Matter of Mildred A.

[*1] Matter of Mildred A. 2008 NY Slip Op 52162(U) [21 Misc 3d 1123(A)] Decided on October 7, 2008 Supreme Court, Nassau County Asarch, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on October 7, 2008
Supreme Court, Nassau County

In the Matter of the Appointment of EMILY F. FRANCHINA, ESQ., as Guardian for the Personal Needs and Property Management of Mildred A., an Incapacitated Person.



028041-I-05



Emily F. Franchina, Esq.

Stephen R. Mahler, Esq.

Joel K. Asarch, J.

By Order and Judgment dated January 6, 2006, the Court appointed EMILY F. FRANCHINA, ESQ. as the Guardian for the Personal Needs and Property Management of MILDRED A., an Incapacitated Person.

On or about July 24, 2006, and in the context of a hearing conducted with regard to a gifting application previously made by the adult daughters of MILDRED A., the said Guardian testified that MILDRED A. had (at that time) approximately $1 million in assets; that she was 88 years of age with dementia; and that she was otherwise medically stable. The Guardian further testified that the cost of maintaining MILDRED A. at the assisted living facility where she resided was approximately $90,000 per year, inclusive of the cost of full-time private aide(s) providing individual care and assistance, and a Geriatric Care Manager monitoring her situation. Notwithstanding the foregoing, however, it was understood by all parties that should MILDRED A. require more intensive care in the future, including, but not limited to skilled nursing care, her continuing necessary living expenses would increase exponentially.

Following such hearing, the Court, by Decision and Order dated November 16, 2006, stated that it " ... is mindful of the assistance that MILDRED A. gave to her daughters prior to her incapacity .... Based upon the foregoing facts and circumstances, it is the decision of this Court that if MILDRED A. possessed the capacity to make such decisions, she would wish to assist her daughters. However, the duty of this Court is to ensure that the welfare and interests of the Incapacitated Person are never subjugated to the needs of others." The Court declined to permit gifting in such application except to the extent that the Guardian was authorized to make a $12,000.00 gift to each of the two (2) daughters of MILDRED A. for calendar year 2006. However, the Court cautioned that "[n]o further gifting of the assets of the Incapacitated Person to any party shall be considered unless appropriate and based solely upon the circumstances of the Incapacitated [*2]Person at such time, and not the need or desire of any third party hereto" (emphasis supplied).

Notwithstanding the foregoing admonition, the Court presently has before it requests from the two daughters for the following relief: (a) that the Guardian loan to daughter, LISA D. A., the sum of $150,000.00 from her mother's assets in order for her to repay a mortgage on certain real property owned and occupied by said daughter; (b) that daughter, ABBY W., be permitted to withdraw funds from her own daughters' college trust accounts (initially established by MILDRED A. for such grandchildren) in order to pay for current necessary living expenses of the W. family, including housing; and (c) that the Guardian make gifts of $12,000.00 from the funds of MILDRED A. to each daughter in order to alleviate all or a portion of their respective financial distress.

In response to such applications, the Court issued an Order, dated June 30, 2008, scheduling a hearing to be conducted on July 22, 2008, to address the relief sought. At the hearing, the Court heard testimony from:

(A)The Guardian, EMILY FRANCHINA, ESQ.: MS. FRANCHINA indicated that MILDRED A. still resides at the assisted living facility with full-time private duty care. Her assets amount at present to approximately $750,000 and she receives income totaling approximately $9,500 per month. While her assets and income are sufficient to support her present needs, should the Incapacitated Person require transfer to a skilled nursing facility, there will be insufficient assets to cover any penalty period incurred by the terms of the Deficit Reduction Act of 2005 if Medicaid planning is permitted;

(B)Daughter, LISA D. A.: Such daughter stated that she purchased the interest of the co-owner in and to certain real property occupied by her by way of a refinance of the underlying mortgage; however, the carrying costs of said real property are in excess of her resources and earnings, as ONE-HALF (1/2) of her salary is now consumed by the mortgage payment alone. LISA D. A. also claims to owe a balance of $30,000.00 to the aforesaid co-owner, payable in December, 2008; and

(C)Daughter, ABBY W.: Such daughter stated that she and her two minor children (ages 14 and 16) have been living in a hotel room for in excess of eight (8) months with the assistance of the Nassau County Department of Social Services, although at present, her elder daughter has temporarily relocated elsewhere. By receiving additional funds, ABBY W. expects to rent a 2- or 3-bedroom apartment, and to have certain medical issues attended that would enable her to secure appropriate employment.

THE LOAN APPLICATION

Daughter, LISA D. A., has sought a loan of $150,000.00 from guardianship funds in order to assist her with satisfying the debt she has amassed due to the "buy-out" of the co-owner of the real property in which she resides. Initially, the Court had communicated with the Guardian when such application was received, indicating that prior to consideration, the Court would require " .. the proposed terms and conditions of such loan, including the annual interest rate and the anticipated maturity date thereof, and whether the loss of principal will jeopardize [the Incapacitated Person's] fiscal well-being." Such information has yet to be supplied to the Court.

Moreover, the vast majority of the Incapacitated Person's assets are held in an Individual Retirement Account. Thus, the withdrawal of any funds will result in significant adverse income tax consequences, depleting the assets of MILDRED A. even further. Accordingly, as the applicant has not supplied any relevant information concerning the proposed transaction, and it appearing that [*3]such loan would exclusively benefit LISA D. A. and with no palpable benefit to MILDRED A., this application is denied in its entirety.

ACCOUNTS ESTABLISHED FOR THE BENEFIT OF GRANDCHILDREN

Some time ago, the Incapacitated Person had set up custodian accounts under the Uniform Gift to Minors Act for her two grandchildren (the minor children of daughter, ABBY W.). As of March, 2008, the account for the younger granddaughter had a balance of $58,077.22, while the account for the elder granddaughter had a balance of $88,293.52.

Daughter, ABBY W., has requested the release of $35,000 from each such account (cumulative sum of $70,000.00) for the payment of her family's current living expenses. According to the applicant, the Nassau County Department of Social Services indicated to her that she should withdraw funds from these accounts and utilize them for such purpose. The Court has also reviewed a written communication submitted from the younger granddaughter's school psychologist, stressing the urgent need for permanent housing for the W. family. Because of ABBY W.'S various medical conditions and need for surgery (which apparently cannot be accomplished until permanent housing is located), the burden of many household responsibilities has fallen on the shoulders of the youngest grandchild of the Incapacitated Person.

It is axiomatic that a parent has a duty to support his or her children and provide for necessaries through their attaining the age of twenty-one, unless sooner emancipated. See Family Court Act Section 413. The existence of a trust fund for the child does not diminish the primary obligation of the parent to support such minor child. See e.g. Quat v. Freed, 25 NY2d 645, 254 NE2d 765, 306 NYS2d 462 (1969).

Had the funds in question sought to be withdrawn from an infant's guardianship account, such application would be carefully scrutinized by this Court and permitted only to the extent required for the infant's necessaries and education. See Application of Dagani, 226 AD2d 197, 640 NYS2d 537 (1st Dept. 1996). However, where the parent is not presently capable of supporting her children (and in fact is the recipient of public assistance), should the Court permit the invasion and dissipation of a trust account established by another relative and intended for the sole use and benefit of such grandchildren for their future needs and education?

This Court is deeply concerned with the potential situation of the infant children supporting their mother. In the instances where the Courts have permitted an infant's general funds to be invaded prior to the triggering event (i.e. the age of majority), the Courts have stressed that such funds may not be used to support the parent but only shall be accessed for the use and benefit of such child. See e.g Leon v. Walker, 1 Misc 2d 219, 147 NYS2d 331 (Sup. Ct., NY Co. 1955); C.P.L.R. 1211(a).

While the Court is deeply sympathetic regarding the plight of the W. family, invading trust accounts which MILDRED A. established and funded pursuant to the Uniform Gift to Minors Act is not the solution. There is no question that a grandmother would wish to aid her grandchildren; however, to permit approximately one-half of the accumulated balance thereof ($70,000.00 of a total of approximately $146,300) to be used for interim housing is judicially unpalatable.

The Court does note the existence of case law which has held that when a surviving parent lacks the resources necessary to support his or her children, the children may bear some of the burden of their support. Matter of Kummer, 93 AD2d 135, 461 NYS2d 845 (2nd Dept. 1983). However, in [*4]light of the Court's decision hereafter, the Court need not reach this issue.

Accordingly, the application to invade the trust accounts established for the minor grandchildren of MILDRED A. is denied in its entirety.

GIFTING APPLICATION

"A guardian's authority to transfer the assets of an incapacitated person to another is derived from Mental Hygiene Law §81.21(a)," Matter of Burns, 267 AD2d 755, 699 NYS2d 242 (3rd Dept. 1999). "Furthermore, in enacting Mental Hygiene Law article 81, the Legislature gave statutory recognition to the common-law doctrine of substituted judgment' (citations omitted) by expressly authorizing the transfer of a part of the incapacitated person's assets to or for the benefit of another person on the ground that the incapacitated person would have made the transfer if he or she had the capacity to act' (Mental Hygiene Law §81.21[a])," Matter of John XX, 226 AD2d 79,83, 652 NYS2d 329 (3rd Dept. 1996), leave to appeal denied, 89 NY2d 814 (1997); In re Shah, 95 NY2d 148,159 (2000).

The daughters of MILDRED A. have each requested a gift in the sum of $12,000.00 for calendar year 2008. Each daughter is faced with a significant financial emergency LISA D. A. risks losing her home due to substantial debt, and ABBY W. is situated in a hotel room with her younger daughter while her elder daughter is currently attending a residential school. The younger daughter, instead of enjoying fully her teenage years, is saddled with added responsibilities due to her mother's physical infirmities and inability to maintain continued employment. This Court raised its concern regarding the consequences of gifting and financially imperiling MILDRED A. in its prior Decision and Order some two years ago, and specifically stated that it was " ... concerned about the needs of MILDRED A. and the effects of the Deficit Reduction Act of 2005." It is apparent to the Court that under a "worse case" scenario, even a modest transfer of assets today might affect MILDRED A.'S eligibility for Medicaid assistance in the future. If her monthly expenses doubled from $7,500 to $15,000 (a conservative figure based upon increased room and board charges at a skilled nursing facility in this geographic area), a sum in excess of $900,000 would be needed to ensure sufficient funds for private pay room and board over the five-year penalty period. This figure, of course, does not contemplate the additional expenses of private-duty aides and other amenities.The Deficit Reduction Act of 2005 is clear that a transfer of assets occurring "exclusively for a purpose other than to qualify for medical assistance" will not incur a penalty period for Medicaid purposes. 42 U.S.C. §1396p(c)(2)(C)(ii); New York Social Services Law §366.5(e)(4)(iii)(B). "Sections 366(5)(d) and (e) of the Social Services Law provide that an individual will not be ineligible for Medicaid as a result of a transfer of assets if a satisfactory showing is made that the asset was transferred exclusively for a purpose other than to qualify for Medicaid," Matter of F.V., FH No. 4898029L (N.Y.S. Dept. of Health, March 14, 2008). MILDRED A. has demonstrated a history of concerned support for her two daughters' financial well-being. Specifically, she has regularly paid their rent, therapy, and utilities bills, as well as miscellaneous living expenses, both before and during her adjudicated incapacity. Such consistent, long-term behavior is precisely the type of substantial evidence [FN1] required to satisfactorily show a motive for gifting unrelated to [*5]Medicaid eligibility. See e.g. Campbell v. Commissioner of New York State Department of Health, 14 AD3d 766, 787 NYS2d 492 (3rd Dept. 2005); Social Services Law Section 366(5)(d)(3)(iii)(B).

Under the substituted judgment rule, it was and remains clear to the Court that if MILDRED A. had the mental capacity to do so, she would wish to continue with her pattern of assisting her daughters (and granddaughters) through difficult financial straits. It flies in the face of reason that an individual would be penalized should she ever need Medicaid assistance for helping to preserve the home of one daughter (thereby potentially avoiding that daughter seeking public assistance at the expenses of the State/County) and to help another daughter (and her grandchildren) obtain private housing (when the State/County is currently paying for ongoing shelter).

After analyzing the Incapacitated Person's needs and her resources during examination of the 2006 gifting application, the Court permitted the gifting of $12,000 to each daughter specifically NOT TO HASTEN the applying for Medicaid for the Incapacitated Person, but to assist with financial emergencies with which each child was suffering at the time. In fact, the Court analyzed the situation under a "worse case" scenario to ensure the Court that there would be sufficient assets available to MILDRED A. for the entire 5-year look back period from the date of the one time annual exclusion gift. The Court further applied the Shah criteria, as well as the factors set forth in Mental Hygiene Law Section 81.21(d)(1) to (6), and concluded that (a) ABBY W. and LISA D. A. are the "natural objects of the bounty of the incapacitated person"; and (b) under the Last Will and Testament of MILDRED A., dated June 7, 1990, they are designated as equal beneficiaries; and (c) there is a long-standing history of gifting to the daughters, as aforesaid. The same analysis applies today.

Accordingly, for purposes other than to qualify for medical assistance but rather to assist the daughters (and grandchildren) of MILDRED A. in what could reasonably be considered financial exigencies, it is the decision of this Court that the Guardian shall transfer the sum of $12,000.00 in 2008 and the sum of $12,000.00 in 2009 to each of the two daughters of the Incapacitated Person in order to assist them with their respective housing issues.

Thus, on the Court's own motion, it is

ORDERED, that within TWENTY (20) DAYS of the date hereof, EMILY F. FRANCHINA, ESQ., as Guardian for the Property Management of MILDRED A., an Incapacitated Person, shall pay from the funds of the Incapacitated Person the sum of $12,000.00 to or for the benefit of LISA D. A. and the sum of $12,000.00 to or for the benefit of ABBY W., which payments shall constitute annual exclusion gifts for calendar year 2008; and it is further

ORDERED, that during the month of January, 2009, EMILY F. FRANCHINA, ESQ., as Guardian for the Property Management of MILDRED A., an Incapacitated Person, shall pay from the funds of the Incapacitated Person the sum of $12,000.00 to or for the benefit of LISA D. A. and the sum of $12,000.00 to or for the benefit of ABBY W., which payments shall constitute annual exclusion gifts for calendar year 2009; and it is further

ORDERED, that notwithstanding the foregoing, the Guardian shall have the authority in her sole discretion to make such payments to either recipient in installments or directly to third-parties on the recipient's behalf if a lump sum payment will negatively affect public assistance benefits for which the daughter(s) of the Incapacitated Person may otherwise be eligible; and it is further [*6]

ORDERED, that the Guardian shall serve a copy of this Decision and Order upon the Nassau County Department of Social Services.

The foregoing constitutes the Decision and Order of the Court.

E N T E R :

__________________________________

JOEL K. ASARCH, J.S.C.

Copies faxed to:

Copies mailed to:

Lisa D. A.

Abby W. Footnotes

Footnote 1:Substantial evidence is that which possesses ample relevancy and strength to compel the reasonable mind to accept as support for a conclusion of ultimate fact. 300 Gramatan Ave. Assoc. v. State Div. of Human Rights, 45 NY2d 176,180 (1978).