Surrogate's Court in New York Reforms Will to Allow Disabled Beneficiary to Obtain Benefits of a Supplemental Needs Trust

In a probate case entitled In the Matter of the Estate of Rose Rappaport, 866 N.Y.S.2d 483 (Sur. Ct. Nassau County, September 29, 2008), the decedent was survived by four adult children, one of whom was disabled.  A guardian ad litem was appointed for the child with a disability.  A trust was created under Article Four of the decedent’s Will, providing for income to be paid to the disabled child, and leaving discretion with the trustee to distribute principal to the disabled child for health, support and maintenance.  The Will failed to nominate any trustees of the Article Four trust, so the three remaining children petitioned the court to become appointed as trustees and to convert the Article Four trust into a supplemental needs trust.  Although no Medicaid benefits were being provided, the New York State Department of Health (DOH) opposed the conversion of the Article Four trust into a supplemental needs trust, arguing that the Will postdates the enactment of EPTL Section 7-1.12, the statute that authorizes the establishment of supplemental needs trusts for individuals with severe and chronic or persistent disabilities.  DOH also argued that the decedent directed the trustees to provide for the disabled child with a “lifestyle that would provide for her standard of living which she had enjoyed during [the decedent’s] lifetime.”  DOH cited Matter of Rubin, 4 Misc.3d 634, 781 N.Y.S.2d 421 (Sur. Ct., New York County 2004), which involved two legal proceedings wherein the court determined that reformation is available to correct mistakes, but “not… to change the terms of a trust to effectuate what the settler would have done had the settler foreseen a change of circumstances that has occurred.”

The court concluded that reformation of the trust was warranted in this case inasmuch as the ccourt application met the criteria first enunciated in Matter of Escher, 94 Misc.2d 952, 407 N.Y.S.2d 106 [Sur. Ct. Bronx County 1978], affd. sub. nom., and later in EPTL Section 7-1.12.  In reaching this conclusion, the court relied on Article Eight in the Will, which directed that the trust “shall not in any way jeopardize any monies that she is now receiving from any government agency or that she will be entitled to receive after my death.”   The court in this case declined to follow the restrictive analysis set forth in the Rubin case cited above.

I recently became aware of the Rappaport case from an email alert sent to members of the Elder Law Section of the NY State Bar Association and The New York Probate Litigation Blog, published by my New York colleague Philip Bernstein, Esq. Philip represented the petitioner and co-executor in the Rappaport case, Irwin E. Rappaport, and argued successfully in favor of reformation of the testamentary trust in the decedent’s will. Good work, Philip!

I blogged about the successes New Jersey attorneys have had in their efforts at persuading courts in New Jersey to reform testamentary instruments so as to protect disabled beneficiaries previously here. I also blogged about cases in which courts agreed to establish special needs trusts in intestate estates here.