Matter of Ivan Gutierrez

Case Number

23PR00389

Case Type

Hearing Date / Time

Tue, 09/19/2023 - 09:00

Nature of Proceedings

Minor's Compromise

Tentative Ruling

Probate Notes:

Appearances required, including the minor. (CRC 7.952.)

The following must be submitted before petition may be approved:

1) Adequate documentation that the minor has fully recovered, or is expected to fully recover from his injuries.  The attachments supporting the allegation at paragraph 8 of the petition do not support a finding that the minor will fully recover.  It is insufficient to attach only the initial medical records. Please submit a current prognosis from the most recent visit to a medical provider.

2) Adequate evidence of sufficient investigation into the solvency of the settling defendant above the policy limits of the settling insurance company.  There are no facts alleged that defendant cannot meet a judgment past the policy limits.

3) New proposal for structured settlement, or further briefing.  The petition to approve the claim of a minor prays for authority to use the balance of the proceeds of the settlement to invest in a structured settlement annuity with payments to the minor to commence when the minor becomes an adult.  It is the policy of this court to place funds in a blocked account.  (Local Rule 1735—“Absent a showing of good cause, it is the policy of the Court to order all funds disbursed to a minor be deposited into a blocked account.”)

While the petition is marked at item 18b(1) as a request that a guardian of the estate be established, when the attachment in support of this request shows a structured settlement annuity that will pay out for 4 years after the minor turns 18. 

Although a structured settlement annuity may be the preferred option when the remaining balance is a significant amount, and where sufficient time remains before the minor reaches the age of majority so that the annuity is a prudent investment, the legal authority of this court to order such relief is questionable at best.

The funds under consideration belong to the minor. They do not belong to the parent, the guardian ad litem, or the court. While the minor may currently lack legal capacity to control the property, it still belongs to the minor. “Juveniles are entitled ‘to acquire and hold property, real and personal’ (Estate of Yano (1922) 188 Cal. 645, 649); and ‘a minor child's property is his own . . . not that of his parents.’ (Emery v. Emery (1955) 45 Cal.2d 421, 432; see also Civ.Code, §202.” (In re Scott K. (1979) 24 Cal.3d 395, 405.) The Civil Code §202 cited in Scott K. is now Family Code §7502 (“The parent, as such, has no control over the property of the child.”) 

While the Court understands the desire of the parent or guardian ad litem to maximize the return on investment, or to prevent an immature 18-year-old from squandering funds, those considerations are subservient to the autonomy that the claimant/minor will have once the age of majority is reached. When viewed as a whole, the statutory scheme for managing property belonging to a minor is to protect the property during minority, and to give it to the owner upon attainment of majority. That legislative intent is made clear in Sections 3612 and 3613, where the legislature limited the court’s jurisdiction to make orders controlling the property of a person over the age of 18 who is not disabled.   

Minor’s Compromise petitions are both required and governed by §3600, et seq., of the Probate Code. Section 3602 governs the disposition of what remains after the Court orders the payment of expenses, costs, and fees (Prob. Code §3601.) As with all protective proceedings, the goal is the best interest of the person to be protected, but the protection of those best interests must be done within the structure provided by the Probate Code. 

In the case of money or property paid or delivered pursuant to compromise or judgment for minor or disabled person, the code provides several options. Each of those options makes the minor’s property available to the minor upon the age of majority. 

Guardianship of the Estate: 

One alternative, of course, is the establishment of a guardianship of the estate of the minor. (Prob. Code §1500, et seq.) Where there is a guardianship of the estate, the court may order the property into the guardianship estate, or may order it to be managed in another manner described in §3602. Those other alternatives mirror §3611’s alternatives. A guardianship of the estate automatically terminates by operation of law “when the ward attains majority.” (Prob. Code §1600(a).) 

Blocked Accounts: 

If no guardianship of the estate is established, §3611 provides an exclusive list of available alternative options. Among those is an order to deposit the funds “in an insured account in a financial institution in this state….” (Prob. Code §3611(b).) Those funds belong to the minor, and are to be paid to the minor without further court order when the minor reaches majority.   

Single-Premium Deferred Annuities: 

Another alternative is for the court to authorize the purchase of “a single-premium deferred annuity.” (Prob. Code §3611(b).) A “Single-Premium Deferred Annuity,” in this context, is defined by statute. Probate Code §1446 provides:  

“’Single-premium deferred annuity’ means an annuity offered by an admitted life insurer for the payment of a one-time lump-sum premium and for which the insurer neither assesses any initial charges or administrative fees against the premium paid nor exacts or assesses any penalty for withdrawal of any funds by the annuitant after a period of five years.” 

While Section 1446 does not specify that the annuitant has access to the funds at the age of 18, the practical effect is not significantly different. It is seldom financially advantageous to purchase an annuity if the payout is fewer than five years away, making annuities generally a less desirable alternative for a minor over the age of 13. The result would be that the minor has full access to those funds at age 18.  

Furthermore, the annuity allowed under Section 3611(b) is far less restrictive than the typical structured settlement annuity (SSA). The SSA simply does not allow the annuitant access to the funds except as allowed by the structure imposed in the annuity contract. The danger of a young adult selling a structured annuity for pennies on the dollar is substantial, because that young adult’s parents or guardian ad litem decided years ago to restrict the annuitant’s access to their own money.  

Special Needs Trust: 

The only exception in Section 3611 to the statutory scheme that the minor shall gain full control over the balance is when a Special Needs Trust is established pursuant to Probate Code §3611(c). Strict controls are provided for the establishment, use, and supervision of Special Needs Trusts. 

Discretionary Disposition of Moderate Amounts: 

When the remaining balance of the money is $20,000 or less, the Court has discretion to order it to be “held on any other conditions the court in its discretion determines to be in the best interest of the minor…” (Prob. Code §3611(d).) By including this section with this particular language the legislature makes clear that a general “best interest” analysis is only available for these limited amounts. To go outside the statute, even though the Court might consider it a better alterative, is in contradiction to the statutory scheme. 

Settlement Trust: 

The code allows the court to order the transfer of the balance to the trustee of a trust established for that purpose – a settlement trust. Such a trust must be revocable by the minor upon attaining 18 years of age. (Prob. Code §3611(g).) 

Deposit with County Treasurer: 

Finally, the funds may be ordered deposited with the county treasurer for safekeeping and possible investment under the conditions contained in the statute. (Prob. Code §3611(h).) 

Each of the alternatives provided for by statute for the disposition of funds belonging to a minor requires complete access immediately upon the minor attaining adulthood. Those authorities in the aggregate create a statutory scheme whereby the legislature has clearly shown its intent to respect the autonomy of the claimant once the claimant becomes an adult.

Please also submit a Proposed Order to Deposit Money Into Blocked Account (MC-355).

Appearances:

The court is open to the public for court business. The court is also conducting hearings via Zoom videoconference.

Meeting ID: 160 543 3416

Passcode: 5053334