Matter of A.S.B.
Annotate this CaseDecided on January 21, 2020
Surrogate's Court, Orange County
In the Matter of the Guardianship of A.S.B. An Infant over the age of 14 Years.
2015-284
Appearances of Counsel: Mother/Guardian DDB, pro se.
Timothy P. McElduff Jr., J.
The following papers were considered in deciding this proceeding:
1. Petitioner's Verified Petition filed on December 30, 2019, together with its exhibits/attachments and supplemental materials provided to the Court through January 16, 2020.
Petitioner, D.D.B., mother and Guardian of the Property of A.S.B. (the "Infant"), seeks, by Verified Petition filed on December 30, 2019, permission and authority to withdraw $15,202.85 from the Infant's property, currently on deposit with Walden Savings Bank, for the purposes of paying five months of missed mortgage payments on the family home (due August 2019 through December 2019) plus an additional month that is anticipated to be missed (due January 2020).
Petitioner's husband, and father of the Infant, died in combat while serving in the United States Armed Forces on December 22, 2014. On or about November 23, 2015, the Infant received $140,407.79 of life insurance proceeds from the death of his father, which was deposited into a savings account at Walden Savings Bank.
From November 23, 2015 through December 29, 2019, Petitioner withdrew $30,671.11 from Walden Savings Bank with the permission and orders of this Court. The purposes of the withdrawals consisted of family trips and travel, school-related travel and activities, bereavement cruises, the purchase of a puppy recommended by a therapist, dental and vision needs, car maintenance/repair and a "Sweet 16" party. As of December 29, 2019, the remaining balance of the Infant's account is $117,700.81.
Petitioner is the mother of the Infant (age 16), as well as a daughter (age 11). Petitioner and her children reside in a single-family house located in New Windsor, New York, which Petitioner estimates to be worth $310,000.00. The home is encumbered by a $297,000.00 mortgage with a principal outstanding balance of $260,791.67 as of December 16, 2019. Petitioner states that she has an additional $32,000.00 in other outstanding debts. Petitioner additionally notes that, as a result of her husband's death in combat, her children's college expenses will be fully funded by government benefit programs.
Petitioner states that she needs the requested withdrawal because she lost her part-time job in September 2019. Petitioner does not specifically state what her part-time job was or what amount of income it previously generated. Petitioner states that she has another source of income from a business that she operates in Ghana, however, she does not specifically state what that business is or what amount of income it generates. Petitioner states that she has been unable to find a new job from September 2019 through December 2019.
Petitioner estimates the annual expenses of maintaining her home to be $37,696.00 and the annual expense of maintaining all other family costs/bills to be $59,800.00, for total annual estimated expenses of $97,496.00.[FN1]
In comparison, Petitioner states that her annual earnings are $15,000.00 and that the annual social security payments she receives for her infant children equal $13,380.00, for a total family annual income of $28,380.00.
Petitioner notes that, because she lost her part-time job, it is extremely difficult for her to cover the costs of the mortgage, utilities and maintenance related to the home, as well as the extracurricular activities of her two children.
Consequently, Petitioner requests that the Court authorize payment of the mortgage on the family home from the Infant's funds for the months of August 2019 through January 2020 (in the total sum of $15,202.85) in order to give the Petitioner time to catch up on the mortgage payments and to avoid a potential, future foreclosure and loss of the home.
SCPA § 1713(1)(a) provides that the Court may direct the application of the infant's property by the guardian towards "the support and education of the infant." Authorization to withdraw the infant's property is a matter of the Court's discretion; however, the Court "must be sensitive to its statutory duty to preserve the infant's estate until his or her majority and to permit withdrawals only to the extent required for necessities and education that cannot otherwise be provided." See In re Dior Polo G., 78 AD3d 941, 941 (2d Dept. 2010); see also SCPA § 1713(2).
Providing shelter, however, falls within the realm of "necessities" that parents are responsible to provide to their children. See Matter of Guardianship of B.E.S., 65 Misc 3d 192, 197-198 (Sur. Ct., Dutchess Co., 2019). "As a result, an application by a parent-guardian to use the assets of the infant to purchase a home or pay a mortgage will be closely scrutinized." Matter of Guardianship of B.E.S., 65 Misc 3d at 198.
In examining whether the infant's funds should be applied toward the payment of the family's mortgage, courts have recognized the following areas of inquiry: (1) the proportion of the proposed withdrawal to the infant's total funds; (2) the parent-guardian's financial resources; (3) the relative proportion of the proposed contributions by the infant and the parent-guardian; (4) whether any tax or other financial advantages will accrue to the infant as a result of the proposed expenditure; (5) whether the house provides a unique or special benefit to the infant; and (6) whether the house represents a sound investment.
[*2]See Matter of Guardianship of B.E.S., 65 Misc 3d 192, 198 (Sur. Ct., Dutchess Co., 2019) (collecting cases).
Similarly, when applying the infant's funds towards the purchase of a home, courts may authorize such application of funds if (1) the parents show they cannot afford the purchase price or a portion thereof by clear proof; (2) the house has features beneficial to the child and accommodates his or her physical limitations; (3) the purchase price is fair; (4) title is vested in the infant at least to the proportionate degree of his or her investment in the house; (5) necessary measures are taken, where needed, to safeguard the investment against the recklessness or extravagancy of the parent; (6) parents offer a quid pro quo to the infant; and (7) the funds remaining after the outlay are sufficient to meet the future needs of the infant and where the infant is expected to remain incompetent, for the anticipated duration of his or her life. See Matter of Marmol, 168 Misc 2d 845, 853-854 (Sup. Ct., New York Co., 1996).
Whether applying an infant's funds toward the purchase of a home or the payment of a home mortgage, courts have expressed particular concern that the infant's funds be secured by the real property in some manner, that some form of financial benefit accrue to the infant as a result and/or that the infant's funds not be exposed to future carrying costs of the property. See e.g. Matter of Marmol, 168 Misc 2d 845, 853-854 (Sup. Ct., New York Co., 1996) (collecting cases in which the court approved the use of infant's funds towards purchases of real property where title was proportionately vested in the infant, where infants were not responsible for ongoing carrying costs and where the purchase was deemed prudent or alternative investment of funds from which the infant stood to benefit); Estate of M.H.H., 118 Misc 2d 224 (Sur. Ct., New York Co., 1983) (permitting the withdrawal of $200,000.00 from infant's account to prevent foreclosure on the family cooperative apartment where it was financially advantageous to the infant and the infant's funds were secured; specifically, an estate tax savings of $70,000 would be achieved by application of the infant's funds toward the purchase and the infant would receive a 50% interest in the apartment in return, which resulted in an approximate $225,000.00 return for a net investment of $130,000.00 [i.e., $200,000.00 minus the $70,000.00 estate tax savings to the infant]).
For example, in Matter of Guardianship of B.E.S., the court denied the petitioner's application to use the infant's funds to pay a mortgage where the petitioner did not identify any tax or financial advantages that would accrue to the infant if the application were granted, did not present any unique benefits to the property for the infant and did not give any indication as to how the basic carrying costs and routine expenses of home ownership would be paid by the petitioner going forward. See Matter of Guardianship of B.E.S., 65 Misc 3d 192, 198 (Sur. Ct., Dutchess Co., 2019).
Similarly, in In re Louis, the petitioner, having demonstrated insufficient income to support the home and family expenses, did not explain how she expected to make mortgage payments in the future without use of the infant's funds. See In re Louis, 21 Misc 3d 1126(A) (Sup. Ct., Kings Co., 2008) (finding that if the petitioner and the infant are to lose their current home by foreclosure action and eviction because the petitioner cannot afford it, then the best interest of the infant is not being served by depleting the infant's funds, as the use of the infant's funds may only delay the inevitable); see also Matter of Guardianship of B.E.S., 65 Misc 3d 192, 198 (Sur. Ct., Dutchess Co., 2019) (finding that if the petitioner does not demonstrate her ability to afford the expenses of home ownership going forward, the application of the infant's funds not only dissipates the assets of the infant, "it also threatens to expose those assets to a significant [*3]risk of waste").
Furthermore, in In re Louis, the court found it significant that the petitioner failed to consider a less expensive residence or bankruptcy protection where her income was insufficient to meet the family's needs, in order to avoid depleting the infant's funds. In re Louis, 21 Misc 3d 1126(A) (Sup. Ct., Kings Co., 2008).
Here, the Petitioner's application to use the Infant's funds to pay her mortgage does not pass the scrutiny of the test most recently summarized in Matter of Guardianship of B.E.S., supra. While (1) the proportion of the proposed withdrawal to the infant's total funds is smaller than in other reported cases [i.e., 13% versus 25%, 40% and more] and (2) the parent's resources are limited, (3) the contribution here would be solely from the infant, (4) there are no tax or financial advantages accruing to the infant, (5) there has been no demonstration of the home's unique or special benefit to the infant, and (6) the Verified Petition demonstrates that the house does not represent a sound investment due to the lack of substantial equity and unaffordable ongoing/future carrying costs.[FN2]
Furthermore, as discussed in Matter of Marmol and Estate of M.H.H., supra, the Infant is not receiving any security, repayment or financial gain in return for the use of his funds toward the real property.
Critically, as emphasized in In re Louis and Matter of Guardianship of B.E.S., supra, the Petitioner has not demonstrated her ability to afford the expenses of home ownership going forward. Therefore, the infant's funds, even if it were appropriate to apply them to the home mortgage, would be at a high risk of being lost and wasted. Unfortunately, the financial problems presented by the Verified Petition in this case are not likely to be solved by a lump sum of $15,202.85, whether from the Infant's property or from other sources.
While the Court acknowledges the sacrifice that this family has endured, the law requires the Court to separate and protect the Infant's funds from the Petitioner's debts. As discussed in In re Louis, supra, the Petitioner has not considered a less expensive residence as an alternative to using the Infant's funds to sustain the current, but unaffordable, home. Additionally, the Petitioner may avoid the need to invade the Infant's funds by availing herself of bankruptcy protections and, should a foreclosure action be filed, New York's Mandatory Foreclosure Settlement Program.
For the foregoing reasons, it is hereby
ORDERED that the Verified Petition filed on December 30, 2019 requesting that the Court authorize payment of the mortgage on the family home from the Infant's funds for the months of August 2019 through January 2020 in the total sum of $15,202.85 is denied, without prejudice to any future application that could cure the deficiencies noted herein.
The foregoing constitutes the Decision and Order of this Court.
Dated: January 21, 2020
Goshen, New York
Hon. Timothy P. McElduff, Jr., Surrogate Footnotes
Footnote 1:Petitioner's Verified Petition lists and describes estimated yearly household expenditures (home-related costs, plus other costs of family maintenance). The total sum of Petitioner's line itemization of these expenditures equals $97,496.00; however, Petitioner calculates the total sum to be $74,879.52 in her Verified Petition.
Footnote 2:The current and anticipated level of Petitioner's income is vastly insufficient to meet the family and home expenses going forward, by both the Court's and the Petitioner's calculation.
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