Case Number: BC543997    Hearing Date: July 16, 2014    Dept: 97

Superior Court of California
County of Los Angeles
Department 97

ALEXANDER GOLDSTEIN, a minor, by and through his guardian ad litem Michael Goldstein
Plaintiff,
v.

BRADLEY CHASEN BELL, et al.,

Defendants.
Case No.: BC 543997

Hearing Date: July 16, 2014

[TENTATIVE] ORDER RE:
PLAINTIFF’S PETITION TO APPROVE COMPROMISE OF DISPUTED CLAIM OF MINOR
This matter is on calendar for the continued hearing on Plaintiff’s request for approval of compromise of a minor’s claim. On June 11, 2014, the Court preliminarily heard the matter and set this continued hearing date so that the Special Needs Trust could be reviewed by the probate department. The probate department completed its review and provided the information below regarding specific items that need correction before the Court may approve funding of the Special Needs Trust. This information is hereby made part of this Order.
Special Needs Trust
The net amount to be received by the minor (i.e., $28,961.69) is very small for the expenses related to the establishment and administration of a special needs trust (i.e. annual accounts, bond, etc.). The petitioner and his attorney should consider if there are better ways to use this money for the benefit of the minor.

All special needs trusts funded by court order must comply with CRC Title 7 Rule 7.903 and LASC ch. 4 Rules 4.116 and 4.117. Although paragraph 3.3 of this trust sets forth these rules, there are many contradictory provisions of the trust that are not rectified by having this language appear separately in the trust. The provisions must be integrated to incorporate the above-mentioned rules. To that end, the following corrections must be made to the trust:

Paragraph 1.6: Any additions to the trust should be subject to prior court approval. This is because the court must determine that the amount to be funded into the trust does not exceed the amount necessary to provide for the beneficiary’s special needs. PC 3604(b)(3).

Paragraph 2.2 : The language pertaining to special needs is too broad. A special needs trust is not for the beneficiary’s comfort and wellbeing, or to allow the beneficiary to live a life of luxury while maintaining eligibility for public benefits. It is to allow a source to pay for the beneficiary’s “special needs,” while still allowing the beneficiary to receive government benefits. The language regarding spending money, vacations, comfort and adornment for a very high quality of life need to be taken out before the court can fund the proceeds into this trust.

Article 3 – Trustee’s Powers: The trust must prohibit investments other than those permitted under Probate Code section 2574. CRC Title 7 Rule 7.903. Although this language is included in paragraph 3.3 of the trust, paragraph 3.1.1 must be revised so there are not contradictory provisions in the trust.

Paragraph 4 .1 and 4.9 – Bond must be required of the trustee. CRC Title 7 Rule 7.903(c)(5). This paragraph states that no bond is required. This must be revised. Para 3.3.7 requires bond, and para 4.1 must also be revised to require bond in order to comply w/ CRC 7.903(c)(5).

Paragraph 4.2, 4.3, and 4.4 – These paragraphs directly contradict paragraph 3.3.6 and CRC 7.903(c)(7) and must be revised. The trustee cannot appoint another trustee to serve at the pleasure of the appointing trustee. Any appointment, removal, resignation or change of trustee in any manner is subject to Court approval. The trustee cannot delegate its fiduciary duties to others.

Paragraph 4.7 – Trustee’s compensation must be changed. The trustee’s fee must be just and reasonable (and not necessarily based on its written fee schedule), and fixed and allowed by the Court.

Paragraph 8.4 – The purpose of the “special power holder” is unclear. The trust will have its own TIN and will be its own entity for income tax purposes. The trustee cannot borrow, lend money, etc., without prior authorization of this Court. PC 2550, LASC ch. 4 Rule 4.116(b)(4). The beneficiary cannot demand assets from the trust. This negates the purpose of the special needs trust. This section must be deleted.

Hearing on this Petition is continued to _____________, 2014 to permit Petitioner to make the necessary alterations to the Special Needs Trust. Petitioner may opt not to proceed by way of a Special Needs Trust in light of the above; in which case, a new Petition for Approval of Disputed Claim of Minor will be required. If Petitioner decides to proceed with the Special Needs Trust, revised trust documents must be filed and served at least 10 days prior to the continued hearing date. Upon approval of the new trust documents, the trustee will be ordered to post a bond in the amount of the principal plus annual income, and Petitioner will be instructed to open a probate proceeding for the trust by filing a certified copy of the settlement order establishing the trust with the probate Court. LASC ch.4 Rule 4.115(e)(1). This Court also will set a date for (a) the first accounting in the Probate Court approximately 14 months after approval by this Court of the Special Needs Trust, and (b) an OSC thereafter in this Court re proof of the filing of the account in the Probate Court. If such proof is filed in this Court by the OSC date, the matter will go off calendar without an appearance.

IT IS SO ORDERED.