A trust is not an available asset if it was funded by a third party and the Medicaid applicant or member cannot, by the terms of the trust, require the trustee to make distributions. In this case, the petitioner was the beneficiary of a testamentary trust created and funded by his parents, which gave the trustee sole discretion over distributions. ALJ John Tedesco concluded this trust was not a countable asset for the petitioner.
This decision was published with support from the Elder Law & Special Needs Section of the State Bar of Wisconsin and the Wisconsin chapter of the National Academy of Elder Law Attorneys.
Preliminary Recitals
Pursuant to a petition filed on January 19, 2024, under Wis. Stat. § 49.45(5), and Wis. Admin. Code § HA 3.03, to review a decision by the Marquette County Department of Human Services regarding Medical Assistance (MA), a hearing was held on March 6, 2024, by telephone.
The issue for determination is whether
There appeared at that time the following persons:
PARTIES IN INTEREST:
Petitioner:
—
Petitioner’s Representative:
—
Respondent:
Department of Health Services
1 West Wilson Street, Room 651
Madison, WI 53703
By:
Marquette County Department of Human Services
480 Underwood Avenue
PO Box 99
Montello, WI 53949-0099
ADMINISTRATIVE LAW JUDGE:
John Tedesco
Division of Hearings and Appeals
Findings of Fact
- Petitioner (CARES # —) is a resident of Marquette County.
- Petitioner was enrolled in the Medicaid Purchase Plan program (MAPP).
- Petitioner receives SSI.
- The agency learned of the — Family Trust and considered it an available asset to petitioner.
- The agency terminated enrollment in the MAPP due to petitioner having assets over the $15,000 limit.
- The trust is an irrevocable trust created under petitioner’s mother’s will. The trust was funded from petitioner’s parents’ assets for the purpose of providing for the health and support of petitioner.
- A trustee has sole discretion to apply funds from the income or principal of the trust for Petitioner’s needs. The trustee has the sole discretion to direct payments from the trust or terminate the trust. The full trust document is in the record as an exhibit.
- On December 18, 2023, the agency issued a notice of decision to the Petitioner informing him that his enrollment in MAPP would terminate effective December 1, 2023 due to assets exceeding the program limit. The notice informed the Petitioner that the agency counted the trust as an available asset.
- On January 19, 2024, an appeal was filed on behalf of the Petitioner with the Division of Hearings and Appeals.
Discussion
The MAPP program allows disabled individuals to work but to retain eligibility for MA. Wis. Stat., §49.472; Medicaid Eligibility Handbook (“MEH”) § 26. If net income is below 250% of the federal poverty level, the person is eligible for the program. Wis. Adm. Code, §DHS 103.03(8)(b); MEH § 26.4.2. The asset limit for MAPP is $15,000. Wis. Adm. Code, §DHS 103.03(8)(c), referring to Wis. Stat., §49.472(3)(b); Handbook, App. 26.4.1.
The issue in this case is whether the agency correctly counted the trust assets as available assets to the Petitioner. The agency relied on the provisions in the Medicaid Eligibility Handbook (MEH) §§ 16.6 and 16.6.5 to determine that the trust is a countable asset.
The Petitioner asserts that the trust is not a countable asset.
The trust in this case is considered a “third party” trust because it is established with assets that belong to someone other than the MA applicant. As such, it is not governed by Wis. Stat. § 49.454 which applies to trusts established with resources or assets of the MA applicant (known as first party trusts).
The Medicaid Eligibility Handbook explains that:
If the resources of someone other than the individual or their spouse (i.e., a third party),were used to form the principal of an irrevocable trust, the trust principal is not an available asset unless the terms of the trust permit the individual to require that the trustee distribute principal or income to him or her.
MEH at Section 16.6.4.1 (emphasis added). In this case, the Petitioner has no legal authority to revoke or terminate the trust or to direct the use of trust assets. That discretion is solely in the trustee. Petitioner cannot sell his interest in the trust. Petitioner cannot require any action by the trustee or effect any action on the trust itself. In other words, the funds in the trust are not available to the Petitioner. The fact that the trust distributions are, under the terms of the trust, for the benefit of petitioner does not mean he has any authority under the terms of the trust to require distributions to him.
In this case, the third-party trust formed and funded by the Petitioner’s mother, with no legal authority on the part of the Petitioner to revoke or terminate the trust and no authority to direct the use of the funds, is not a countable asset in determining the Petitioner’s eligibility for MA.
Conclusions of Law
The agency should not count the funds in the trust as countable assets in determining the Petitioner’s MA eligibility.
THEREFORE, it is
Ordered
That this matter is remanded to the agency to re-determine the Petitioner’s MA eligibility without counting the remaining assets in the trust. The agency shall send a new notice to the Petitioner regarding his MA eligibility with new appeal rights. These actions shall be completed within 10 days of the date of this decision.
[Request for a rehearing and appeal to court instructions omitted.]