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In re Estate of Woolworth

June 11, 2010


Appeal from an order of the Surrogate's Court, Oswego County (John J. Elliott, S.), entered August 25, 2009. The order, insofar as appealed from, denied that part of the petition seeking approval of a supplemental needs trust.

The opinion of the court was delivered by: Green, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.


It is hereby ORDERED that the order insofar as appealed from is unanimously reversed on the law without costs and the petition is granted in its entirety.

Petitioner, as administratrix of the estate of her husband, Ronald Woolworth (decedent), commenced this proceeding seeking, inter alia, an order confirming the settlement of an action seeking damages for decedent's wrongful death and conscious pain and suffering, and approving petitioner's proposed distribution of the proceeds of that settlement. Surrogate's Court granted the relief sought in the petition, with the exception of the proposal that the Surrogate approve a supplemental needs trust (SNT) funded by petitioner's entire share of the net proceeds of the settlement. We conclude that the Surrogate should have granted the petition in its entirety, thereby approving the proposed SNT for the benefit of petitioner, who without dispute is a disabled person eligible for an SNT.


Decedent died intestate on March 15, 2006, survived by petitioner and two adult daughters. Pursuant to SCPA 702 (1), the Surrogate granted petitioner limited letters of administration to prosecute a cause of action in decedent's favor for wrongful death and/or conscious pain and suffering. She thereafter commenced an action alleging negligence and medical malpractice against physicians who treated decedent and the medical facility where he sought treatment in the months preceding his death. That action settled before trial for $737,500. Supreme Court authorized the settlement and ordered that the balance remaining after payment of attorney's fees, disbursements and uncovered medical expenses was payable to petitioner as administratrix of decedent's estate.

The balance, which was the amount of $516,876.60, constituted decedent's entire estate. Pursuant to EPTL 4-1.1 (a) (1), petitioner's share was calculated to be $283,438.30 and each daughter's share was calculated to be $116,719.15. Petitioner thereafter sought, inter alia, permission to distribute the shares of the daughters directly to them, and to have her entire share deposited into an SNT. After the petition was filed, the Surrogate and petitioner's attorney exchanged correspondence concerning the proposed SNT. The attorney explained in a letter to the Surrogate that petitioner receives benefits from the Oswego County Department of Social Services (DSS), and she did not want her inheritance to affect her eligibility for such benefits. The attorney also forwarded to the Surrogate a "Waiver and Consent" executed by DSS consenting to the establishment and terms of the proposed SNT. The Surrogate responded in a letter stating, inter alia, that, "[w]hile [he] underst[ood] the underlying reason for the request, the present sheltering of available resources' and payback to the government providers only a future possibility, [he could] not in good conscience approve the transfer of the entire balance[, i.e., petitioner's intestate share] to [an SNT]." The Surrogate further stated that he was willing to approve an SNT funded with only $100,000 of petitioner's share, and he would add a provision for an annual accounting to the proposed trust instrument. In response, petitioner's attorney agreed to add the annual accounting provision but would not consent to the Surrogate's proposed limitation of $100,000 to fund the trust because that limitation would effectively render petitioner ineligible for Medicaid. In his final correspondence with petitioner's attorney concerning the SNT, the Surrogate wrote: "In the end, I believe that I have a responsibility to the public fisc that takes priority. I recognize that to have someone pay from their own resources when somehow, [some way] we can get the government' to pay is an old-fashioned thought but it is a thought that I agree with." The Surrogate further stated that, "[i]f [his] only choice is to establish a trust with the entire amount or to decline the request [his] inclination would be the latter."

Consistent with that "inclination," the Surrogate denied the petition to the extent that it sought the approval of an SNT funded by petitioner's entire share of the net proceeds of the settlement. We now conclude that the order insofar as appealed from should be reversed and the petition granted in its entirety.


An SNT "is a discretionary trust established for the benefit of a person with a severe and chronic or persistent disability' (EPTL 7-1.12 [a] [5]) that is designed to enhance the quality of the disabled individual's life by providing for special needs without duplicating services covered by Medicaid or destroying Medicaid eligibility" (Cricchio v Pennisi, 90 NY2d 296, 303; see Matter of Abraham XX., 11 NY3d 429, 434). It is a planning device authorized by federal and state law to shelter the assets of a severely disabled person "for the dual purpose of securing or maintaining eligibility for state-funded services, and enhancing the disabled person's quality of life with supplemental care paid by his or her trust assets" (Abraham XX., 11 NY3d at 434). The SNT is designed to "address[ ] the unique and difficult situation faced by severely disabled individuals with assets that are sufficient to end their Medicaid eligibility but insufficient to account for their medical costs" (id. at 437).

Under the pertinent statutes, 42 USC § 1396p (d) (4) (A) and Social Services Law § 366 (2) (b) (2) (iii) (A), neither the corpus nor the income of an SNT is considered a resource or income available to the disabled trust beneficiary (see Abraham XX., 11 NY3d at 435; Cricchio, 90 NY2d at 303; Matter of Kennedy, 3 Misc 3d 907, 909-910; Matter of Goldblatt, 162 Misc 2d 888, 889; see also 18 NYCRR 360-4.5 [b] [5] [i] [a]).

Such favorable treatment is extended to an SNT as long as the trust documents are in conformance with the requirements of EPTL 7-1.12 (a) (5) (see Cricchio, 90 NY2d at 303), as well as the applicable regulations of the Department of Social Services (see Social Services Law § 366 [2] [b] [2] [iii], [iv]). In addition, an SNT is exempted from the general rules governing available resources and Medicaid eligibility when the recipient is "disabled," as that term is defined in the Social Security Act (42 USC § 1382c [a] [3]), and the SNT contains "[t]he assets of such a disabled individual which was established for the benefit of the disabled individual while such individual was under sixty-five years of age by a parent, grandparent, legal guardian, or court of competent jurisdiction, if upon the death of such individual the state will ...

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