of: November 18, 2016 1:07 PM EST In re Zhou Ping Li Supreme Court of New York, Kings County November 1, 2005 101000/93 Reporter 2005 N.Y. Misc. LEXIS 3592 *; 234 N.Y.L.J. 85 Matter of Zhou Ping Li Core Terms benefits, services, supplemental, incapacitated, stipulation of settlement, transfers, planning, costs, deed, per day, opposing, asserts, proposed transfer, nursing home, home health care, monthly income, cash assets, establishment, expenses, guardian, annual, home care, per annum, ineligible, approving, requires, resides, argues, terms Case Summary Procedural Posture Movant, a guardian of an incapacitated veteran, moved pursuant to Mental Hygiene Law § 81.21 for an order expanding her powers as guardian and sought the court's approval in order to effectuate the terms of a stipulation of settlement. The Department of Veterans' Affairs (DVA) opposed the motion. The guardian also sought to transfer the veteran's joint tenancy interest in the house in which he resided to his mother and brother. Overview The DVA asserted that based upon the home and community-based expenses, the veteran's income was sufficient to cover these expenses as well as the estimated cost of the home health care services which he had been utilizing. While, as the DVA asserted, the veteran received only 10 hours of care from outside agencies, he nevertheless required 24 hour per day care, and the balance of care was being provided to him by his family members. Because such care could not be considered to be of infinite duration, the court rejected the DVA's argument. As the veteran's mother aged and his sisters and brother aged, at some point in time, they would no longer be able to provide such services, thus requiring that Medicaid provide home care services to him 24 hours per day. The guardian thus adequately demonstrated that the costs of home health care services would likely escalate in the future to the point where the veteran's expenses would exceed his income. Consequently, it could not be concluded that the veteran had sufficient income, nor would he in the future, to privately pay for the costs of home health care services while at the same time maintaining himself in a home in the community. Outcome The court granted the guardian's motion. LexisNexis® Headnotes Military & Veterans Law > Veterans > General Benefits > Compensation for Service Connected Death & Disability Military & Veterans Law > Veterans > Department of Veterans Affairs HN1 Pursuant to Mental Hygiene Law § 79.39(a), the Department of Veterans' Affairs (DVA) may be recognized as a party in interest on behalf of an incapacitated person to whom benefits from the DVA may accrue with respect to benefits from the administration or the income therefrom. Public Health & Welfare Law > ... > Medicaid > State Plans > General Overview HN2 There is no question that the use of Medicaid planning by competent persons is legally permissible, and that proper planning benefits their estates. It has been held that incapacitated persons, by a court's authorization of transfers by the incapacitated person's guardian, should be accorded this same right to engage in such Medicaid planning. Thus, a guardian is permitted to effectuate this kind of Medicaid planning on Page 2 of 7 Eric Lee behalf of an incapacitated individual pursuant to Mental Hygiene Law § 81. Public Health & Welfare Law > ... > Medicaid > State Plans > General Overview HN3 While Mental Hygiene Law § 79.03 states that any inconsistent provisions of general guardianship law of the State of New York shall be superseded by the provisions of § 79, no part of § 79 prohibits lawful Medicaid and estate planning conducted on behalf of a disabled or incapacitated veteran. Evidence > Burdens of Proof > Clear & Convincing Proof Public Health & Welfare Law > ... > Medicaid > State Plans > General Overview HN4 A court may approve a transfer of an incapacitated person's interest in a house only if it is also satisfied by clear and convincing evidence that a competent, reasonable individual in the position of the person's guardian would be likely to perform the asset transfers under the same circumstances. Mental Hygiene Law § 81.21(e)(2). Public Health & Welfare Law > ... > Medicaid > State Plans > General Overview HN5 Supplemental needs trusts are for the benefit of incapacitated persons and supplement rather than supplant government entitlements, thereby enabling the incapacitated person to enjoy an enhanced quality of life. Judges: [*1] Justice Pesce Opinion by: Pesce Opinion Upon the foregoing papers in this Mental Hygiene Law article 81 proceeding, Yan Shen Li, as guardian of the person and property of Zhou Ping Li, an incapacitated person, moves, pursuant to Mental Hygiene Law § 81.21, for an order expanding her powers as guardian, as follows: (1) authorizing her to execute a deed, transferring Zhou Ping Li's interest, if any, in and to the family residence, which is located at 419 61 Street, in Brooklyn, New York, to his mother, Jin Rong Li, and his brother, Zhou Zhi Li, (2) approving the stipulation of Settlement, dated April 29, 2005, entered into between her and the Human Resources Administration of the City of New York, Department of Social Services (the DSS), (3) authorizing her to pay to the DSS the sum of $ 100,000 in full settlement of its claim against the estate of Zhou Ping Li for the period of May 13, 1997 through February 14, 2005, (4) authorizing her to transfer the remaining assets in Zhou Ping Li's guardianship accounts to his mother, Jin Rong Li, and (5) approving the establishment of an irrevocable supplemental needs trust for the benefit of Zhou Ping Li, which names her as [*2] the trustee. Zhou Ping Li was serving in the United States Navy before he was involved in an accident, which occurred on October 26, 1991. As a result of the accident, he suffered brain damage, which rendered him paralyzed from the neck down, speechless, and unable to care for himself. Zhou Ping Li has a mother, a brother, and two sisters. By order dated January 18, 1994, Zhou Ping Li's sister, Yan Shen Li, was appointed the guardian of Zhou Ping Li's person and property. Zhou Ping Li is now 34 years old and his condition is not expected to improve. He receives various services, including the services of home attendants 10 hours per day, seven days per week. The DSS has provided Medicaid benefits to Zhou Ping Li, which cover the costs of all of these services. His mother, Jin Rong Li, cares for him overnight (the remaining 14 hours per day). According to Yan Shen Li's 2004 annual accounting, Zhou Ping Li received Veterans' Administration compensation benefits (VA benefits) in the annual amount of $ 67,191 and Social Security benefits in the annual amount of $ 7,044. He also received $ 6,888.98 of interest from bank accounts in that year. As of December 31, 2004, Zhou Ping Li's estate [*3] has cash assets in the amount of $ 746,812.85, which consist of an accumulation of his VA benefits and Social Security benefits. Zhou Ping Li, by deed dated October 24, 1990, also holds title as a joint tenant with his mother, Jin Rong Li, and his brother, Zhou Zhi Li, in the house in which he presently resides. On April 18, 2005, the DSS filed an amended proof of claim, which asserted that the guardianship estate of Zhou Ping Li is indebted to it for Medicaid granted to him from May 13, 1997 to February 14, 2005 in the amount of $ 441,933.35. The DSS claimed that this sum was an overpayment by it because Zhou Ping Li's cash assets exceeded its countable resources threshold, rendering him ineligible for Medicaid coverage during that time period. By Stipulation of Settlement dated April 29, 2005, entered into and executed by the DSS and Yan Shen Li, the DSS agreed to fully settle its $ 441,933.35 claim against Zhou Ping Li's estate in 200 N.Y. Misc. LEXIS 3 2, *3 2 Page 3 of 7 Eric Lee consideration of Yan Shen Li's payment to it of $ 100,000 from the proceeds of Zhou Ping Li's estate (which, as noted above, is valued at $ 746,812.85). Pursuant to the terms of this Stipulation of Settlement, Yan Shen Li would then transfer the balance [*4] of Zhou Ping Li's estate to his mother, Jin Rong Li. In addition, Yan Shen Li would establish a supplemental needs trust, naming her as the trustee and Zhou Ping Li as the beneficiary, in the form annexed to such Stipulation of Settlement. The Stipulation of Settlement further provides that from the monthly VA benefits and Social Security benefits which Yan Shen Li receives for Zhou Ping Li, she would make payments in the amounts of: (1) the Medicaid monthly income allowance and disregard for a single person, in such sum as may be in effect from time to time (presently $ 687 per month) as and for Zhou Ping Li's room and board, to Zhou Ping Li's mother, Jin Rong Li, (2) Zhou Ping Li's net allowance monthly income (NAMI) amount, fixed in the sum of $ 3,000, to the DSS, and (3) the balance of Zhou Ping Li's monthly income to the supplemental needs trust, which is to be used for such lawful, additional items as he may require. In accordance with these terms, the DSS represents in the Stipulation of Settlement that it will make no further claim against Zhou Ping Li for the Medicaid benefits paid on his behalf for the period 1993 through February 14, 2005. Yan Shen Li, by the instant motion, [*5] now seeks the court's approval, as required under Mental Hygiene Law § 81.21, in order to effectuate the terms of the Stipulation of Settlement. While the DSS has agreed to and has expressly given its consent to all of the aforesaid terms of the Stipulation of Settlement, the Department of Veterans' Affairs (the DVA) opposes Yan Shen Li's motion for such court approval. Yan Shen Li's motion also seeks to transfer, by correction deed, his joint tenancy interest in the house in which he resides to his mother and brother. The DSS does not oppose this transfer, but the DVA opposes it. HN1 Pursuant to Mental Hygiene Law § 79.39 (a), the DVA may be recognized as a party in interest on behalf of an incapacitated person to whom benefits from the DVA may accrue "with respect to benefits from the administration or the income therefrom." Thus, the DVA is a party in interest with respect to the terms of the Stipulation of Settlement since it involves the disposition of accrued VA benefits and future VA benefit payments. However, contrary to its assertion, the DVA has no standing to oppose Yan Shen Li's motion insofar as it seeks a transfer [*6] of the real property. The house at issue was purchased by Zhou Ping Li's parents, no consideration was paid by Zhou Ping Li for the transfer of an interest to him, which vested prior to his service in the armed forces, and no VA benefit payments were used. Thus, no transfer which concerns "benefits from the [DVA] or the income therefrom" is involved (see Mental Hygiene Law § 79.39 [a]). In addressing Yan Shen Li's instant motion, the court notes that HN2 there is no question that the use of Medicaid planning by competent persons is legally permissible, and that proper planning benefits their estates. It has been held that incapacitated persons, by a court's authorization of transfers by the incapacitated person's guardian, should be accorded this same right to engage in such Medicaid planning (see Matter of Klapper, NYLJ, Aug. 9, 1994, at 26, col 1 [Sup Ct, Kings County, Leone J.]). Thus, the Court of Appeals has established that a guardian is permitted to effectuate this kind of Medicaid planning on behalf of an incapacitated individual pursuant to Mental Hygiene Law article 81 (see Matter of Shah v. DuBuono, 95 N.Y.2d 148, 159, 733 N.E.2d 1093, 711 N.Y.S.2d 824 [2000]; [*7] see also Matter of John XX., 226 A.D.2d 79, 83-84, 652 N.Y.S.2d 329 [1996]; Matter of DiCecco, 173 Misc. 2d 692, 697, 661 N.Y.S.2d 943 [1997]; Matter of DaRonco, 167 Misc. 2d 140, 142, 638 N.Y.S.2d 275 [1995]; Matter of Daniels, 162 Misc. 2d 840, 844, 618 N.Y.S.2d 499 [1994]; Matter of Parnes, NYLJ, Nov. 2, 1994, at 32, col 2 [Sup Ct, Kings County, Leone, J.]; Matter of Beller [Maltzman], NYLJ, Aug. 31, 1994, at 23, col 4 [Sup Ct, Kings County, Leone, J.]; Matter of Goldberg [Ginsberg], NYLJ, Aug. 31, 1994, at 24, col 1 [Sup Ct, Kings County, Leone, J.]; Matter of Klapper, NYLJ, Aug. 9, 1994, at 26, col 1). HN3 While Mental Hygiene Law § 79.03 states that any inconsistent provisions of general guardianship law of the State of New York shall be superseded by the provisions of article 79, no part of article 79 prohibits lawful Medicaid and estate planning conducted on behalf of a disabled or incapacitated veteran (see Matter of Michaelson, 162 Misc. 847, 853, 296 N.Y.S. 119 [1937]; Matter of Garmes, 159 Misc. 470, 472, 287 N.Y.S. 52 [1936]). Therefore, there is no inconsistency with Mental Hygiene Law article 81, and, consequently, no prohibition against the requested [*8] transfers merely because Zhou Ping Li is a recipient of VA benefits. Pursuant to Mental Hygiene Law § 81.21, the court, in determining whether to approve this application, considers that Zhou Ping Li lacks sufficient mental 200 N.Y. Misc. LEXIS 3 2, *3 Page 4 of 7 Eric Lee capacity to make the proposed dispositions himself (see Mental Hygiene Law § 81.21 [d] [1], [e] [1]). His disability is of permanent duration and he, thus, is not likely to regain such capacity (see Mental Hygiene Law § 81.21 [d] [2], [e] [1]). In addition, the needs of Zhou Ping Li can be met from the remainder of his assets after the proposed transfers are made (see Mental Hygiene Law § 81.21 [d] [3]). Zhou Ping Li has not manifested an intention inconsistent with the performance of these transfers (see Mental Hygiene Law § 81.21 [e] [3]). The beneficiaries of the proposed transfer of assets, Zhou Ping Li's mother, and, with respect to the house, his mother and his brother, are the natural objects of his bounty (see Mental Hygiene Law § 81.21 [d] [4]). Zhou Ping [*9] Li's estate also will not incur any tax penalty by the proposed transfer of assets (see Mental Hygiene Law § 81.21 [d] [5]). While the factors above support the granting of Yan Shen Li's motion, HN4 the court may grant such motion only if it is also satisfied by clear and convincing evidence that "a competent, reasonable individual in the position of [Zhou Ping Li] would be likely to perform the[se transfers] under the same circumstances" (Mental Hygiene Law § 81.21 [e] [2]; Matter of Shah, 95 NY2d at 159-160, 733 N.E.2d 1093, 711 N.Y.S.2d 824). The DVA, in opposing Yan Shen Li's motion, contends that the proposed estate and Medicaid planning transfers and establishment of a supplemental needs trust should be rejected because they are financially unnecessary and unwarranted and would not be in Zhou Ping Li's best interests. Specifically, DVA argues that Zhou Ping Li does not need or require the assistance of Medicaid in the payment of the home health care services presently being provided to him because independently of Medicaid, he should have sufficient income to pay for these costs, together with his other expenses, without depleting [*10] his assets. In support of its argument, the DVA asserts that since Zhou Ping Li requires 10 hours per day of paid home care services, based upon a rate of $ 15 per hour, the annual costs of these services would be $ 54,750 per year. It states that based upon the home and community-based expenses set forth in the 2004 annual accounting of $ 21,641.76, Zhou Ping Li's income of $ 81,123.98 in 2004 ($ 67,191 of VA benefits, $ 7,044 of Social Security benefits, and $ 6,888.98 of interest from bank accounts) would be sufficient to cover these expenses as well as the estimated cost of the home health care services which he has been utilizing. The DVA asserts that, in addition, the DVA would be willing to pay the cost of a total of 12 hours per week of non- institutionalized, non-skilled home care, four hours per day, three days per week. The DVA, therefore, concludes that Zhou Ping Li can afford to pay for all of the services which he presently receives and needs from him own income, without the need to transfer his assets in order to preserve them. It argues that the court, on this basis, should, deny the relief requested by Yan Shen Li. The DVA's argument must be rejected. It is undisputed [*11] that Zhou Ping Li has already received more than $ 800,000 in Medicaid benefits since February 13, 1993, and he will continue to require such services which these benefits covered. If the requested transfers proposed by Yan Shen Li are effectuated, Zhou Ping Li would be eligible for Medicaid. While, as the DVA asserts, Zhou Ping Li presently receives only 10 hours of care from outside agencies, he nevertheless requires 24 hour per day care, and the balance of such care is now being provided to him by his family members. Although Zhou Ping Li's mother and extended family now are able to provide care for him 14 hours per day, such care cannot be considered to be of infinite duration. As Zhou Ping Li's mother ages and his sisters and brother age, at some point in time, they will no longer be able to provide such services, thus requiring that Medicaid provide home care services to him 24 hours per day. Yan Shen Li's attorney points out that private-pay home care agency costs for 24-hour per day, live-in home health aide services conservatively average $ 250 per day or $ 91,250 per annum, when market rates for weekend and eight annual days of holiday services are necessarily included. [*12] Food and additional utilities expenses incurred by the residence of the companions must also be incurred. Yan Shen Li's attorney also notes that the daily cost of Zhou Ping Li's care, if he requires two home health care aides each day on two 12-hour shifts, amounts to $ 456 per day or $ 166,000 per annum. She points to the fact that the total costs of maintaining an incapacitated person in the community with 24-hour live-in home care currently averages $ 150,000 per annum, and with two companions each on 12-hour shifts, it amounts to more than $ 220,000 per annum. As discussed above, Zhou Ping Li's income from his VA benefits and Social Security benefits presently amounts to only approximately $ 75,000 per annum. As pointed out by Yan Shen Li's attorney, if Zhou Ping Li were required to pay for his own care, invasion of his principal account each year minimally in the sum of $ 75,000, 200 N.Y. Misc. LEXIS 3 2, *8 Page 5 of 7 Eric Lee and up to $ 145,000 If he required two 12-hour shifts, would rapidly reduce the interest earned on his principal and would fully deplete his principal account. Additionally, inflation costs can be expected to rise. Yan Shen Li has thus adequately demonstrated that the costs of home health care services [*13] will likely escalate in the future to the point where Zhou Ping Li's expenses will exceed his income, that his medical condition is not expected to improve and may deteriorate over time, and that his mother (who is aging) and his sisters and brother may not be able to continue to provide the substantial assistance which they are presently burdened with providing to him. Consequently, it cannot be concluded that Zhou Ping Li has sufficient income, nor will he in the future, to privately pay for the costs of home health care services while at the same time maintaining himself in a home in the community, which would also require that he pay rent, telephone, electric, heat, food, household and healthcare supplies (such as diapers), and other equipment. The DVA, in opposing Yan Shen Li's motion, also contends that the proposed transfers set forth in the Stipulation of Settlement should not be approved due to the fact that Zhou Ping Li has total cash assets of $ 746,812.85. It asserts that Zhou Ping Li's estate can, therefore, pay the DSS its full claim of $ 441,933.35 and still retain cash assets exceeding $ 300,000. It speculates that it would not be less advantageous for the DSS to still [*14] settle its claim for $ 100,000 if the requested transfers are not made. However, there is no support for the DVA's speculation that the DSS would, in fact, do so, particularly in view of the DSS' position that Zhou Ping Li was not eligible for Medicaid based upon his possession of these assets, which exceeded its countable resource threshold. On the other hand, if the relief requested is not granted, Zhou Ping Li will be ineligible for continuing Medicaid benefits and services, the DSS may commence an action against him for the full amount of the overpayment by it for his care since May 13, 1997, Zhou Ping Li's estate would be required to bear the expense of the defense of that action, Zhou Ping Li would be required to pay for all of his care from his own funds, and Zhou Ping Li's ability to continue to provide for himself would be compromised. "Any person in . . . [Zhou Ping Li's] . . . condition would prefer that the costs of his care be paid by the State, as opposed to his family" (Matter of Shah, 95 N.Y.2d at 160, 733 N.E.2d 1093, 711 N.Y.S.2d 824). The court thus finds that Zhou Ping Li, were he not incapacitated, would avail himself of estate and Medicaid planning so that his Medicaid benefits could continue [*15] (see Mental Hygiene Law § 81.21 [e] [2]). The DVA further argues that the requested transfers could jeopardize Zhou Ping Li's interests because of his loss of his cash assets. Specifically, it asserts that Zhou Ping Li could be exposed to a penalty period or period of ineligibility of up to three years in the event that he should require nursing home placement within three years from the date of the transfer of his assets. The DVA speculates that if such contingency should arise, Zhou Ping Li might not have the ability to pay for such nursing home costs during the time period in which he would be rendered ineligible for Medicaid. The DVA's argument is unavailing. Zhou Ping Li's prognosis does not indicate that he would require nursing home placement within three years. Furthermore, a transfer at this time would start any penalty period running so that Zhou Ping Li would incur no waiting period if, in the future, following such time period, his prognosis should change and worsen. In contrast, without the approval of the Stipulation of Settlement and the requested transfers of Zhou Ping Li's assets, his confinement to a nursing home, if ultimately required, [*16] would rapidly deplete his estate; proper Medicaid planning, at this time, would avoid such a detrimental outcome. The DVA additionally argues that the proposed transfers would not be in Zhou Ping Li's best interests on the basis that if he required private nursing home placement, his options in selecting a nursing home might be compromised. The mere existence of a possibility that this could occur, however, does not provide a basis to reject the proposed transfers. Zhou Ping Li may never need private nursing home placement, and, if such need should arise, he would be in no worse position than that of numerous other incapacitated persons who are Medicaid recipients. The DVA, in opposing Yan Shen Li's motion, also asserts that if the requested transfers are approved, Zhou Ping Li would be unable to access new medical treatments based upon future technological advances that might improve his condition. There is no showing, though, that a person covered by Medicaid is denied access to state of the art medical treatment, and in view of Zhou Ping Li's current condition and bleak prognosis, he should not be deprived of his ability to engage in Medicaid planning based only upon mere speculation [*17] that there will be some future technological advancement to improve his condition 200 N.Y. Misc. LEXIS 3 2, *12 Page 6 of 7 Eric Lee which he would need private funds to obtain. The DVA's contention that in order to permit such Medicaid planning as requested herein, the incapacitated person must be facing immediate financial perdition, is without merit. A guardian, on behalf of an incapacitated person, may engage in Medicaid planning available to competent individuals so that this outcome does not arise. Zhou Ping Li need not reach the point of being in the position where his expenses exceed his income and all of his cash assets have been completely exhausted before being able to transfer his funds to prevent such eventuality and preserve them so that he will be able to have trust income to pay for his supplemental needs and comfort while being Medicaid eligible for his health costs. Thus, the granting of Yan Shen Li's motion insofar as the Stipulation of Settlement seeks payment of $ 100,000 to the DSS from Zhou Ping Li's estate, is warranted. Such payment will fully settle and resolve the DSS' claims against Zhou Ping Li for Medicaid payments, and a competent, reasonable individual in Zhou Ping Li's position would likely perform [*18] this transfer to resolve this claim (see Mental Hygiene Law § 81.21 [e] [2]). Insofar as Yan Shen Li's motion seeks to transfer the balance of Zhou Ping Li's assets in his guardianship accounts to his mother, Jin Rong Li, it is noted that such a transfer would eliminate any disqualification for Medicaid benefits based upon Zhou Ping Li's possession of these cash assets. Since Zhou Ping Li requires home care, no penalty period of Medicaid ineligibility would result from the transfer itself. Consequently, Zhou Ping Li's needs for home health care, which would be covered by Medicaid, would be met following the transfer (see Mental Hygiene Law § 81.21 [d] [3]). Additionally, no Federal or State gift taxes would be required to be paid on such a transfer (see Mental Hygiene Law § 81.21 [d] [5]). Zhou Ping Li is unmarried and without children, and as Yan Shen Li's attorney points out, a strong and pervasive cultural custom of the Chinese-American community, of which Zhou Ping Li and his family are members, is a male son's care and support of his parents, when his parents are aged, retired, [*19] or unable to work. The donee of the proposed disposition, Zhou Ping Li's mother, is a natural object of his bounty (see Mental Hygiene Law § 81.21 [d] [4]). Thus, the transfer of these assets to Zhou Ping Li's mother should be approved. To the extent that Yan Shen Li seeks the court's approval to transfer the balance of Zhou Ping Li's net monthly income to a supplemental needs trust, to be used for such supplemental items as Zhou Ping Li may require, it is noted that an incapacitated person's assets may be transferred to a supplemental needs trust for his or her own benefit where such proposed trust complies with the statutory requirements (see Mental Hygiene Law § 81.21 [a] [6]; Matter of Goldblatt, 162 Misc. 2d 888, 888, 618 N.Y.S.2d 959 [1994]; Matter of Moretti, 159 Misc. 2d 654, 661, 606 N.Y.S.2d 543 [1993]; Matter of Morales, NYLJ, July 28, 1995, at 25, col 1 [Sup Ct, Kings County, Leone, J.]). SuchHN5 supplemental needs trusts are for the benefit of incapacitated persons, and supplement rather than supplant government entitlements, thereby enabling the incapacitated person to enjoy an enhanced quality of life (see Matter of Moretti, 159 Misc. 2d at 661, 606 N.Y.S.2d 543). [*20] Here, Zhou Ping Li's net monthly income from the VA benefits and Social Security benefits would be paid into the proposed supplemental needs trust to be used for such supplemental items as Zhou Ping Li may require. As proposed, Yan Shen Li, after such transfer, would be permitted to apply so much of the income and principal as is necessary for Zhou Ping Li's comfort, well-being, support, and maintenance so as to provide for his supplemental needs. The DVA opposes the establishment of the supplemental needs trust. It argues that there is no need for it because Zhou Ping Li would still be paying $ 3,000 monthly to the DSS. Such argument is rejected. The establishment of a supplemental needs trust would permit Zhou Ping Li to continue to receive Medicaid benefits and services, while the balance of his monthly income would be retained so that it could be used for such additional items as he may require. Here, if Zhou Ping Li had the capacity to act, it is apparent that he would create the supplemental needs trust, naming himself as the beneficiary, to carry out his objective (see Mental Hygiene Law § 81.21 [e] [2]; Matter of Moretti, 159 Misc. 2d at 661, 606 N.Y.S.2d 543). [*21] Thus, an order authorizing the establishment of the proposed supplemental needs trust should be granted (see Mental Hygiene Law § 81.21 [a] [6]; Matter of Moretti, 159 Misc. 2d at 662, 606 N.Y.S.2d 543). In support of her motion insofar as it seeks a correction deed to transfer Zhou Ping Li's joint tenancy interest in the home in which he resides to his mother and brother, Yan Shen Li recites that the house was purchased by her and Zhou Ping Li's parents on October 19, 1989. They then executed a deed on October 24, 1990, which 200 N.Y. Misc. LEXIS 3 2, *17 Page 7 of 7 Eric Lee conveyed the property to themselves and to their two sons, Zhou Ping Li and his brother, Zhou Zhi Li, as joint tenants. Yan Shen Li asserts that no consideration was actually given for this transfer, and that no present interest in the property was intended to be conveyed by the October 24, 1990 deed. She claims that her parents were under a misapprehension of the laws of this State, believing that, in the event of their demise, the property would be lost if their sons' names did not appear on the deed. She states that her parents believed that this was the sole way to provide for their sons' inheritance of the house, but that it would [*22] not convey a present interest in the house. Zhou Ping Li's father, Guan Liu Li, died on September 29, 2000, and his interest in the house, by operation of law, would have passed to his wife and Zhou Ping Li's mother, Jin Rong Li, the surviving joint tenant by the entirety under the original deed. Yan Shen Li, by her motion, seeks this court's authorization of a correction deed to relinquish Zhou Ping Li's interest in the house and effectuate a transfer to Jin Rong Li, as well as to Zhou Ping Li's brother, Zhou Zhi Li. The DVA, in opposing the proposed transfer of the house, asserts that Zhou Ping Li's parents' alleged misapprehension of the law is tenuous because an attorney's name appeared on the deed. As discussed above, however, the DVA has no standing with respect to the issue of this transfer and has no personal knowledge of the events which transpired at the time of the execution of the deed. In any event, the court may consider all relevant factors and approve such a transfer of Zhou Ping Li's interest in the house where it finds that a competent, reasonable individual in the position of Zhou Ping Li would be likely to make such a transfer (see Mental Hygiene Law § 81.21 [d] [6], [*23] [e] [2]; Matter of Shah, 95 N.Y.2d at 159-160, 733 N.E.2d 1093, 711 N.Y.S.2d 824). Here, Zhou Ping Li's mother and brother are the natural objects of his bounty (see Mental Hygiene Law § 81.21 [d] [4]). The family wishes to list the real property for sale so that premises in a safer neighborhood may be purchased for the comfort of Zhou Ping Li and the family, and so that the new home may be equipped to provide Zhou Ping Li with space on the ground floor, which will make it possible for him to be taken out of the home at less risk. He presently resides in the second floor of the house and two family members must carry him down a flight of 13 steps in order to bring him out of the house. Yan Shen Li asserts that this dangerous situation has precipitated the need to sell this home and purchase a more appropriate home in which they can all reside. Therefore, since Yan Shen Li has demonstrated that the sale of the house is necessary to replace it with one which is handicapped accessible and better suited for the benefit and comfort of Zhou Ping Li, and which would meet his needs and optimize his situation, the court is satisfied, by the clear and convincing evidence [*24] submitted, that a competent, reasonable individual in the position of Zhou Ping Li would likely make this transfer under the same circumstances (see Mental Hygiene Law § 81.21 [e] [2]). Thus, the approval of this transfer may be granted. Therefore, inasmuch as the facts herein meet the scrutiny of the standards set forth in Mental Hygiene Law § 81.21 (e), an order approving the Stipulation of Settlement, the requested asset transfers, the establishment of a supplemental needs trust, and the transfer of Zhou Ping Li's interest in the house, is warranted (see Matter of Shah, 95 N.Y.2d at 159-160, 733 N.E.2d 1093, 711 N.Y.S.2d 824; Matter of John XX., 226 A.D.2d at 82-84; Matter of DaRonco, 167 Misc. 2d at 142; Matter of Daniels, 162 Misc. 2d at 848; Matter of Klapper, NYLJ, Aug. 9, 1994, at 26, col 1; Matter of Moretti, 159 Misc. 2d at 662, 606 N.Y.S.2d 543). Consequently, Yan Shen Li's motion must be granted in its entirety. Accordingly, Yan Shen Li's motion is granted. This constitutes the decision, order, and judgment of the court. End of Document 200 N.Y. Misc. LEXIS 3 2, *21 Eric Lee No Shepard’s Signal™ As of: November 18, 2016 1:26 PM EST In re SMITH Surrogate's Court of New York, Suffolk County December 18, 2006 No Number in Original Reporter 2006 N.Y. Misc. LEXIS 4340 *; 236 N.Y.L.J. 116 MATTER OF ROBERT JOHN SMITH, PETITIONER, A DISABLED PERSON, FOR AN ORDER ESTABLISHING A FIRST-PARTY SUPPLEMENTAL NEEDS TRUST FOR HIS BENEFIT PURSUANT TO EPLT § 7-1.12 Core Terms supplemental, indenture, further ordered, self-settled, irrevocable, Disability, ineligible, benefits, conform, days Judges: [*1] Surrogate Czygier Opinion by: Czygier Opinion This is a proceeding by petitioner for authorization to create a self-settled supplemental needs trust. While he suffers from a physically debilitating illness, Petitioner asserts that he is competent to handle his own affairs. Pursuant to the allegations set forth in his petition, robert John Smith is permanently disabled, and he currently receives Social Security Disability payments and has filed an application to receive Medicaid benefits. Petitioner is also the plaintiff in a personal injury action, and the receipt of proceeds from such action could make him ineligible to receive government entitlements. In addition, petitioner's father, Robert John roth, died on January 5, 2002, and amount held for petitioner's benefit in a testamentary trust may make petitioner ineligible for Medicaid benefits. Thus, Petitioner is asking the court to establish the supplemental needs trust for his benefit (see, Matter of Gillette, 195 Misc2d 89; matter of Kennedy, 3 Misc2d 907). EPTL 7-1.12, Social Services Law § 366(2)(b)(2)(III) and 42 USC § 1396p(d)(4)(A) [*2] allow a supplemental needs trust to be self-settled provided a court of competent jurisdiction has authorized the same prior to the execution of the indenture (see, Gellette, Supra). Here, Petitioner has submitted an unexecuted copy of the irrevocable supplemental needs trust. With the court's permission, petitioner will be the settler of the trust and his sister, Judy Pepitone, will serve as trustee. further application to the court shall be made if there is a need to appoint a successor trustee. The provision of the trust tend to conform to EPTL 7-1.12 and otherwise tend to conform with present federal and state law. The Court notes, however, that it has found two typographical errors, a reference to petitioner's age in Article I(E), and a reference in Article IV(A)(4)(a) to "Supreme Court" when such reference should properly be to "Surrogate's Court." These corrections to the proposed trust should be made. Jurisdiction has been obtained over all necessary parties including the Department of Social Services. No Opposition having been made to the relief requested by petitioner, it is ORDERED that the "Robert John Smith Special Needs Trust," as modified [*3] by this decision and order, is approved and authorized by the court as an irrevocable supplemental needs trust for the benefit of Robert John Smith, and it is further ORDERED, that the proposed trustee is directed to file her oath and designation, as trustee, with this court within thirty (30) days of the execution of the trust indenture, and it is further ORDERED, that the petitioner file a copy of the executed trust indenture with this court, with complies with this decision and order, within thirty (30) days of the date hereof. Page 2 of 2 Eric Lee End of Document 2006 N.Y. Misc. LEXIS 4340, *3 Eric Lee Cited As of: November 18, 2016 1:06 PM EST In re FIORILLO Surrogate's Court of New York, New York County October 12, 2005 No Number in Original Reporter 2005 N.Y. Misc. LEXIS 4704 *; 234 N.Y.L.J. 71 MATTER OF DAVID FIORILLO Core Terms beneficiary, corpus, medical assistance, trust instrument, requirements, supplemental, provisions Judges: [*1] Surrogate Preminger Opinion by: Preminger Opinion Petitioner seeks to create an irrevocable supplemental needs trust (SNT), pursuant to EPTL § 7-1.12, for his own benefit, and has submitted a proposed trust instrument for the approval of the court. Petitioner suffers from various physiological and neurological disabilities, but has mental capacity, and requires government medical assistance. He intends to fund the trust with proceeds of an annuity that was established by his deceased father. The Department of Social Services of the City of New York appeared and objected to various provisions of the trust instrument, but those have all been resolved, except for one: the necessity of a bond. The court reviews a proposed, first-party or self-settled SNT to determine whether its provisions comply with the relevant statutory requirements and case law and whether the interests of the beneficiary are protected (EPTL 7-1.12[a][5]; SSL § 366 [2][b][2][iii][A]; 42 UCS § 1396p[d][4][A]; SCPA § 207; Mental Hygiene Legal Service ex rel Thomas C. V. Bishop, 298 AD2d 644, 646 [2002]; Matter of Goldblatt, 162 Misc.2d 888, 890 [1994]; Matter of Gillette, 195 Misc2d 89 [*2] [2003]; Matter of Chase, NYLJ, Dec. 8, 2004, at 27, col 2). The court finds that it does so here. As required, the proposed SNT provides that the Department of Social Services will receive all amounts remaining in the trust upon the death of the beneficiary, up to an amount equal to the total medical assistance paid to the beneficiary during his lifetime. The SNT is in the interests of the incapacitated person, since he depends on governmental benefits and assistance, and the creation of the SNT will preserve his eligibility, and it otherwise appears to be in his best interest. The remaining issue for the court's determination is the posting of a bond. DSS regulations, specifically 18 NYCRR § 360-4.5(b)(5)(iii)(e), require the trustee to provide proof of bonding if the trust corpus is over $ 1,000,000, unless waived by a court or "if the assets of the trust are less than $ 1,000,000, if required" by the court. Here the corpus is far less than $ 1,000,000, and is closer to $ 100,000. Nonetheless, and despite the existence of some other safeguards in the proposed SNT, the court will require a bond only for the value of the corpus, not, as requested by DSS, for 110 percent of its [*3] value. This requirement is without prejudice to the ability of the trustee to seek, at a later time, to be relieved, of this requirement. Accordingly, the court approves and establishes the supplemental needs trust for the benefit of David Fiorillo, with the proviso that the trustee post a bond as set forth in this decision. Settle decree. End of Document Eric Lee Positive As of: November 18, 2016 1:36 PM EST Estate of Judith N. Doman Surrogate's Court of New York, Suffolk County October 6, 2008 No Number in Original Reporter 2008 N.Y. Misc. LEXIS 6314 *; 240 N.Y.L.J. 68 ESTATE OF JUDITH N. DOMAN a/k/a JUDITH DOMAN, Deceased (1029P/06) Subsequent History: Affirmed by Matter of Doman, 68 A.D.3d 862, 890 N.Y.S.2d 632, 2009 N.Y. App. Div. LEXIS 9076 (N.Y. App. Div. 2d Dep't, 2009) Subsequent appeal at Matter of Doman, 110 A.D.3d 1073, 973 N.Y.S.2d 782, 2013 N.Y. App. Div. LEXIS 6985 (N.Y. App. Div. 2d Dep't, 2013) Core Terms cooperative, apartment, decedent, void ab initio, invalidate, funding, grounds, statute of limitations, documents, issues Judges: [*1] Surrogate Czygier Opinion by: Czygier Opinion Before the court is a pre-answer motion to dismiss petition to invalidate captioned decedent's trust, pursuant to CPLR 3211(a)(1), (5) and (7). For the reasons set forth herein, the motion is granted. Background This petitioner had previously sought to bring a proceeding to invalidate an inter vivos trust created by subject decedent. She is one of two of the children of decedent's first marriage. By decision/order, dated June 26, 2007, this court granted a pre-answer motion to dismiss said proceeding on the grounds that petitioners therein lacked standing. The remaining grounds for the motion were not addressed in the prior decision. An inter vivos created by decedent and dated August 24, 1998 (QPRT), was to have been funded with shares in a cooperative corporation and propriety lease for the Fifth Avenue (New York City) apartment in which subject decedent and her husband (Nicholas) resided. Subject decedent (Judith) continued to reside there after Nicholas' death on January 25, 2004, until the apartment was sold in 2004 for $ 1,610,000. Judith and Paul Green were co-trustees of the QPRT. The trust terms provide for its conversion to a Qualified Annuity Trust [*2] (QAT) should it cease to qualify as a QPRT; this conversion has taken place. Judith died on May 5, 2006, and her will, dated April 7, 2006 whereupon letters testamentary issued to Paul Green. Upon the trust's termination, the remainder is payable to the Doman Home Trust of which Alexander Doman (Nicholas' son from a prior marriage) is trustee. None of the beneficiaries of the Doman Home Trust are Judith's heirs. Petitioner then brought an application for limited letters, stating that she wished to bring a proceeding to invalidate the QPRT/QAT on the grounds (1) that the trust was void ab initio because the trust res was not owned by Judith when the QPRT was established, (2) that the establishment of the trust was the result of fraud and duress, and (3) that Judith executed the trust without the advice of independent counsel. The application for limited letters was granted on January 18, 2008, over the objections filed by Alexander Doman, successor co-trustee of the QPRT and resulting QAT. In the aforementioned decision granting the application for limited letters, it was noted that inquiry on such application, pursuant to SCPA 702(9), is limited to whether there is a proper party who [*3] could bring the alleged claim, and that the executor of Judith's estate was not in a position to bring a proceeding against himself as trustee of the trust at issue. The court directed petitioner to make the co-executors of Nicholas' estate parties to the anticipated proceeding to invalidate the referenced trust. The court also opined that , while Page 2 of 3 Eric Lee there may be factual issues with respect to petitioner's position that the trust was void ab initio, the viability of fraud claims was doubtful and a strong argument for ratification was indicated. The proceeding to invalidate the subject trust has now been brought and, as indicated, a pre-answer motion to dismiss same is before the court. The grounds asserted in the petition include, inter alia, (1) that the trust was void ab initio, (2) that the establishment of the trust was the result of fraud, duress and under influence, and (3) that Judith executed the trust without the advice of independent counsel. Arguments In support of the motion to dismiss the petition, counsel for respondents points to the numerous documents executed by both Nicholas and Judith to effect the transfer of the title of the cooperative apartment tot he trust, including, [*4] but not limited to: an assignment of the cooperative apartment's proprietary lease from Nicholas to Judith on August 22, 1998, which it appears was redrafted and executed on January 29, 1999, possibly at the behest of the cooperative association; an assignment of same on January 29, 1999 from Judith to the trustees of the QPRT; an occupancy and assignment agreement executed by Judith and Nicholas on August 28, 1998, which recited that it was binding on the couple's heirs and assigns; and a consent to the assignment executed by the president of the cooperative's board in his official capacity on March 4, 1999.; He also notes that Judith filed a gift tax return, stating the date of the gift as August 24, 1998; that she received trustee's commissions on the sale of the apartment by the trust; and that she received annual commissions and annuity payments between 1998 and 2006. With respect to the petitioner's position that the trust was void ab initio, counsel for respondents argues that the date of funding is irrelevant as regards the trust's validity, and that Judith recognized the trust and accepted its benefits from its inception until her death. He also argues that the petition should [*5] be dismissed on statute of limitations grounds, pursuant to CPLR 213(8), since Judith had ample time within which to commence an action with the applicable period and chose not to do so. Further, respondents' counsel notes that any allegation of fraud in the pleading before the court are either not sufficiently specific or non-existent. It is also respondents' position that there is no trust, unjust enrichment or injunctive relief under the facts of this case; and that the doctrines of collateral estoppel and res judicata bar any potential recovery petitioner may seek herein, since issues concerning fraud, duress and undue influence have already been litigated in the context of proceedings concerning a post nuptial agreement affecting subject decedent's estate. In opposition to the motion, petitioner argues that the documents establishing the transfers of the cooperative apartment are suspect and discovery is necessary to resolve the purported factual issues raised by the alleged inconsistencies in said documents. Petitioner contends that the fact that Judith did not own the cooperative apartment on the date the trust was created voids the trust; a situation which cannot be altered [*6] by principles or estoppel or ratification. Petitioner also posits that Nicholas' alleged fraudulent misrepresentations (i.e. keeping the specifics of the trust's operation and import from Judith) continued until his death; and that a resulting trust and injunctive relief are the only ways to adequately compensate Judith's estate for the alleged malfeasances. In addition, it is argued that a constructive trust lies because, inter alia, Nicholas' estate plan benefitted at the expense of Judith's estate plan. Finally, petitioner contends that there is no identity of issues which would allow for application of the doctrines of collateral estoppel and/or res judicata. Discussion The criterion the court employs when deciding a motion to dismiss for failure to state a cause of action, pursuant to CPLR 3211(a)(7), is whether the petitioner, having been given the benefit of every favorable inference, has a cause of action (Guggenheimer v. Ginzburg, 43 NY2d 268, 275; Fast Track Funding Corp. v. Perrone, 19 AD3d 362). Although petitioner attacks the subject QPRT/QAT on a number of fronts, the primary argument asserted is that the trust was void ab initio. The focus for this assertion is that Judith [*7] did not won the property on the day that the trust was created and, consequently, the trust was no funded with the cooperative apartment shares until some months after the trust's execution. A careful review of suggest that the argument is framed more in terms of the allegation that Judith did not own the property on the date the trust was executed, therefore no trust, according to petitioner, was formed or could take effect. As this court has recognized and as petitioner has argued, the validity of an express trust has historically been determined by (1) the identification of a designated 2008 N.Y. Misc. LEXIS 6314, *3 Page 3 of 3 Eric Lee beneficiary; (2) a designated trustee, who was not the beneficiary; (3) a fund or property sufficiently identifiable to enable title to be transferred to the trustee(s); and (4) legal assignment or actual delivery of the fund or property to the trustee(s) with the intention of passing legal title (Matter of Hird, 10/2/2003 NYLJ 29 (col. 1); citing, Matter of Hunt, 4/12/2002, NYLJ 21 (col. 5); Brown v. Spohr, 180 NY 201). This court also relies upon the language used in EPTL 7-1.18, which provides that "[a] lifetime trust shall be valid as to any assets therein to the extent the assets have been transferred [*8] to the trust." Recognizing that simply attaching a schedule which recites that certain assets belong to a trust is not sufficient (Estate of Rothwell, 189 Misc.2d 191), the comparison between the case before the court and the relevant case law diminishes petitioner's position. The case before the court does not concern a mere expectancy or hope of inheritance with respect to the specific property at issue (See, Marx v. Marx, 5 Misc.2d 42; citing, Hickok v. Bunting, 67 App. Div. 560). On all material points, there is no dispute as to the facts leading up to the Judith's eventual denomination as trustee and beneficiary of the subject trust. These facts indicate that the ultimate design was the result of an ongoing process that, due tot he nature of the property involved and the various ministerial steps necessary to effectuate the transfer, played itself out over the course of some months. During this time, there was no deviation by any of the parties from this course, the consequence of which was Judith eventually deriving the benefit of the property funding the trust. The outcome was not the result of happenstance. Indeed, Judith's deliberate participation in the process was confirmed [*9] by her subsequent participation in converting the trust from a QPRT to a QAT. An assignment of the cooperative apartment's proprietary lease from Nicholas to Judith on August 22, 1998 was, apparently, redrafted and executed again in January, 1999. An occupancy and assignment agreement, dated August 28, 1998, which appears to have been acknowledged in January and March of 1999 contains the cooperative board president's consent to the transfer of shares to the trust. These are two of the documents petitioner relies upon to support her argument that the irregularities therein require discovery to resolve outstanding factual issues. These are, however, but two amongst a number of documents indicating a series of transactions designed to effectuate the funding of the trust at issue in accordance with the agreement of the parties. In reliance on the above- quoted language in EPTL 7-1.8, even were the court to inquire, at petitioner's urging, into the reasons behind the delay in obtaining the signature of the cooperative association's president, for instance, none of these alleged irregularities appear to void the trust. Assuming the trust is not void ab initio, petitioner's remaining arguments [*10] must fail on both ratification and statute of limitations grounds. First, no cause of action lies for a constructive trust under the elements enunciated by Sharp v. Kosmalski, 40 NY2d 119, as the circumstances before the court do not fall within the standard established therein. Second, Judith's action from the inception of the trust until 2006 were consistent with one who was aware of the trust and accepted its benefits in all their forms, including commissions and annuities, thus ratifying its terms (Kazqaras v. Manufactuers Trust Company, 4 AD2d 227). Third, although not before the court on this application, the same reasons for applying the bar of the statute of limitations to the application concerning the post-nuptial agreement between Nicholas and Judith exist here; to wit, even if petitioner could establish that Judith was unable to ascertain the alleged fraud during the initial six years of the applicable statute of limitations there is no indication that Judith was prevented from discovering such fraud prior to the expiration of the statute of limitations, certainly not during the more than two years after Nicholas' death (Estate of Nicholas Doman, File #313P2004 and Estate [*11] of Judith N. Doman a/k/a Judith Doman, File #1029P2006, 6/26/2007, S. Czygier; citing In re Neidich, 290 AD2d 557; see also, Estate of Blake, 282 AD2d 905 for the proposition that an action sounding in fraud must be commenced with six years of the date of execution or within two years of the date when such fraud could reasonably have been discovered). Again, her fiduciary must be bound by Judith's actions, as well as her failure to act. Accordingly, it is ORDERED that the motion to dismiss the petition to invalidate the inter vivos trust, dated August 24, 1998, referenced herein is granted. End of Document 2008 N.Y. Misc. LEXIS 6314, *7