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Keywords

trustobjection

Related Cases

Kroll v. New York State Dept. of Health, 143 A.D.3d 716, 39 N.Y.S.3d 183, 2016 N.Y. Slip Op. 06499

Facts

The co-trustees of an irrevocable trust created by Moses Ratowsky for his grandson, Daniel Schreiber, sought to transfer the principal of the original trust into a new supplemental needs trust. Daniel, who was 20 years old and had disabilities, received Medicaid and Social Security income. The original trust allowed him to withdraw the principal at age 21, which would disqualify him from government benefits. To prevent this, the trustees aimed to create a new trust that would not grant him withdrawal rights, thereby preserving his eligibility for benefits.

The petition alleged that the grandson was an individual with certain disabilities who was 20 years old, received Medicaid and Social Security income, and lived at home with his mother and father.

Issue

Whether the new supplemental needs trust created for Daniel Schreiber required a payback provision under New York law, given that the trust was funded by assets from an existing trust.

The State contended that because the new trust had been created with the grandson's assets, it must be considered a 'first-party' or 'self-settled' supplemental needs trust, and that it was therefore required to contain a 'payback' provision pursuant to EPTL 7–1.12.

Rule

Under EPTL 7–1.12, a supplemental needs trust must be created by someone other than the beneficiary to avoid requiring a payback provision. If the beneficiary is considered the 'creator' of the trust, the trust must include a payback provision to recoup government benefits upon the beneficiary's death.

Pursuant to EPTL 7–1.12, 'the creator' of a supplemental needs trust must be 'a person or entity other than the beneficiary or the beneficiary's spouse'.

Analysis

The court determined that Daniel Schreiber was not the 'creator' of the new supplemental needs trust because the assets of the original trust were not his. The original trust was funded by his grandfather, and Daniel had not contributed any of his own assets to it. Therefore, the principal of the original trust did not constitute a resource or income for Daniel, and the new trust did not require a payback provision.

Here, contrary to the State's contention, a payback provision was not required pursuant to Social Services Law § 366(2)(b)(2)(iii) since the grandson was not the 'creator' of the new supplemental needs trust.

Conclusion

The court affirmed the Surrogate's Court's decision to dismiss the Department of Health's objections and granted the petition to approve the new supplemental needs trust without a payback provision.

Accordingly, the Surrogate's Court properly dismissed the State's objections and granted the petition approving the exercise of the power of appointment.

Who won?

The co-trustees prevailed in the case because the court found that the new supplemental needs trust did not require a payback provision, as Daniel was not the creator of the trust.

The court concluded that the new trust did not give the grandson the right to withdraw any sum from the trust at any time.

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Keywords

Related Cases

In re Trust Estate of Jamison, 431 Pa.Super. 486, 636 A.2d 1190

In re Estate of Ehrlich, 427 N.J.Super. 64, 47 A.3d 12

Trosch v. Maryland Nat. Bank, 32 Md.App. 249, 359 A.2d 564

Hatch v. Riggs Nat. Bank, 361 F.2d 559, 124 U.S.App.D.C. 105

Estate of Cristofani v. C. I. R., 97 T.C. No. 5, 97 T.C. 74, Tax Ct. Rep. (CCH) 47,491, Tax Ct. Rep. Dec. (P-H) 97.5