Hill, et al v. USA

Filing 662

ORDER pursuant to the Status Hearing held on May 24, 2018, by Judge Lewis T. Babcock on 5/29/2018. (ebuch)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
LEWIS T. BABCOCK, JUDGE
Civil Case No. 1:90-cv-01071-LTB
ROBERT E. HILL, individually, and as parent
and next friend of Tasha R. Hill, a minor; and
CYNTHIA G. HILL, individually, and as parent
and next friend of Tasha R. Hill, a minor,
v.

Plaintiffs,

UNITED STATES OF AMERICA,
Defendant.
_____________________________________________________________________________
ORDER
_____________________________________________________________________________
THIS MATTER comes before the Court after a status hearing that occurred
on May 24, 2018 (the “Hearing”). (ECF No. 658.) I discussed the matter—whether
the Trustee is properly withholding certain amounts from Plaintiff Richard Hill’s
payments in his role as a personal attendant care provider—in court during the
Hearing. (ECF No. 661.) This Order serves to provide unambiguous clarification to
the matter at issue.
I.

BACKGROUND

In October 1988, as an infant, Tasha Hill suffered permanent brain damage
and catastrophic injury because of negligent treatment at the Evans Army
Community Hospital. Her parents, Plaintiffs Robert Hill and the late Cynthia Hill,
brought a Federal Tort Claims action in this Court, the United States Government
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conceded liability mid-trial, and after an appeal on the issue of damages, the parties
eventually settled the litigation.
As part of the settlement, two trusts were established: (1) the Amended
Private Trust for the Benefit of Tasha R. Hill (the “Private Trust”) and (2) the
Irrevocable Reversionary Inter Vivos Medical Care Trust for the Benefit of Tasha R.
Hill (the “Reversionary Trust”). (ECF Nos. 348, 410, 489-2.)
Both trusts contain language regarding the Hills’ personal care of Tasha. The
Reversionary Trust provides that “the Trustee shall pay all necessary and
reasonable expenses, regardless of cause, to the extent allowed below in this
Paragraph 4.” (See ECF No. 489-2 ¶ 4.) One of the allowable expenses, as detailed
in paragraph 4(c), is personal attendant care. Paragraph 4(c) provides that “[t]he
Trustee shall pay for twenty-four-hour-a-day personal attendant care services for
the Beneficiary, whether such services are provided in the home of her Parents or in
a licensed, long-term care facility that provides attendant or residential care
services for disabled persons.” (Id. ¶ 4(c).)
The Reversionary Trust further provides that, if Tasha’s parents provide 24hour personal care, “the Trustee shall pay the Parents jointly the total gross rate of
$185,000.00 annually, to be paid monthly, increasing at the Consumer Price IndexUrban or any successor index (hereinafter ‘CPI-U’) with a base year of 1997.” (Id. ¶
4(c)(i).) The Trustee “shall determine and make such withholding and payments
required from the gross annual rate, recognizing the Parents’ status as employees of
the trust.” (Id. ¶ 4(c)(vi).) These provisions are echoed in the Private Trust. (ECF

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No. 410 ¶ 9.)
II.

LAW

Both trusts are “governed by, construed and administered according to the
laws of the State of Colorado.” (ECF Nos. 410 ¶ 21, 489-2 ¶ 19.) In construing a
trust, the Court must determine the intent of the settlor and interpret the trust in
its entirety “to harmonize and give effect to all the provisions, rendering none
meaningless or superfluous.” Denver Found. v. Wells Fargo Bank, N.A., 163 P.3d
1116, 1122 (Colo. 2007); see also Brunton v. Int'l Tr. Co., 164 P.2d 472 (Colo. 1945)
(holding that each paragraph of a trust instrument must be read in light of the
whole instrument, and the intention of founders must be ascertained from
everything that appears within the four corners of the document).
III.

ANALYSIS

A. Mr. Hill’s Historical Arguments
Mr. Hill has consulted a lawyer about the withholding and raised the issue
with this Court both before and during the Hearing. First, in 2009, Mr. Hill raised a
dispute with the IRS about a “withholding issue.” (ECF No. 547-11.) He retained an
attorney to assist him. (ECF No. 603 ¶ 4.) The IRS eventually sent a letter to the
Hills, explaining that it “cannot allow the above claim for an adjustment to your
tax, for the following reasons: The compensation Robert E. Hill received from a
Irrevocable Trust for the benefit of Tasha R. Hill during 2003, 2004, and 2005 is
taxable under IRC Section 61.” (ECF No. 606-2 at 3.)
Second, in 2010, the Hills (Robert and his second wife Audrey) brought their
argument to this Court in response to the final report from SunTrust, a prior
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trustee. (ECF No. 592.) The Hills asked for a construction of paragraph 4(c)(i)
(which states that “Trustee shall pay the Parents jointly the total gross rate of
$185,000.00 annually”). (Id.) Their argument centered on the word “gross” and
argued that the Trustee should not withhold federal income tax from their pay.” (Id.
at 2–3.)
The Hills eventually acknowledged that the Reversionary Trust specifically
provided for “such withholding and payments required from the gross annual rate,
recognizing the Parents’ status as employees of the trust.” (ECF No. 605 at 3.)
However, the Hills argued this was not an authorization to withhold federal income
tax; it was instead an authorization to withhold some salary payments if Tasha was
admitted to a health care facility for more than 14 days. (Id.)
This reference to withholding salary payments related to Tasha’s admittance
to a health care facility was the primary argument Mr. Hill made during the
Hearing.
The Reversionary Trust reads that
(ii) In the event the Beneficiary is admitted to a licensed healthcare
facility or to a licensed long-term care or residential care facility for 14
days or less, the Parents will be paid for personal attendant care
services without any pro rata reduction. In the event the Beneficiary is
admitted to a licensed healthcare facility or to a licensed long-term
care or residential care facility for more than 14 consecutive days, the
Trustee shall pay the monthly amount to the Parents for the first 14
days of such admission, but shall not pay the parents for providing
personal attendant care services for the remainder of such admission,
provided such facility is capable of providing such services.
and
(iii) In the event the Beneficiary is admitted to a licensed healthcare
facility or to a licensed long-term care or residential care facility, the
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Trustee shall pay for personal attendant care services provided by the
staff of such facility, but shall not pay the Parents for providing
personal attendant care services to the Beneficiary while she is
admitted to such facility, except as provided above in paragraph 4(c)
(ii).
(ECF No. 489-2 ¶ 4.)
At the Hearing, Mr. Hill reiterated his argument that the word “withholding”
in the Reversionary Trust’s paragraph 4(c)(vi)—discussing the Hills’ payments for
providing personal attendant care services as employees—does not apply to the
withholding of federal taxes, but to the withholding of payments to the Hills if
paragraph 4(c)(ii) or 4(c)(iii) is enacted. (See ECF No. 605 at 3–4.) Thus, he argues,
the Trustee has been improperly withholding money from the Hills for federal taxes
and he should be reimbursed accordingly.
B. The Court’s Interpretation
While I understand Mr. Hill’s argument, he is misguided in his
interpretation. Interpreting the Reversionary Trust as a whole, the Trustee has
been properly withholding money. As an employer, the Reversionary Trust is
required to withhold federal income tax and the language of the Trust specifically
permits withholding from the gross amount.
Employers are required to withhold federal income tax. With exceptions not
applicable here, “every employer making payment of wages shall deduct and
withhold upon such wages a tax determined in accordance with tables or
computational procedures prescribed by the Secretary.” 26 U.S.C. 3402(a)(1). When
I ruled that the Trust was authorized to make worker’s compensation claims, I
confirmed that Mr. Hill was an employee of the Trust. (ECF No. 651 at 4.)
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Paragraph 4(c)(vi) directly applies to the “payment authorized in paragraph
4(c)(i)” and provides for “withholding and payments required from the gross annual
rate, recognizing the Parents’ status as employees of the Irrevocable Reversionary
Trust.” In turn, paragraph 4(c)(i) pertains to the payments to the Hills for providing
personal attendant care services.
As I said during the Hearing, Mr. Hill has the frankly awkward position in
this circumstance of wearing two hats. The first is as a devoted parent to a woman
who continues to thrive, despite her severe impairments, due in great part to Mr.
Hill’s constant attention, dedication, and care as a father. The other hat Mr. Hill
wears, however, is that of an employee of the Reversionary Trust, and it is in this
capacity that he receives payments authorized by paragraph 4(c)(i). Those payments
must be, and have been, properly withheld according to the unambiguous terms of
the Reversionary Trust and the applicable statutes and regulations.
It is so ORDERED.
Dated: May 29, 2018, in Denver, Colorado.
BY THE COURT:
s/ Lewis T. Babcock
LEWIS T. BABCOCK, JUDGE

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