Posts Tagged ‘Hamilton v. Laine’

Special Needs Trust Created Too Late; Funds Go To State


Virgil Lamont Hamilton, a California child, was injured in a tragic swimming pool accident in 1982. Hamilton suffered severe brain damage, and will require total care and extensive medical treatment for the rest of his life. Since the accident, Hamilton has lived in a California state institution, Agnews Developmental Center.

Attorneys for Hamilton brought suit against the swimming pool owner and, in 1984, settled the case. The result of the settlement was that $400,000 was placed into a “medical trust fund” for Hamilton’s benefit, and an annuity was purchased with an additional $100,000. The annuity payments were structured to begin in 1992.

Immediately upon completion of the settlement, Hamilton lost his eligibility for California’s Medicaid program (Medi-Cal). The state Department of Developmental Services stepped in and provided Hamilton’s care, but brought an action against the trustees of the medical trust fund. The result of that action was an order, entered in 1989, directing that the remaining funds in the trust account be paid to the state. Upon exhaustion of the trust account, Hamilton once again qualified for medical assistance through Medi-Cal, and the health care program once again began paying for his medical care.

In 1992 the annuity payments began to arrive. Initially, Hamilton received $5,000 per month. Medicaid/Medi-Cal recipients are required to pay most of their income (minus a small personal needs allowance, in most cases) toward their own medical care, and so Medi-Cal demanded that the entire annuity payment be delivered to the Agnews Developmental Center each month. The result: Hamilton received the same care he would have received if he had not settled his personal injury action, and the proceeds provided no additional care, equipment, therapy or other benefits.

Hamilton’s mother thought she saw a way to benefit her son. In 1995, she asked the California courts to restructure his “medical trust fund,” and the annuity payments, and to effectively create what is usually called a “special needs trust.” With such a trust arrangement, the annuity payments could be used for Hamilton’s extra needs–the types of things not provided by Medi-Cal which might improve his quality of life. Unfortunately, the state’s payments for Hamilton’s care by this time had exceeded $250,000 and the Department of Developmental Services opposed the funding of the special needs trust unless the Department was first reimbursed for those payments.

Hamilton’s mother asked the California court to approve the special needs trust as if it had originally been established when the lawsuit was settled in 1984. She asked the court to enter the order nunc pro tunc–as if that had been the original order of the court, but a clerical error had been made in the entry of the formal order. The trial court agreed, saying that it was rectifying “the court’s [earlier] failure to establish a properly drafted trust.” The Department appealed.

The California Court of Appeals reversed the nunc pro tunc order. Saying that the use of such a process is limited to truly clerical errors, and not to remedy judicial mistakes, the judges refused the request to modify Hamilton’s trust fund. Hamilton v. Laine, September 16, 1997.

What does the Hamilton case have to do with elder law? Many Medicaid recipients are elderly, and a disproportionate portion of nursing home residents are aged. Those who have been injured (or who inherit money) may find that they receive no benefit from their settlement unless a properly drafted special needs trust is established at the time. Competent legal assistance is essential for institutionalized personal injury plaintiffs of any age.

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