On or about October 8, 2004, petitioner commenced a proceeding pursuant to Article 81 of the Mental Hygiene Law for the appointment of a Guardian for his father, respondent an Alleged Incapacitated Person. The Petition alleged that as the result of a stroke occurring during a routine cardiac catherization, respondent (age 51) was currently residing in PENINSULA HOSPITAL CENTER (Head Trauma Unit), Far Rockaway, New York, in a “minimally responsive condition” and that he required assistance with all activities of daily living. Following a hearing conducted herein, the Court appointed the Petitioner, and his mother as the Co-Guardians for the Personal Needs and Property Management of respondent, an Incapacitated Person, by Order and Judgment dated February 7, 2005.
During the ensuing years, respondent was transferred to PARK TERRACE REHABILITATION AND NURSING CENTER, Corona, New York for further rehabilitation, and ultimately discharged to his residence in Great Neck, New York. At home, the Co-Guardians utilized the assistance of MAXIM HEALTH CARE SERVICES, INC. to provide full-time home health care for him.
A Nassau Visitation Lawyer said that, by Decision and Order dated September 26, 2005, the Court denied an application to transfer to the mother certain property belonging to the Incapacitated Person with leave to renew upon notice to the NASSAU COUNTY DEPARTMENT OF SOCIAL SERVICES, a necessary and interested party to such application. As the Court stated in such Decision and Order, “where the co-guardians seek to transfer investment property and an interest in a business to the community spouse, as well as income, in anticipation of the incapacitated person applying for Medicaid benefits, the local department social services is a necessary party and they should be heard on the issue of such transfers being exempt from any Medicaid penalty period. Cf. Mental Hygiene Law §81.07(g)(1)(v).”
The Co-Guardians subsequently renewed their application on notice to the NASSAU COUNTY DEPARTMENT OF SOCIAL SERVICES for an Order permitting the Co-Guardians to engage in prudent Medicaid planning, and to transfer all of the assets of the Incapacitated Person to his community spouse pursuant to Mental Hygiene Law Section 81.21(b). The assets sought to be transferred consisted of the family residence (held as Tenants-by-the-Entirety); certain investment property consisting of a cooperative apartment and a condominium unit owned by respondent and located in Great Neck, New York; a 25% interest of respondent. in a closely-held family business; a life insurance policy issued by New York Life Insurance Company; the right to receive a monthly stipend; the balance of a jointly-held checking account; and several motor vehicles. In reaching its conclusion to permit the transfer to the community spouse, the Court heldb”A guardian’s authority to transfer the assets of an incapacitated person to another is derived from Mental Hygiene Law §81.21(a)”.
“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’ (.
It was clear to the Court that based upon the care and persistent encouragement which the mother continued to provide to her husband, the financial support which the Incapacitated Person had provided to his family prior to his injury, the ongoing disability of the Incapacitated Person, and the long-term marriage of the parties (in excess of TWENTY-FIVE (25) years), the mother was clearly the “natural object of the bounty of the incapacitated person” and respondent if possessed of the ability to make such transfer, would certainly have desired that his assets be transferred to his wife, to enable her to continue to provide for their family in the marital residence. See Mental Hygiene Law Section 81.21(b)-(e). Accordingly, the transfer of assets as sought in such application was granted by this Court, with no opposition.
Thereafter, the Co-Guardians were successful in settling a medical malpractice action instituted on behalf of respondent in the gross amount of FIVE MILLION ($5,000,000.00) DOLLARS. After payment of attorneys’ fees and disbursements, the balance of funds was distributed as follows: the sum of $1,000,000.00 to the wife in settlement of all claims for her loss of consortium and society; the sum of $200,000.00 to PARK TERRACE CARE CENTER, INC. as and for outstanding facility charges; the sum of $116,581.10 to MAXIM HEALTH CARE SERVICES, INC. as and for home health care services rendered to respondent in his home (and as a result of a lawsuit instituted by said health care agency as against respondent and the wife for unpaid invoices), with the balance of $2,921,303.20 transferred to the guardianship account established hereunder. A surety bond in this sum as surety thereon was filed by the Co-Guardians.
The Co-Guardians now seek authority from this Court to reimburse themselves for individual sums advanced by them and to transfer the sum of $2,121,303.20 (less allowed reimbursements) from guardianship funds to NAHAL Z. as community spouse, thereby leaving a balance remaining of $800,000.00 in the guardianship account(s). Pursuant to the Amended Stipulation and Compromise Order which was “So Ordered” dated November 21, 2008, and issued in connection with the aforesaid medical malpractice action, the within application for such allocation and distribution of the remaining settlement proceeds was permitted to be made before the Guardianship Part.
Throughout this guardianship proceeding, this Court has been impressed by the unwavering devotion of the Co-Guardians to respondent and the wife visited her husband daily while he was a resident of the skilled nursing facility, and went to great lengths to monitor his care and encourage his progress, to be an outspoken advocate on his behalf, and to ensure that every option and/or treatment was considered.
The Court recognizes the taxing nature of an unexpected and devastating incapacity, and fully appreciates the great lengths to which the wife has gone to ensure that her husband was eventually able to return home privately securing additional speech, occupational, cognitive/sensory, acupuncture, and hyperbaric therapies for his benefit, as evidenced by the bills attached to the moving papers. The Court also notes that the wife expended individual funds to purchase a van to ensure the safety and comfort of respondent while being transported; to renovate and modify the home to make such environment handicapped-accessible; to secure the services of home health aides (a portion of which cost (to wit: $116,581.18) was paid from the medical malpractice settlement, as stated hereinabove); and to retain nurse practitioners and nursing assistants to care for her husband. In addition, the wife sought professional counsel in connection with certain Medicaid issues and litigation against the closely-held family corporation. Respondent also expended personal funds for the necessary general household expenses for the family.
The Court declines to reimburse Co-Guardian, the wife for the cost of renovating the house which was previously transferred to her as community spouse pursuant to the Order of this Court dated November 30, 2005. As she received the sum of $1,000,000.00 individually from the settlement of the medical malpractice action, a portion of such sum should be utilized for the modification of the real property that is now titled to her individually.
Finally, with respect the that portion of the application seeking to transfer the remaining medical malpractice assets (with the exception of $800,000.00) to the community spouse, such application is also denied. The Court has considered the previous request and the Decision and Order granting the motion to transfer significant real estate and other assets to the community spouse in order to support her and her family during her husband’s incapacity. The transfer of the remaining malpractice assets, however, does not fall within the same category.
While it is clear that the Co-Guardians are each devoted to respondent and have made certain that his significant needs are being met, the Court is concerned that two different service providers resorted to court intervention in order to receive payment for services rendered, as both the skilled nursing facility and the home health agency had outstanding charges satisfied from the malpractice settlement proceeds. While issues may have existed as to the propriety of the bill from the skilled nursing facility, the amount eventually compromised was, in essence, the outstanding principal amount. Similarly, MAXIM HEALTHCARE SERVICES, INC. had to wait a significant period of time to be paid the balance owed to them, notwithstanding the availability of substantial assets previously gifted to the wife. Therefore, the Court is hesitant to permit the transfer of additional assets of the Incapacitated Person, thus rendering him unable to pay for the cost of his own care and thereby compelling him to rely upon the discretion of others outside the jurisdiction of this Court with regard to the manner of payment and/or the timing thereof.
While the Court is not aware of any case law directly on point, it is clear that the funds allocated to respondent from the medical malpractice action (after payment of attorneys’ fees, his outstanding obligations, and the sum earmarked for the wife ) were intended to and should generally encompass the future needs of the Incapacitated Person and should therefore remain in a vehicle(s) established for his benefit. See e.g., C.P.L.R. 5031(c). Based upon the profound disability of respondent, the cost of full-time assistance and supervision henceforth will be substantial — a factor which was likely contemplated in the course of settling the malpractice action. The monies recovered herein due to injuries sustained by respondent must be treated differently than those assets amassed during the course of the marriage which constituted the subject of the prior application for Medicaid planning. Based upon the genesis of such funds and the presumed intent of the litigants contributing thereto, the remaining funds should be utilized primarily for the continuing care and maintenance of respondent as opposed to being transferred to his community spouse.
Notwithstanding the foregoing, this Court is willing to consider a budget for necessary household expenses (utilities, food, insurance, etc.) and for the cost of supporting the infant child of the parties. Upon receipt and review of such budget, the Court shall consider allocating a certain monthly sum to be used for the benefit of Incapacitated Person and his family.
Alternatively, the Co-Guardians may consider whether the creation and funding of a Supplemental Needs Trust for the benefit of respondent is appropriate and desired. Counsel shall advise Chambers and the Court Examiner in writing as to whether the Co-Guardians wish to establish a Supplemental Needs Trust with guardianship funds, the form of which shall be subject to the prior approval of the Court and on notice to all necessary and interested parties, including the NASSAU COUNTY DEPARTMENT OF SOCIAL SERVICES.
Accordingly, it is ordered, that the Co-Guardians, are hereby authorized and directed to pay from the funds of the Incapacitated Person, the total sum of $431,578.11 to the wife as and for reimbursement for expenditures made from individual funds to or for the benefit of the Incapacitated Person.
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