Trusts as Disqualifying Medicaid Resourcesby Frank Heinisch, Christin Lovegrove on 10/22/15
This analysis if to be viewed as a starting point in research of trusts as a disqualifying resource for medicaid purposes and one should reach their own conclusions after reading the cases in full.
Frank C. Heinisch
- The following are Nebraska cases dealing with trusts counted as disqualifying Medicaid resources.
If the Medicaid applicant contributes to trust (self funded) and the trust is irrevocable if there are any circumstance of benefit to the applicant or spouse, all the trust corpus is a disqualifying Medicaid resource, no matter that it is a discretionary trust. If the trust is self-funded irrevocable with no benefit to the applicant or spouse, it still is a transfer [gift] subject to the 60 month look-back rule.
A revocable trust is a disqualifying Medicaid resource regardless of source of funding.
A discretionary third-party trust funded by third party assets (i.e. parent for child) is not a disqualifying medicaid resource for the Medicaid applicant.
A support third-party trust funded by third party assets is a Medicaid resource to the extent of the maximum amount of support available.
A discretionary support trust is a disqualifying Medicaid resource to the extent of the maximum amount of support available. [Trustee has discretion to pay support, maintenance, health and education.]
- Betty L. Thorson v. NDHHS, 274 Neb. 322 (2007). Good history of Medicaid trust resource rules. A 1989 irrevocable self-funded trust giving independent trustee discretion to supplement government programs benefits. Case decided that trust was a Medicaid resource because the "any discretion to distribute assets [to Medicaid applicant] is sufficient."
- Hazel I. Wilson v. NDHHS, 272 Neb. 131 (2006). Good historical review of Medicaid trust resource, especially time line of look back limitations. Holding the transfer from third party trusts to widow to children were not subject to Medicaid resource disqualification if the transfer is beyond the look back term. Transfers from third party trust outside look back period are not a Medicaid disqualifying resource.
- Ruth Pohlmann v. NDHHS, 271 Neb. 272 (2006). Testamentary Trust from Husband 1982 Marital Trust - all net income - power of appointment in wife for principal (never funded). Family Discretionary Trust - all net income and discretionary principal distributions. Funded in 2002. Any circumstance test only relates to self settled trust, not testamentary trust. Failure to elect against will creating a transfer was not before court.
- Ronald D. Boruch v. NDHHS, 11 Neb. App. 713 (2003). November 6, 1993 irrevocable trust - use and possession of real estate and annual income for life. History of Medicaid trust resources was reviewed. If one creates an irrevocable trust after June 9, 1993 with own funds and is a trust beneficiary or can benefit under any circumstances the trust corpus is counted in the determination of Medicaid eligibility. Any circumstance test trumps need to use look back period.
- Iris A. Doksansky v. Norwest Bank Nebraska, N.A. 260 Neb. 100 (2000). Discretionary Support Trust - attempt to garnish trust to pay son’s child support. Held child support due by son was not part of the support to be provided to son therefore not a Medicaid resource. Look to support mandate in trust to determine if the discretionary trust is a support trust. Same trust: Iris A. Smith v. Richard D. Smith, 246 Neb. 193 (1994), "We find that In re Will of Sullivan 144 Neb. 36, 12 N.W.2d 148 (1943) does not stand for the proposition that in all cases the dependents of a beneficiary of a discretionary support trust can compel a trustee to make payments for their benefit. We interpret the case to mean that the trustee of a discretionary support trust can be compelled to carry out the purposes of the trust in good faith."
- William Hoesly v. State of Nebraska, Department of Social Services, 243 Neb. 304 (1993). Renunciation of a bequest with intention to continue to qualify for Medicaid is a disqualifying resource.
- Failure of a spouse to elect against a will is a disqualifying Medicaid resource. NEBRASKA DEPARTMENT OF HEALTH AND HUMMAN SERVICES Manual Letter #2-2014 Rev. January 1, 2014, 21-001.01 example 27.
NEBRASKA DEPARTMENT OF HEALTH AND HUMMAN SERVICES Manual Letter #62-2014 Rev. July 8, 2014,
"Where a trust includes the assets of another person or persons as well as the assets of the client and/or his/her spouse, the rules in this section apply only to the portion of the trust attributable to the assets of the client and/or the client’s spouse.
"2-009.07A6f(2)(a) Payment Can Be Made From Trust
The following applies when payment may be made to the individual and/or the individual’s spouse under the terms of the trust:
1. Payments from income, or from the corpus, made to or for the benefit of the client and/or the client’s spouse are treated as income to the client.
2. If there are any circumstances under which payment from the trust corpus could be made to or for the benefit of the client and/or the client’s spouse, the portion of the corpus from which payment to or for the benefit of the client or the client’s spouse could be made must be considered a resource available to the client.
3. Any portion of the corpus that could be paid to or for the benefit of the client and/or the client’s spouse is treated as an available resource.
4. Payments from income or from the corpus that are not made to or for the benefit of the client and/or the client’s spouse are treated as transfers of assets for less than fair market value.
Payments are considered to be made to the individual when any amount from the trust, including an amount from the corpus, or income produced by the corpus, is paid directly to the individual or to someone acting on his/her behalf, e.g., a guardian or legal representative."
Also see Discretionary Trusts, Support Trusts, Discretionary Support Trusts, Spendthrift Trust and Special Needs Trust under the Nebraska Uniform Trust Code, Nebraska Law Review, Volume 86, Number 2 page 231 2007 (use Casemaker).