Superior Court Judge Upholds Her Decision Authorizing The Establishment Of Third Party Special Needs Trusts Within An Intestate Estate

I previously blogged about an Order entered in July 2009 by Hon. Patricia Del Bueno Cleary, J.S.C., a Superior Court Judge in Monmouth County, who granted my motion authorizing my client, the Administrator of his mother’s intestate estate, to (1) establish two Supplemental Benefits Trusts to protect the intestate shares of the estate which passed to the decedent’s two disabled adult daughters, and (2) fund the trusts with the beneficiaries’ intestate shares. Both of the disabled daughters receive needs-based government benefits, and they would have lost their eligibility for the benefits if their intestate shares were distributed outright to them rather than in trust. Judge Cleary established the trusts after concluding that the intent of the deceased parent was to establish Supplemental Benefits Trusts for her disabled daughters had she not passed away first.

The State of New Jersey had opposed my motion, and, after the Court granted the application, filed a motion for reconsideration. On reconsideration, the State argued, among other things, that no trusts should be established in an intestate estate since there was insufficient evidence of the decedent’s intent, and, even if the Court decided to authorize the establishment of the trusts, the disabled children should be directed to repay the State’s Medicaid lien and other State liens before being permitted to fund the trusts. On November 14, 2009, Judge Cleary heard oral argument on the State’s motion for reconsideration. Deputy Attorney General Diana Rosenheim appeared on behalf of the State of New Jersey, and I appeared on behalf of the applicant, the Administrator of the intestate estate. Judge Cleary denied the State’s motion for reconsideration, and dictated a superb bench opinion providing her reasons for the denial. The Order denying the State’s motion for reconsideration is annexed here – Judge Cleary’s Order denying reconsideration

Although Ms. Rosenheim told me that the State may appeal to the Superior Court, Appellate Division, I believe that the Court had a solid legal basis for the decision, and that it will be upheld, if an appeal is filed.

UPDATED ON JANUARY 24, 2011: My prediction proved to be flat wrong. The State did appeal Judge Cleary’s decision, but rather than being upheld as I predicted, the Superior Court, Appellate Division reversed. The appellate court ruled that  the trial court had no authority to establish and fund the trusts under the doctrine of probable intent because “the doctrine of probable intent is a rule of construction or interpretation and, therefore, presupposes an existing testamentary disposition . . . [w]here there is no will there can be no will construction.” I blogged about the appellate court decision here.