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In re B. H.

Court of Chancery of Delaware

November 16, 2017

IN THE MATTER OF B. H., a minor P. H. and R. H., Petitioners

          Draft Report: November 13, 2017

          Date Submitted: October 23, 2017

          Bartholomew J. Dalton, Esquire, and Andrew C. Dalton, Esquire, of Dalton & Associates, P.A., Wilmington, Delaware; Attorneys for Petitioners.

          Joseph R. Slights III Vice Chancellor


         WHEREAS, Master Zurn considered a Petition filed by Petitioners, P. and R. H. ("Petitioners"), under Court of Chancery Rule 180 and 12 Del. C. § 3901, in which Petitioners requested that the Court establish a plenary guardianship on behalf of a minor following a settlement of a medical negligence personal injury claim;

         WHEREAS, the Master issued her Draft Report on November 13, 2017, followed by a Final Report on November 16, 2017 (the "Final Report"), in which she recommended that the Petition be denied; and

         WHEREAS, the Petitioners took timely exceptions to the Final Report;

         NOW, THEREFORE, this 14th day of December, 2017, THE COURT FINDS AND ORDERS AS FOLLOWS:

         1. The Court has conducted a de novo review of the factual and legal conclusions in the Final Report.[1] The Court has also reviewed the record, including the Petition and all exhibits thereto, and has determined that it is possible to conduct a de novo review of this matter without conducting a further evidentiary hearing.[2]The exceptions do not turn on dispositive credibility determinations that would require the Court to view the witnesses.[3]

         2. Pursuant to 12 Del. C. § 3901 and Court of Chancery Rule 180, the default rule is that a "limited guardianship" of the property will be established for the benefit of a minor who receives funds in settlement of a personal injury claim. That limited guardianship serves the purpose of ensuring that the settlement funds are placed in "an annuity or structured financial instrument for the benefit of the minor."[4]The court's supervision of the guardianship does not extend beyond that, meaning there are no regular reports (with supporting documents) to receive and review, and no applications (often serial) by the guardian to access the guardianship funds to adjudicate. Indeed, the limited guardianship terminates once the funds are secure in one of the prescribed investment vehicles.

         3. Among the purposes of the limited guardianship is to reduce the number of plenary guardianships created and monitored by the Court of Chancery following a minor's personal injury settlement (with associated burdens).[5] The statute (and attendant rules) accomplish this by providing that plenary guardianships should be established only where the court determines that a plenary guardianship is "necessary"[6] and "in the "best interests of the minor" in order "to protect the estate and maximize benefits available to the minor, including public benefits."[7] In the absence of the requisite showing, the statute and this Court's rules presume that "an annuity or structured financial instrument" will provide adequate protection of the minor's funds and appropriate long-term benefits.

         4. Here, Petitioners maintain that a plenary guardianship should be created in this court so that they may create an investment fund on behalf of the minor that will yield better returns than an annuity or structured financial instrument and that will allow them to access those funds without penalty should the minor require future treatment. The minor's treating physician, R. E. W., PhD., M.D., has opined that the minor probably will require future treatment but he has not quantified the expected or even probable costs of the treatment(s).

         5. The Master concluded that the Petitioners had not made the requisite showing under Rule 180(c)(1) or Section 3901(k)(1) to justify the creation of a plenary guardianship. I agree. The fact that a guardian believes that she can earn better returns for the minor in an investment vehicle other than "an annuity or structured financial instrument" is not, alone, a justification for a plenary guardianship under Delaware's revised minor's settlement/guardianship regime. If it were, then every guardian of a minor who settled for more than the $25, 000 threshold established in the statute (and by extension the Court's rules) could circumvent the statute's preference for a limited guardianship by simply averring that she could do better for the minor in other investments than the minor would earn via an annuity or other structured financial instrument. The Court very quickly would find itself back in the business of plenary guardianships of the property for minor personal injury settlements. That is not what was intended by the General Assembly when it revised the minor's settlement regime.

         6. Petitioners maintain that they will need access to the settlement proceeds during the course of the guardianship to pay for the minor's anticipated medical needs (and that such access will not be available if the settlement funds are structured). This, of course, is precisely the reason the statute and this Court's rules allow for the creation of a plenary guardianship as an exception to the default rule providing for a limited guardianship. But to invoke this exception, the guardian must do more than simply state (even with physician's support) that the minor will require future treatment. The statute and the rules contemplate that settlement funds can be placed in a plenary guardianship only to the extent "necessary … during the term of minority" to attend to the needs of the minor such as future medical care.[8] Thus, to justify setting aside the settlement funds (or a portion thereof) in a plenary guardianship, Petitioners must identify, with appropriate supporting evidence, the funds that will likely be "necessary" to pay the cost(s) of the anticipated care.[9]Contrary to Petitioners' position here, this is not a fanciful exercise. Dr. W. has identified a range of medical treatments this minor will likely require "during the term of minority." These treatments/procedures have a cost and that cost can be calculated. Indeed, such calculations (probable estimates) of future medical care are presented in our courtrooms every day. No such evidence was presented in support of the Petition sub judice.

         7. After carefully considering the Exceptions, de novo, I am satisfied that the Master correctly determined that the Petition failed to justify the creation of a plenary guardianship. "Believing the Master to have dealt with the issues in a proper manner and having articulated the reasons for her decision well, there is no need for me to repeat her analysis."[10]

         8. The exceptions to the Final Report are overruled, and the Final Report is adopted and affirmed.

         9. Petitioners may refile their Petition if they provide the Court with specific information regarding the projected (probable) costs of future medical treatment along with competent supporting evidence.

         IT IS SO ORDERED.


         In this guardianship case, parents of a minor child seek approval of settlement of a medical malpractice claim of a minor. P.H. and R.H. ("the Guardians") wish to be appointed plenary guardians of their daughter B.H.'s property, specifically a $1, 834, 401 settlement from a medical malpractice case. The Guardians wish to place these funds in an investment guardianship account.

         A petition for plenary guardianship was filed on October 6, 2017. I denied that petition for failure to comply with Court of Chancery Rule 180 in a final report dated October 13, 2017. An amended petition was filed on October 23, 2017. I denied that petition in a draft report dated November 13, 2017. On November 14, 2017, the Guardians filed a "Notice of Exceptions to Draft Report" and confirmed to the Register in Chancery ...

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