By Peter K. Kelly
In 1971, the 26th
Amendment to the United States Constitution was adopted, which guaranteed that
citizens eighteen years or older shall not be denied the right to vote, by the
United States or by any state. In 1974,
the New York State Legislature enacted 53 bills amending various state statutes,
granting adult rights and privileges to persons who attained the age of
18. In the estate and trust field, the most
significant change occurred in the adoption of a new definition of "infant" or
"minor," meaning a person who has not attained 18 years of age. EPTL 1-2.9-a; former SCPA 103(26), now SCPA 103(27).
Generally, when money is payable to an infant, such as the proceeds of a
negligence case, it is paid to his guardian but must be paid over to the former
infant when he or she turns 18. SCPA 2220(3); CPLR 1206(c).
Nevertheless, because many parents
and guardians have serious concerns with 18-year-olds coming into substantial
sums of money, they have devised methods of payment which seek to ensure that
the 18-year-old does not squander the funds and to protect the funds until the
18-year-old becomes "more mature." One
lawful method, in the case of a negligence recovery, is the purchase of an
annuity which spreads payments over a period of time. This limits the ability of the young adult to
squander a substantial recovery and controls the dangers of a possible
spendthrift. SCPA 2220(5)
specifically permits a court to order proceeds payable to an infant to be paid
by a structured installment settlement in the form of an insured annuity
contract. While that statute does not
state how funds will be paid to an infant after she turns 18, courts have
routinely allowed periodic payments of structured settlements to be paid after
the infant turns 18. Moreover, implicit
in SCPA 2220, subdivision 5, is the power of the court, with the
consent of the infant's guardian, the plaintiff and defendants, to determine
that the infant's recovery is to be paid to them periodically after they become
18.
Two recent New York cases in
differing context shed light on the rights of competent 18-year-olds to their
funds after their eighteenth birthday.
In Matter of Alyssa H., N.Y.L.J., Jan. 10, 2012, 2011 N.Y. Misc. LEXIS 6385 (Sup.
Ct. Nassau County) [enhanced version available to lexis.com subscribers],
Justice Joel Asarch of the Nassau County Supreme Court considered a motion
brought by the parents of an 18-year-old to restrain her from access to funds
which she received pursuant to a personal injury action until she reaches
25. In 2004, the court issued an order
placing $83,846.63 in a bank account in the name of her father as natural
guardian for the credit of the infant, to be held, subject to further order of
the court, until she reaches 18. It
further directed that the bank pay all monies to her upon proper proof that she
had reached 18 years of age. The father
argued that based upon a drug-trafficking conviction in another state and the
influence of her current paramour, she would squander these funds intended for
her education, possibly for illegal purposes.
The daughter had another version of the facts, claiming she was living
with her mother, supporting herself and saving for college, and now, being 19,
she was able to handle this large sum of money.
Justice Asarch, relying on CPLR 1206(c), held that unless
there is some reason to appoint an Article 81 Guardian for this young
adult, "...a competent adult is free to use his or her funds as
desired-foolishly, capriciously, impulsively or otherwise." He denied the motion and permitted the
daughter to access her funds.
In another context, in a compromise
of a wrongful death proceeding, Surrogate Czygier approved the payment of
the infants' shares to a trust for their benefit after their eighteenth
birthday, rather than to them directly, as adults. See
Matter of Anchudia, File No. 247
A 2007/A (Sur. Ct. Suffolk County June 23, 2011) (unpublished). In that instance, the mother agreed to add
$200,000 to each child's trust from her Kaiser
share of an $8,000,000 recovery. These
additional funds induced the guardian ad litem and the court to permit the
infants' shares to be paid to the trust rather than to them directly after they
became 18. While SCPA 2220(5)
clearly permits the payments of the infants' shares to them by periodic
payments under an annuity after they turned 18, it appears to be the first time
a court has approved a constraint upon the funds of a competent young adult
after they became 18 years of age. In
this context, the infants clearly benefit by the additional funds in trust,
which would grow during their minority.
There are many vehicles to protect
young adults from squandering substantial funds until they become "more
mature," but we need to be reminded that they can and should be able to access
their funds under the law when they become adults.
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