Zeoli v. Commissioner of Social Services

• Decision Date: 04 September 1979
• Court: Connecticut Supreme Court
• Parties: , 21 A.L.R.4th 718 Christine ZEOLI et al. v. COMMISSIONER OF SOCIAL SERVICES.

Page 553

425 A.2d 553

179 Conn. 83, 21 A.L.R.4th 718

Christine ZEOLI et al. v. COMMISSIONER OF SOCIAL SERVICES.

Supreme Court of Connecticut.

Argued June 14, 1979.

Decision Released Sept. 4, 1979.

Michael A. Arcari, Asst. Atty. Gen., with whom, on brief, was Carl R. Ajello, Atty. Gen., for appellant (defendant).

Peter D. Hershman, New Haven, for appellees (plaintiffs).

Before COTTER, C. J., and LOISELLE, BOGDANSKI, LONGO and PETERS, JJ.

COTTER, Chief Justice.

This is an appeal from a judgment of the Court of Common Pleas reversing an order of the commissioner of the department of social services terminating medical assistance payments to the plaintiffs, Christine and Rita Zeoli. ¹ The plaintiffs, mentally handicapped women who are incapable of caring for themselves, were placed in a convalescent institution on December 1, 1973, two months after their father's death. Payment of medical assistance also commenced on December 1, 1973, pursuant to § 17-134a of the General Statutes, which authorizes those benefits in accordance with title XIX of the Social Security Act, "Grants To States For Medical Assistance Programs." 42 U.S.C. §§ 1396-1396i.

On May 31, 1976, after notice, the payments were terminated. Upon request, a fair hearing was held pursuant to § 17-2a of the General Statutes on June 29, 1976. The hearing officer rendered a decision on July 8, 1976, upholding the termination of payments on the ground that the plaintiffs had assets available to them in excess of the permissible limits for medical assistance payments. The assets in question consisted of a joint savings account having a balance of $9515.85 as of November 1, 1975, which was held in the name of the plaintiffs' brother, Daniel Zeoli, as trustee, with the plaintiffs as beneficiaries.

The savings account comprises the proceeds from the sale of real property formerly owned by the plaintiffs' father, Nicola Zeoli. Through his will, Nicola Zeoli devised a one-half interest in his real property to his son, Daniel, and the remaining half was devised to Daniel as trustee for his two sisters, the plaintiffs. Acting in accordance with the powers granted to him in the will and with the approval of the Probate Court, Daniel sold the real property and deposited one-half of the proceeds in the savings bank account in question.

The underlying issue before this court is whether the plaintiffs were eligible for title XIX assistance under the pertinent state and federal statutes and regulations. The question of eligibility depends upon whether the savings account constitutes an asset of a spendthrift testamentary trust, whether that trust is intended for general or supplementary support, and whether the restrictions placed on the asset still permit it to be considered an available asset as this concept is defined by state and federal regulations for purposes of granting title XIX payments.

Nicola Zeoli's intent to create a testamentary trust is clear. In articles third, sixth, and eighth of his will he designated certain assets to be held in trust, appointed a trustee and gave him powers and standards by which to administer and distribute those assets including the power to sell any property in the trust and hold uninvested or reinvest any cash proceeds from such sale, and designated beneficiaries of the trust and remainder persons to receive whatever remains at the death of the beneficiaries. ² See, generally, 1 Scott on Trusts (2d Ed.) § 2.3, pp. 36-37. On May 28, 1974, the Probate Court for the district of Hamden determined that a trust was created and appointed Daniel Zeoli, the testator's named trustee, to act as trustee. As previously mentioned, pursuant to the powers granted him in the will and with the Probate Court's approval, Daniel Zeoli sold the real property that constituted the residuary estate of the testator and deposited one-half of the proceeds in a trustee bank account. The bank account, as proceeds of the sale of the realty, must be considered an asset of the testamentary trust and subject to its terms.

A trust which creates a fund for the benefit of another, secures it against the beneficiary's own improvidence, and places it beyond the reach of his creditors is a spendthrift trust. Carter v. Brownell, 95 Conn. 216, 223, 111 A. 182. Section 52-321 of the General Statutes provides that trust fund income is not subject to the claims of creditors of the beneficiary if the trustee is granted the power to accumulate or withhold trust income or if the income has been expressly given for the support of the beneficiary or his family. See Cromwell v. Converse, 108 Conn. 412, 424-25, 143 A. 416; Foley v. Hastings, 107 Conn. 9, 13, 139 A. 305. Since Nicola Zeoli's will specifically provides the trustee with the power to accumulate and withhold trust income, its language creates a spendthrift trust under § 52-321. ³

The defendant contends that even if a spendthrift trust is created under Nicola Zeoli's will, the funds are vulnerable to the state's claim because the intent of the plaintiffs' father was to create a trust for general support. See, generally, annot., 92 A.L.R.2d 838. Thus, the defendant maintains that the plaintiffs, or someone else on their behalf, have the right to compel the brother, as trustee, to release the trust assets for their care and support and that any refusal to do so would constitute an abuse of discretion under the terms of the will.

The well-settled rule in this state is that the exercise of discretion by the trustee of a spendthrift trust is subject to the court's control only to the extent that an abuse has occurred under the powers granted by the testamentary disposition. Bridgeport v. Reilly, 133 Conn. 31, 37, 47 A.2d 865; In re Application of Smith, 133 Conn. 6, 11, 47 A.2d 521. To determine the discretionary powers provided, it is necessary to ascertain the dispositive intention as expressed by the language of the entire will "in the light of the circumstances surrounding the testator when the instrument was executed, including the condition of his estate, his relations to his family and beneficiaries and their situation and condition." Gimbel v. Bernard F. & Alva B. Gimbel Foundation, Inc., 166 Conn. 21, 26, 347 A.2d 81, 84. See Rosa v. Palmer, 177 Conn. 10, 13, 411 A.2d 12; Colonial Bank & Trust Co. v. Stevens, 164 Conn. 31, 37, 316 A.2d 768; Connecticut Bank & Trust Co. v. Lyman, 148 Conn. 273, 279, 170 A.2d 130.

Applying these principles, we find that the testator's intent was to provide the trustee with sufficient flexibility to use the funds under the trust solely for supplemental support. Both the surrounding circumstances and the language of the will militate in favor of this interpretation. The trust established by Nicola Zeoli's will clearly recognizes the obvious incapacity of his daughters to care for themselves. ⁴ As the amount held under trust, approximately one-half of his entire estate, ⁵ indicates, the plaintiffs' father was a person of modest means. Presumably, the funds under the trust would not provide for general support of his daughters in an institution for much more than a few months. Moreover, at the time of the will's execution and at the time of the testator's death, the daughters were not receiving medical assistance payments and the testator could not know if and how soon such benefits would become available.

The trust created under the testator's will clearly contemplates the circumstances discussed above. The trust grants the trustee in express terms the power both to discriminate totally against either of the beneficiaries by withholding all income and to disregard funds that might be available to either of the beneficiaries. On the other hand, in precatory language, the trust provides that the trustee apply "the net income or principal of the trust for the maintenance, support, education, health and general welfare of those of my daughters who my Trustee believes would benefit most from a share of the income of this trust after considering the income of the beneficiaries from other sources." ⁶

In granting the trustee the ability to discriminate against either of the beneficiaries as well as to consider other sources of funds available to the beneficiaries, the testator reveals an intent to provide for only the supplementary support of his daughters. The combination of express and precatory terms in the will attempts to grant the trustee flexibility to provide the support that would benefit either of the beneficiaries the most, that is, imposing on the trustee the legal duty to furnish only supplementary support. If the testator had desired to create a trust for general support, it would have been simple to do so and no discriminatory provision would have been necessary or desirable.

The defendant contends that if the testator intended the state to provide medical assistance benefits to his daughters, no spendthrift trust for supplemental support would have been needed and he would have simply devised all of his property to his son. This argument, however, fails to take into account both the testator's lack of certainty about the availability of welfare payments for his daughters at the time of the execution of his will and the legal duty impressed upon the trustee by the trust to provide for supplementary support. The trust made clear, as no devise solely to his son could, the intent of the testator to provide funds from which some of the personal needs of his daughters could be satisfied. ⁷

Since the assets held in the spendthrift trust were not intended for the plaintiffs' general support, they could not compel their distribution and a refusal of the trustee to make funds available cannot be considered an abuse of his discretion. See Connecticut Bank & Trust Co. v. Hurlbutt, 157 Conn. 315, 327, 254 A.2d 460; Bridgeport v. Reilly, 133 Conn. 31, 37-39, 47 A.2d 865; Bridgeport-City Trust Co. v. Beach, 119 Conn. 131, 141, 174 A. 308.

We have...