IN THE MAZE OF CONFUSION, THERE IS A SOLUTION.

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1 Volume 1, Issue 7 THE ELDER AND DISABILITY ADVOCACY FIRM UPDATE IN THE MAZE OF CONFUSION, THERE IS A SOLUTION. Successor Conservator Can Sue Previous Conservator s Attorneys for Legal Malpractice After a personal injury case was settled for $1.2 million, a federal district court dismissed the plaintiff s negligence, breach of duty and fraud claims against her attorneys, finding that the client could not prove that she was damaged by the attorneys actions and that the magistrate who approved the settlement had already determined that the client was not under fraud or duress when she agreed to settle the case. Phinisee v. Layser (E.D.Penn., No , Sept. 22, 2014). Attorneys Derek Layser and Gilbert Spencer represented Rasheena Phinisee and her daughter in a medical malpractice action. Based on Layser and Spencer s advice, Ms. Phinisee proposed a $1.2 million settlement, which the government conditionally accepted. After the settlement conference, Ms. Phinisee claimed that her lawyers had not told her that there was a Medicaid lien on the settlement and that they had pressured her into settling for less money than IN THIS ISSUE Successor Conservator Can Sue Previous Conservator s Attorneys for Legal Malpractice (pages 1-2) SPECIAL GUIDE: Three Ways Special Needs Settlement Planning Experts Can Help Trial Lawyers (pages 3-4) Page 1

2 she could have received at trial. In April 2012, Ms. Phinisee fired Layser and Spencer and filed several pro se motions attempting to reopen the settlement and to remove Layser and Spencer as attorneys of record. In August 2012, a magistrate judge granted the government s motion to enforce the settlement and found that Layser and Spencer had properly described the Medicaid lien to Ms. Phinisee and that she did not agree to the settlement while under fraud or duress. The Third Circuit upheld the trial court s decision on appeal. Ms. Phinisee then filed suit against Layser and Spencer for negligence, breach of fiduciary duty, fraudulent and negligent misrepresentation and breach of contract. Layser and Spencer moved to dismiss the complaint. The U.S. District Court for the Eastern District of Pennsylvania dismisses Ms. Phinisee s complaint with prejudice. The court determines that her non-fraud claims are nothing more than an expression of dissatisfaction with the settlement amount and an attempt to recover additional monies. The court also finds that the fraud claims are barred by the doctrine of collateral estoppel because the magistrate judge specifically determined that there is no question of fraud or duress here, which would vitiate [Plaintiffs ] consent and that Layser and Spencer adequately explained the existence and consequences of the Medicaid lien to Phinisee. To read the full text of this decision, go to: google.com/scholar_case?- case= &hl=en&as_sdt= Three Ways Special Needs Settlement Planning Experts Can Help Trial Lawyers Special Needs Settlement Planning (SNSP) is a comprehensive array of legal services intended to assist injury victims and trial lawyers in the process of settling claims. SNSP combines traditional tools, such as Special Needs Trusts for persons with disabilities, with a thorough evaluation of the complex issues that arise in cases involving injury victims. SNSP experts can provide injury victims with a customized settlement plan that not only preserves public assistance benefits when necessary, but also addresses all aspects of lifecare needs and estate planning concerns. At the same time, SNSP Page 2

3 services allow trial lawyers to focus on the liability aspects of the case and reduce the malpractice risk. 1. How can SNSP attorneys help if the plaintiff receives government benefits? Identification of Government Benefits Programs. SNSP professionals can assist in identifying which public assistance programs an injury victim with a disability is receiving and the types of issues those programs present. Special Needs Trusts. If the injury victim receives means-tested public assistance, SNSP attorneys can help create a Special Needs Trust in order to retain those benefits after the settlement is received and can tailor the trust to the specific needs of the client. Lien Resolution. In many cases involving injury victims with disabilities, settlement proceeds are subject to Medicaid liens as well as conditional payments made by Medicare. SNSP lawyers can assist in identifying and resolving such liens in the process of settling a case. MSA s a.k.a. Medicare Set- Aside Arrangements. Recent developments have raised the importance of addressing the Medicare Secondary Payer (MSP) Act, which requires that Medicare s interest be considered whenever a Medicare beneficiary (or potential Medicare beneficiary) receives a settlement involving payment for future medical expenses. SNSP attorneys are at the forefront of this emerging area and can advise trial lawyers and the injury victim about the possible need for a Medicare Set-Aside arrangement. Financial Planning. SNSP attorneys can add valuable, distinctive perspective and bring in financial planning experts to best prepare a financial plan that will meet the lifetime needs of the injury victim. This can include a structured settlement, along with a wellbalanced portfolio of acceptable investments. Additionally, SNSP professionals can help coordinate a proposed structure with a Special Needs Trust, and corresponding trustees, and ensure that the payee and beneficiary designations for a given structure comply with state and federal public benefits laws. Tax Planning. SNSP professionals can identify and resolve an injury victim s income tax issues that may result from a settlement that includes numerous causes of action. In larger settlements, the SNSP professional can minimize probable estate tax concerns with a plan that will comply with the injury victim s needs. 2. How does the SNSP attorney get involved with the Court? Settlement Approval. Frequently proposed settlements for injury victims with disabilities or for minors require approval by the probate court. SNSP attorneys offer expertise in efficient approval of proposed settlements, including approval of attorney s fees and costs. Often, requests for court approval of settlements can be combined with requests for the creation of Special Needs Trusts, Medicare Set-Aside arrangements, and/or the creation of conservatorships or guardianships. Identification of Appropriate Fiduciaries. SNSP professionals can be valuable in identifying appropriate fiduciaries to manage settlement funds for injury victims with disabilities or for minors. Each case presents a unique set of issues, and often identifying a trustee or conservator with the right mix Page 3

4 of knowledge and experience is critical. Legal Conservatorships and Guardianships. In many cases a conservatorship or guardianship is required to provide court oversight of the settlement funds of an injury victim with disabilities or a minor. SNSP professionals are experienced in the creation of conservatorships and can combine the process with a request for settlement approval and creation of a Special Needs Trust and/or Medicare Set-Aside arrangement. Qualified Settlement Funds. The Internal Revenue Code allows settlement funds to be placed into a Qualified Settlement Fund (QSF) while the details of a settlement are being worked out. The funds sit in the QSF while issues such as resolution of liens, creation of trusts and development of a financial plan are worked out. Funds held in a QSF are not considered to be available to the injury victim, so constructive receipt issues are avoided. Defendants can make payment into a QSF and complete their involvement in the case. SNSP professionals are familiar with the state and federal laws governing QSF s and can navigate the process of creating them in appropriate cases. 3. What Is the SNSP Attorney s Role After the Case Is Over? Ongoing advice to fiduciaries and family. SNSP professionals provide ongoing legal advice to trustees of Special Needs Trusts, conservators and other fiduciaries. Because these fiduciaries are often required to follow state trust law and both state and federal public benefits laws, ongoing legal representation is useful. SNSP attorneys assist fiduciaries in determining whether certain expenditures are appropriate, seek court authority for certain large purchases such as a home or specially-equipped vehicle, and prepare the required accountings and other documents. SNSP attorneys also provide ongoing advice to families of the injury victim with disabilities. Our firm works closely with a professional network of highly qualified financial planners, PI attorneys and fiduciary agencies. Court Should Not Have Removed Trustee After Legal Fee Request A Texas appeals court rules that a trial court should not have removed a trustee of a special needs trust after the trustee sought approval of legal fees incurred when the trial court questioned the trustee s decision to pay for the construction of a pool at the beneficiary s home. In The Guardianship of Brandy N. Hollis, An Incapacitated Person (Tex.App.Ct., 14th Dist., No CV, Nov. 4, 2014). Compass Bank served as the trustee of a court-approved special needs trust established for the benefit of Brandy Hollis. Ms. Hollis had been seriously injured in a car crash in 2007, and the trust was funded with personal injury settlement funds. In March 2012, Compass Bank filed its third account showing a distribution of $67,526 for the construction of a swimming pool at Ms. Hollis parents home, where she lived. The trust balance at that time was $1,925, The court held a show cause hearing to investigate the bank s decision to spend the funds on the pool and this hearing resulted in the trust entering into an agreement with Ms. Hollis s parents that required them to reimburse the trust for the cost of the pool upon the sale or transfer of the house. In January 2013, Compass Bank filed its fourth account and requested reimbursement for $23, in legal fees incurred, in part because of the pool controversy. The court, again on its own motion, held another hearing for the bank to show cause why it should not be removed as trustee for misapplication of trust property, failure to obey court orders, gross mismanagement or gross misconduct in the performance of the duties of Trustee. The bank

5 argued that it was allowed by the terms of the trust document and Texas law to seek attorneys fees and that it had increased the trust principal by an average rate of 10 percent per year. Despite these arguments, the court removed Compass Bank as trustee. The bank appealed. The Texas Fourteenth Court of Appeals reverses the trial court. The court finds that Compass Bank cannot be said to have engaged in gross mismanagement by seeking reimbursement for its counsel s attorneys fees. The special needs trust expressly provides that [a]n individual or entity serving as Trustee shall be reimbursed from the estate for the reasonable costs and expenses incurred in connection with the administration of the estate. Likewise, the Texas Trust Code provides that a trustee may reimburse himself from trust principal or income, or partly from both, for advances made for the convenience, benefit or protection of the trust or its property and expenses incurred while administering or protecting the trust. Compass Bank incurred expenses in the form of attorney s fees in administrating and protecting the trust, and therefore it was entitled to request reimbursement of those fees. To read the full text of this decision, go to: scholar_case?q= cv& hl=en&as_=4,238&case= &scilh= Chippewa Street St. Louis, MO Phone (314) Fax (314) Please visit our website for valuable resources and to check out upcoming firm events, seminars and our blog! Like us on Facebook! Follow us on Twitter! Connect with us on LinkedIn! Our firm is dedicated to catering to and implementing solutions to the problems of those who are elderly, persons with disabilities and their families. We provide a wide-range of solutions for people who are facing crisis and those who wish to avoid crisis through proper planning. We specialize in formulating client-specific plans that are carefully designed to meet the varied familial, financial and healthrelated circumstances that our clients are experiencing. Our practice areas include: Elder Law Fiduciary Litigation Estate Planning Wills, Trusts, Powers of Attorney Special Needs Trusts Probate & Trust Administration Guardianships & Conservatorships Asset Protection Medicaid & Long-Term Care Planning Veterans Benefits Medicare Set-Aside Arrangements Lien Resolution Please contact Sarah Landis at our office to schedule an appointment to meet with Christine A. Alsop or one of our exceptional associate attorneys.