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When a Trust Doesn’t Count for Medicaid Eligibility

Donna came in to talk about how to pay for her mother’s nursing home care, specifically Medicaid eligibility.  She was concerned that her mother, Evelyn, had been named beneficiary of a trust created by her grandmother.  The trust had been making payments to her mother for living expenses over the years.  Upon review of the trust, I was pleased to tell her that the funds in the trust for her mother’s benefit would not prevent Evelyn from becoming eligible for Medicaid assistance, and would not even be required to be spent for nursing home costs.

Under Medicaid policy, a trust is a countable as the beneficiary’s assets if the trustee is required to pay for support or maintenance expenses of the beneficiary.  However, a trust that gives the trustee “sole discretion” as to whether to pay for various things is generally not counted as assets available to the beneficiary.  A recent case overturned a Medicaid denial based on counting such a discretionary trust.

Marian Pikula, beneficiary of a testamentary trust under the will of her late father, was denied long-term care Medicaid benefits. The Medicaid agency and a state court determined that her assets, including those in the trust, exceeded the allowable asset limit for Medicaid eligibility.  (The “countable assets” limit for these benefits in Mississippi is $4,000 for a single individual, higher for a spouse at home.)  Specifically, the agency concluded the trust was a general support trust available to her.

The Connecticut Supreme Court reversed.  The court held that the testator’s intent was to create a discretionary, supplemental needs trust; consequently, the trust principal and income was not “available” to Pikula.  Because income and principal distributions were within the sole and absolute discretion of the trustee and any unused income was to be added to principal, and considering the small value of the trust, it was clear that the testator (will-maker) did not intend to provide for Pikula’s basic needs.  The state Supreme Court reversed with instructions to grant her appeal.  Pikula v. Dept. of Social Services, 2016 WL 1749666 (Conn. May 10, 2016)

We have drafted many trusts so that they would not disqualify the beneficiaries for valuable SSI and Medicaid benefits, and we have appealed numerous Medicaid denials based on erroneous interpretations of trusts.  To avoid such problems in your planning, call us today to discuss this important issue.

Richard Courtney

Richard Courtney

Richard A. (“Rick”) Courtney has practiced law since 1978 and is a founding partner of the Jackson law firm of Frascogna Courtney, PLLC, where he chairs the Courtney Elder Law Associates planning group. His primary areas of practice are elder law, public benefits law (Medicaid, Medicare and SSI), personal asset protection and estate planning, trusts and trust administration, special needs planning for persons with disabilities, guardianships and conservatorships, nursing home and disability rights, and probate administration. Rick is the first attorney in Mississippi designated a Certified Elder Law Attorney by the American Bar Association-accredited National Elder Law Foundation. He is a former Assistant Dean and Adjunct Professor of Law at Mississippi College School of Law and current Adjunct Professor – Skills Fellow at University of Mississippi Law School of Law.
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