Opinion
2196/2002.
Decided September 21, 2006.
Andrew Rosner, Esq., Garden City, New York, Attorney for Petitioner.
Blaise F. Parascandola, Esq., Brooklyn, New York, Guardian ad Litem for Dalanna Bailey, minor child
The action relating to decedent's wrongful death and conscious pain and suffering was settled before trial for the sum of $400,000.00. The entire amount is allocated to the wrongful death action. The compromise is approved, the restrictions in the letters of administration are removed, and the administrator is authorized to consent to the settlement and issue general releases. Distribution shall be made pursuant to the terms of the structured settlement more specifically outlined in the papers submitted.
The decedent died of injuries resulting from medical malpractice, consisting of an overdose of morphine in the hospital. The decedent's mother, Loretta Bailey, the petitioner herein, commenced an action as administrator of her daughter's estate. The sole distributee of the estate is decedent's three year old daughter, Dalanna Loretta Bailey.
The defendants have offered $400,000.00 to settle the claims in full. The terms of the structured portion of the offer with the proposed allocation of the net proceeds was submitted. Petitioner requests that all of the proceeds be allocated to the wrongful death claim and that the claim for conscious pain and suffering be discontinued and also waives any claim for commissions.
The proceeds shall be paid as follows:
1) To the attorneys the sum of $114,818.77 pursuant to Judiciary Law § 474 inclusive of disbursements, for all services rendered through distribution including the appointment of a guardian and the deposit of the infant's up front monies in a guardian account jointly held with the clerk of the court.
2) To petitioner, the sum of $9,524.60 for reimbursement of funeral expenses.
3) The balance of the proceeds shall be paid to decedent's daughter, Dalanna Loretta Bailey based upon pecuniary loss (E.P.T.L. § 5-4.4).
Petitioner proposes that the majority of the net proceeds be used to purchase an annuity. Said annuity would provide guaranteed payments by Prudential Insurance Company of America, having an A+ rating (Superior) and a financial rating of "XV" ($2 billion or more) to the infant distributee commencing at age 18 with the last payment at age 53. After a conference before the court, petitioner submitted a proposed annuity with the cost of the annuity being $247,500.00. Additionally, the approximate sum of $28,000.00 up front monies will be deposited for the benefit of the infant, to be administered by the guardian of the property jointly with the clerk of the clerk. By this means, the infant distributee will avoid investment risk, yet she will still be assured of receiving funds to assist in paying for college by commencing payment of the annuity promptly at age 18. As so structured, the settlement would further benefit the infant distributee by providing an average annual rate of return of approximately 5.44% free of tax. The proposed annuities yield a far greater amount than paying the balance outright to the infant distributee.
The proposed allocation if the proceeds are placed in a bank account would yield $247,500.00, plus interest taxable to the infant distributee.
However, in reviewing the proposed distributions applied to the structured settlements, the distributions would yield $711,587.87 for the infant distributee.
The guardian ad litem filed his report whereby he stated that not only did he have no objection but recommended the structured settlement for his ward. Pursuant to petitioner's proposed structured settlement, the infant child would receive amounts substantially greater than she would have received had the funds been deposited in bank accounts.
The Supreme Court is empowered to approve or disapprove a wrongful death action, EPTL § 5-4.6 (a) (1). The statute also empowers a transfer of the matter to Surrogate's Court to determine the issues of allocation and distribution of proceeds and related matters after the compromise has been approved. The Surrogate's Court is particularly suited to administer the proceeds of an approved settlement and is the preferred forum, as all parties interested in the estate such as creditors, distributees and the Tax Commission are before the Surrogate's Court and have an opportunity to be heard (9A Rohan, NY Civ Prac ¶ 5-4.6 (1). Surrogate's Court has concurrent power to approve wrongful death settlements ( Pollicina v. Misericordia Hospital Medical Center, 82 NY2d 332).
An agreement of the parties was reached through settlement evidenced by a letter contained in the moving papers whereby, after brief negotiations, the plaintiffs accepted defendants' offer. The Surrogate's Court has complete control of any proposed compromise of the wrongful death action, except one that is reached by the parties during the pendency of a Supreme Court action with the approval of a Justice thereof and upon which a judgment or appropriate order is entered (37 NY Jur 2d Death § 551). EPTL § 5-4.6; SCPA § 2204 requires a personal representative make an application to the court to approve the amount of damages proposed. When no action is pending, the application for compromise and allocation is made to the Surrogate's Court and in those cases the Surrogate's Court is permitted to approve the settlement amount (15 NY Prac, NY Law of Torts § 15:25; Pollicina, 82 NY2d 332, supra).
Petitioner, the administrator of decedent's estate, requests that this court allow her to settle and compromise the causes of action for wrongful death, to settle her account and permit her to distribute those proceeds and to fix and allow attorney's fees and disbursements.From the papers presented, the proposed compromise is in the best interests of the infant.
A structured settlement annuity is quite similar to a tax free municipal bond, in that it represents a tax free stream of income in the future ( Kelner and Kelner, Cashing Out Structured Settlements, NYLJ, Sept. 28, 1999, at 3, col 1). The tax free nature of the structured settlement makes this form of settlement very attractive as opposed to a taxable savings bank deposit, and there is rarely a need to have funds available before the child reaches 18. The approximate sum of $28,000.00 in up-front monies have been made available for the infants' immediate needs, if any. Generally, a guardian has the custody and control of the infant's person only with no control over the infant's real or personal property (6 NY Jur 2d, Infants § 125). "That is to say, a natural guardian has no authority to act on behalf of the ward in respect to the ward's property; parenthood or" guardianship by nature" confers no right to intermeddle with the property of the infant, but is a mere personal right in the parents to the custody of the person of the child until the child attains majority." ( ibid.) The natural guardian, often a parent, does not have the right to manage large property interests suddenly acquired even though they generally make decisions about the management of a child's property ( ibid.; Matter of Mede, 177 Misc 2d 974). Given the minor's entitlement to a substantial sum, parents cannot manage the funds without court approval and scrutiny, (SCPA § 2220).
It is common in personal injury and wrongful death actions for the law firm representing the child's interest in the litigation to arrange an appropriate mechanism for the management and disbursement of settlement funds. Section 1201 of the CPLR authorizes a guardian of the property to appear for an infant in litigation and is distinguished from a guardian ad litem (Siegel, NY Prac § 196 [3rd ed]).
The GAL appointed to represent the infant recommended approval of a structured settlement as that set forth in the amended petition with payments to begin when the infant attains the age of majority, more specifically detailed in the petition (e.g. Estate of Auston, NYLJ, Feb. 21, 2000, at 27, col 4). The balance of the net proceeds, representing upfront monies to the infant, shall be made payable to the guardian of the infant's property jointly with the Clerk of the Court.
The use of most of the proceeds to purchase deferred benefits commence on the ward's attaining the age of 18 (e.g. Estate of Carrero, NYLJ, May 14, 2002, at 20, col 2). In the situation in Matter of Mede, 177 Misc 2d 974, supra, where there was heightened concern where a father had appointed himself trustee for his children's assets, the court disallowed the trust. However, those were unusual circumstances not present here ( e.g. Daiger v. Bank of New York, 2001 WL 579741, [SD NY, May 30, 2001]). In that case, the father had access to his children's funds past the age of majority, did not have to account to anyone, and wanted to treat the proceeds as if it were his own money. He sought to invest it in all forms of investment whether or not they were prudent. There it was particularly egregious in that the father supplanted the infant's money for his own. In the case herein, the issuer is rated in Best's Insurance Guide as having an "A+" (Superior) rating.
As a general rule, structured settlements are routinely done by all courts and are purchased for the infant even if it is not a condition of settlement. The structure can be bought by either the plaintiff or the defendant from the settlement funds. In the case herein, the proposed annuity purchased allows a continuous guaranteed stream of money past the age of majority (SCPA § 2220(5)). In fact throughout the years, surrogates have not raised any objection to the concept of structured settlements for infant plaintiffs or beneficiaries yet some courts reached different results with no apparent rational basis for distinction causing the legislature to enact SCPA § 2220(5) specifically to let the courts know that the legislature has authorized such settlements, (McKinney's 1988 Session Laws, Law Review Commission, Leg. Doc. (1988) No. 65 [N]). CPLR § 1206 and SCPA § 2220 deal with the power and duty of the court to provide for the best interests of the infants and make a determination in the exercise of its sound discretion.
The petitioners' application for leave to settle and compromise the cause of action arising out of the circumstances resulting in the wrongful death of the petition is, therefore, granted and the proceeds shall be used to purchase annuities as outlined herein and more specifically detailed in the papers submitted.
Compensation of the guardian ad litem is fixed in the sum of $_________________.
Settle decree.