New York Wrongful Death Compromises: Alienation of Infant’s Funds Beyond 18

New York Wrongful Death Compromises: Alienation of Infant’s Funds Beyond 18

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 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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