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Special Needs Trust Created Too Late; Funds Go To State

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Virgil Lamont Hamilton, a California child, was injured in a tragic swimming pool accident in 1982. Hamilton suffered severe brain damage, and will require total care and extensive medical treatment for the rest of his life. Since the accident, Hamilton has lived in a California state institution, Agnews Developmental Center.

Attorneys for Hamilton brought suit against the swimming pool owner and, in 1984, settled the case. The result of the settlement was that $400,000 was placed into a “medical trust fund” for Hamilton’s benefit, and an annuity was purchased with an additional $100,000. The annuity payments were structured to begin in 1992.

Immediately upon completion of the settlement, Hamilton lost his eligibility for California’s Medicaid program (Medi-Cal). The state Department of Developmental Services stepped in and provided Hamilton’s care, but brought an action against the trustees of the medical trust fund. The result of that action was an order, entered in 1989, directing that the remaining funds in the trust account be paid to the state. Upon exhaustion of the trust account, Hamilton once again qualified for medical assistance through Medi-Cal, and the health care program once again began paying for his medical care.

In 1992 the annuity payments began to arrive. Initially, Hamilton received $5,000 per month. Medicaid/Medi-Cal recipients are required to pay most of their income (minus a small personal needs allowance, in most cases) toward their own medical care, and so Medi-Cal demanded that the entire annuity payment be delivered to the Agnews Developmental Center each month. The result: Hamilton received the same care he would have received if he had not settled his personal injury action, and the proceeds provided no additional care, equipment, therapy or other benefits.

Hamilton’s mother thought she saw a way to benefit her son. In 1995, she asked the California courts to restructure his “medical trust fund,” and the annuity payments, and to effectively create what is usually called a “special needs trust.” With such a trust arrangement, the annuity payments could be used for Hamilton’s extra needs–the types of things not provided by Medi-Cal which might improve his quality of life. Unfortunately, the state’s payments for Hamilton’s care by this time had exceeded $250,000 and the Department of Developmental Services opposed the funding of the special needs trust unless the Department was first reimbursed for those payments.

Hamilton’s mother asked the California court to approve the special needs trust as if it had originally been established when the lawsuit was settled in 1984. She asked the court to enter the order nunc pro tunc–as if that had been the original order of the court, but a clerical error had been made in the entry of the formal order. The trial court agreed, saying that it was rectifying “the court’s [earlier] failure to establish a properly drafted trust.” The Department appealed.

The California Court of Appeals reversed the nunc pro tunc order. Saying that the use of such a process is limited to truly clerical errors, and not to remedy judicial mistakes, the judges refused the request to modify Hamilton’s trust fund. Hamilton v. Laine, September 16, 1997.

What does the Hamilton case have to do with elder law? Many Medicaid recipients are elderly, and a disproportionate portion of nursing home residents are aged. Those who have been injured (or who inherit money) may find that they receive no benefit from their settlement unless a properly drafted special needs trust is established at the time. Competent legal assistance is essential for institutionalized personal injury plaintiffs of any age.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.