Opinion
27771-I-04
8-13-2009
IN THE MATTER OF THE APPOINTMENT OF DAVID J.Z. AND NAHAL Z., AS CO-GUARDIANS FOR THE PERSONAL NEEDS AND PROPERTY MANAGEMENT OF v. EMIL Z., AN INCAPACITATED PERSON.
On or about October 8, 2004, DAVID J. Z. commenced a proceeding pursuant to Article 81 of the Mental Hygiene Law for the appointment of a Guardian for his father, EMIL Z., an Alleged Incapacitated Person. The Petition alleged that as the result of a stroke occurring during a routine cardiac catherization, EMIL Z. (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, DAVID J. Z., and his mother, NAHAL Z., as the Co-Guardians for the Personal Needs and Property Management of EMIL Z., an Incapacitated Person, by Order and Judgment dated February 7, 2005.
During the ensuing years, EMIL Z. 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 EMIL Z.
By Decision and Order dated September 26, 2005, the Court denied an application to transfer to NAHAL Z. 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 EMIL Z. and located in Great Neck, New York; a 25% interest of EMIL Z. 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 held
"A guardian's authority to transfer the assets of an incapacitated person to another is derived from Mental Hygiene Law §81.21(a)" In re Burns, 267 AD2d 755, 699 NYS2d 242 [3rd Dept. 1999] appeal after remand 287 AD2d 862. "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 In re Shah, 95 NY2d 148,159 (2000), a case involving interspousal transfers for Medicaid planning, the Court of Appeals held that:
In determining whether to approve a specific application for a transfer of assets, the court shall consider several factors, including: "whether the donees or beneficiaries of the proposed disposition are the natural objects of the bounty of the incapacitated person and whether the proposed disposition is consistent with any known testamentary plan or pattern of gifts" ( Mental Hygiene Law §81.21[d][4]); and "whether the proposed disposition will produce estate, gift, income or other tax savings which will significantly benefit the incapacitated person or his or her dependents" ( Mental Hygiene Law §81.21[d][5]). Considering these factors, a court may grant the application if satisfied by clear and convincing evidence that, among other things, "a competent, reasonable individual in the position of the incapacitated person would be likely to perform the act or acts under the same circumstances" ( Mental Hygiene Law §81.21[e][2]). We agree with the common sense verity uttered by the Appellate Division that the transfer here was properly authorized because "[t]here can be no quarreling with the Supreme Court's determination that any person in Mr. Shah's condition would prefer that the costs of his care be paid by the State, as opposed to his family" (citation omitted).
It was clear to the Court that based upon the care and persistent encouragement which NAHAL Z. 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), NAHAL Z. was clearly the "natural object[] of the bounty of the incapacitated person" and EMIL Z., if possessed of the ability to make such transfer, would certainly have desired that his assets be transferred to his wife, NAHAL Z., 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 EMIL Z. 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 NAHAL Z. 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 EMIL Z. in his home (and as a result of a lawsuit instituted by said health care agency as against EMIL Z. and NAHAL Z. for unpaid invoices), with the balance of $2,921,303.20 transferred to the guardianship account established hereunder at MERRILL LYNCH. A surety bond in this sum with BERKLEY REGIONAL INSURANCE COMPANY 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" by the Hon. Edward W. McCarty, III, J.S.C., 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 EMIL Z. NAHAL Z. 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. DAVID J. Z., too, has shown great commitment to his father — in essence, postponing his budding career to ensure his availability to assist with his father's continuing needs.
The Court recognizes the taxing nature of an unexpected and devastating incapacity, and fully appreciates the great lengths to which NAHAL Z. 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 NAHAL Z. expended individual funds to purchase a van to ensure the safety and comfort of EMIL Z. 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, NAHAL Z. sought professional counsel in connection with certain Medicaid issues and litigation against the closely-held family corporation. DAVID J. Z. also expended personal funds for the necessary general household expenses for the family.
The Co-Guardians each request reimbursement of such expenditures, and further request that the balance of the malpractice settlement (with the exception of $800,000.00) be transferred to NAHAL Z., as community spouse, thereby constituting a Medicaid exempt transfer. The Co-Guardians contend that the sum to remain in the guardianship account(s), to wit: $800,000.00, would be sufficient to care for the Incapacitated Person for a period of FIVE (5) years.
In reviewing the requests for reimbursement, it is clear that individual (non-guardianship) funds were expended by NAHAL Z. for the direct benefit of EMIL Z. as follows:
(1)The cumulative sum of $87,337.00 for various therapies while he was residing at PARK TERRACE REHABILITATION AND NURSING CENTER during the period from February 7, 2005 through November 14, 2007. EMIL Z. was provided with cognitive/sensory therapy [August 6, 2006 through October 6, 2006]; hyperbaric oxygen therapy [April 2, 2007 through October 18, 2007]; acupuncture [March 1, 2006 through February 23, 2007]; occupational therapy [March 2, 2006 through November 12, 2007], and speech therapy for dysphasia [December 21, 2005 through September 20, 2007];
(2)The sum of $156,645.00 to PARK TERRACE REHABILITATION AND NURSING CENTER on account of the cost of care and room and board for EMIL Z. from February 7, 2005 through November 14, 2007, which sum was paid between June 20, 2006 and October 26, 2007. The balance owed to such facility was paid as part of the medical malpractice action settlement as stated hereinabove (to wit: $200,000.00);
(3)The sum of $46,594.86 to MAXIM HEALTHCARE SERVICES, INC. representing the difference between the amount billed ($163,176.04) and the amount paid as part of the medical malpractice action settlement (to wit: $116,581.18) for full-time home health aide assistance for EMIL Z. during the period from November 19, 2007 and May 31, 2008;
(4)The sum of $29,721.25 for the purchase of a Ford E250 van to transport EMIL Z. to various appointments. The Court notes that the family does own other motor vehicles; and
(5)The sum of $111,280.00 paid to licensed nurse practitioners and nurse assistants to assist with EMIL Z.'S care at home during the period from June 7, 2008 through February 28, 2009.
In reviewing copies of the Annual Reports and Accounts of the Co-Guardians for calendar years 2005 and 2006, the Court finds that these expenses do not appear to be duplicative. Accordingly, it is the decision of this Court that these expenditures totaling the sum of $431,578.11 should be reimbursed to the Co-Guardian, NAHAL Z., from the assets of the Incapacitated Person, EMIL Z.
Similarly, in preliminarily reviewing the aforesaid accountings, it appears that DAVID Z. advanced from his personal funds the total sum of $63,583.15 to assist with the care and maintenance of his father and the payment of certain household expenses, and for which he appears to have been reimbursed the sum of $ 15,000.00. Notwithstanding further review by the Court Examiner and any adjustments required after analyzing the Annual Reports and Accounts through calendar year 2008, the Co-Guardians may reimburse DAVID J. Z. at the present time in the total sum of $45,000.00 from the assets of the Incapacitated Person.
The Court declines to reimburse Co-Guardian, NAHAL Z., 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 NAHAL Z. 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.
Further, the issue of reimbursement of attorneys' fees paid to FREDERICK J. KRAMER, ESQ. for legal services rendered between March 31, 2008 and April 7, 2009; to COFFINAS & COFFINAS, LLP as specified in the written communication dated March 18, 2009; and THOMAS A. SIPP, ESQ., as detailed in the time sheets covering the period from October 10, 2005 through March 5, 2009 as attached to the moving papers, is denied without prejudice. It is the practice of this Court to have attorney fee requests reviewed by the Court Examiner, who then makes recommendations concerning same as part of his or her review of the Annual Reports and Accounts. In the present case, the Court Examiner shall review the various fee requests for services rendered by counsel, and shall make recommendations as to which such services directly benefitted EMIL Z. and the amount of the fees which the Court should allow to be paid from the funds of the Incapacitated Person for same. It should be noted that the Court is disinclined to reimburse the costs of litigation incurred in connection with the family-held corporation, as the ownership interest of same was previously permitted to be transferred to NAHAL Z. as community spouse.
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 EMIL Z. 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 NAHAL Z. 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 EMIL Z. from the medical malpractice action (after payment of attorneys' fees, his outstanding obligations, and the sum earmarked for NAHAL Z.) 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 EMIL Z., 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 EMIL Z. 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 EMIL Z. 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 EMIL Z. 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, DAVID J. Z. and NAHAL Z., are hereby authorized and directed to pay from the funds of the Incapacitated Person, the total sum of $431,578.11 to NAHAL Z. as and for reimbursement for expenditures made from individual funds to or for the benefit of EMIL Z., the Incapacitated Person; and it is further
ORDERED, that the Co-Guardians, DAVID J. Z. and NAHAL Z., are hereby authorized and directed to pay from the funds of the Incapacitated Person, the total sum of $45,000.00 to DAVID J. Z. as and for reimbursement of expenditures made from individual funds to or for the benefit of EMIL Z., the Incapacitated Person; and it is further
ORDERED, that the Co-Guardians shall submit to the Court and the Court Examiner a proposed budget containing expenses anticipated for sustaining the household and supporting the infant child of EMIL Z. and NAHAL Z.; and it is further
ORDERED, that within THIRTY (30) DAYS of the date hereof, the Co-Guardians shall submit their Annual Report and Account for calendar year 2008, if not already accomplished; and it is further
ORDERED, that within SIXTY (60) DAYS of the date hereof, the Court Examiner, GUY R. VITACCO, JR., ESQ., shall submit to the Court his Report as Court Examiner covering the accounting periods through December 31, 2007. As a part of such review, the Court Examiner shall review the sums advanced by and reimbursed to DAVID J. Z., and shall make recommendation as to whether any additional funds are due to him; and it is further
ORDERED, that in all other respects, the motion is denied.
The foregoing constitutes the Decision and Order of the Court.