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COA reversal: Total settlement must fund special-needs trust

July 26, 2018

The Indiana Court of Appeals found a trial court exceeded its authority and made errors of law when it ordered only $1 million into a special needs trust after a settlement of more than $17 million. 

In 2013, then-42-year-old Timothy Robbins sustained catastrophic, permanent injuries when he was  side-swiped by a semitruck, resulting in Timothy being ejected from his vehicle. As a result of the accident, he sustained a devastating traumatic brain injury, multiple skull and facial fractures, and additional serious injuries. He now permanently resides in a nursing home and will require full-time care for the rest of his life.

Timothy’s father was appointed to be the permanent guardian over Robbins and his estate. In a lawsuit against the tortfeasors responsible for the accident, the jury awarded damages to Robbins in the amount of $18.5 million. In post-trial mediation, the parties agreed to settle the case for $17.75 million.

His guardian was concerned that Robbins would lose eligibility for his Medicaid and Supplemental Security Income (SSI) benefits.

After paying attorney’s fees and litigation expenses, the net settlement to Timothy was $11.2 million. The structured settlement agreement provided that $4.5 million of the net amount would be funded through two annuities, providing Timothy guaranteed monthly payments for 25 years, and that the remaining $6.75 million would be paid in a lump sum. Robbins' guardian sought authority to create and fund the special needs trust with that lump sum.

But the Johnson Superior Court denied that request. Instead, the trial court allowed only $1 million of the $6.75 million to be placed in the trust, ordering the remaining $5.75 million to be paid directly to the Guardianship Estate.

It reasoned that considerable expenses would have been shifted to the taxpayer, that the amount under the mediated agreement was adequate to meet Timothy’s future needs without public assistance, and that the trust fund appeared to “be for the benefit of the Guardian and the descendants of Timothy A. Robbins as opposed to Timothy A. Robbins.”

However, the appellate court reversed that ruling, acknowledging that even if the trial court had a genuine disagreement with the policy decisions of Indiana state and federal legislators, it is still bound to abide by them.

“While the trial court is free to disagree as to the wisdom of the legislature’s policy choices, the trial court exceeded the bounds of its authority by refusing to enforce this policy choice based on that disagreement,” Judge John Baker wrote for the court.

The appellate court also noted that the trial court’s refusal to place the full amount of the settlement proceeds into the special needs trust was a mistake of law. The court called the decision erroneous and a “legal impossibility” that the special needs trust would be designed to benefit his guardian or descendants.

“The judgment of the trial court is reversed in relevant part and remanded with instructions to direct that the full, available amount of settlement proceeds be placed in Timothy’s special needs trust,” Baker concluded.

The case is In Re the Matter of Guardianship of Timothy A. Robbins, an Adult, 18A-GU-242.

 

 

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