In general, an irrevocable trust established by either spouse is a countable, available asset if there are any circumstances under which the applicant could receive money from the trust. But this policy does not apply to a trust “established by will.” In this case, the petitioner’s husband died and established a testamentary trust for her benefit, which did not allow the petitioner to distribute funds to herself. ALJ John Tedesco concluded (lacking any agency argument on this point) that the trust was an unavailable asset.
Preliminary Recitals
Pursuant to a petition filed June 11, 2015, under Wis. Stat. § 49.45(5), and Wis. Admin. Code § HA 3.03(1), to review a decision by the Dodge County Department of Human Services in regard to Medical Assistance, a hearing was held on July 21, 2015, at Juneau, Wisconsin.
The issue for determination is whether the agency erred in its denial of the MA application based on its counting assets of an irrevocable testamentary trust as available to her.
There appeared at that time and place the following persons:
PARTIES IN INTEREST:
Petitioner:
—
Petitioner’s Representative:
Attorney Elaine Shanebrook
120 N Main Street Suite 310
PO Box 87
—
Respondent:
Department of Health Services
1 West Wilson Street, Room 651
Madison, WI 53703
By: —
Dodge County Department of Human Services
143 E. Center Street
Juneau, WI 53039-1371
ADMINISTRATIVE LAW JUDGE:
John P. Tedesco
Division of Hearings and Appeals
Findings of Fact
- Petitioner (CARES # —) is a resident of Dodge County.
- Petitioner’s husband died on 6/16/12.
- Petitioner’s husband’s will established a testamentary trust benefitting petitioner. The trust became irrevocable at the husband’s death. Terms of the trust do not allow petitioner to distribute the funds of the trust to herself.
- Petitioner applied for MA. The agency denied he based on excess assets of the trust.
- Petitioner appealed.
Discussion
MA certification is available if all conditions of eligibility– including meeting the asset test are providing necessary, requested verification, are satisfied. Wis Admin. Code § DHS 103.08(1). Certification pursuant to an application can be made retroactive for up to three months. For a single person seeking Institutional MA coverage, the asset limit is $2,000. Wis. Stat. §49.47(4)(b). See also MA Eligibility Handbook (MEH), Table 39.4 (EBD), viewable online at http://www.emhandbooks.wi.gov/meh-ebd/.
The agency must request verification of non-exempt assets for Institutional MA applicants. MEH, §20.3.5. The agency requested verification of the Trust principal under this rubric. The MEH also says that verification of exempt assets is not required. Exempt assets are listed in the statute: a homestead, household/personal possessions, a motor vehicle, burial spaces/agreements, small life insurance policies, and certain burial funds. Wis. Stat. §49.47(4)(b). The problematic asset in this case, a trust, is not an exempt asset, although it proves below to be a non-exempt, unavailable asset. Because the trust was not an exempt asset, the agency was correct to require verification.
The agency was concerned that the petitioner’s Trust is an available asset that puts her over the $2,000 asset limit. The Trust is irrevocable, because the grantor is deceased and therefore cannot revoke it. The MEH instruction is as follows:
16.6.4 Irrevocable Trusts
An irrevocable trust is a trust that cannot, in any way, be revoked by the grantor.
16.6.4.1 Trust Established With Resources of a Third Party
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… .
16.6.4.2 Trust Established With Resources of the Individual or Spouse
If the resources of the individual or the individual’s spouse were used to form all or part of the principal of the trust, some or all of the trust principal and income may be considered a non-exempt asset, available to the individual. If there are any circumstances under which payment from the trust could be made to or for the benefit of the individual at any time no matter how distant, the portion of the principal from which, or the income on the principal from which, payment to the individual could be made shall be considered non-exempt assets, available to the individual.
This treatment applies regardless of:
- the purpose for which a trust is established;
- whether the trustees have or exercise any discretion under the trust;
- any restrictions on when or whether distributions may be made from the trust; or,
- any restrictions on the use of distributions from the trust.
Example 1: Doug is a 65 year old Medicaid applicant. Several years ago, Doug transferred his life savings of $60,000 to an irrevocable trust, naming himself as the beneficiary. Doug’s brother, Jim was appointed as the trustee. Under the terms of the trust, Jim could disburse up to $10,000 annually, from either trust principal or trust income, either directly to Doug or indirectly to provide some benefit for Doug. The trustee had sole discretion as to when and how these trust disbursements would be made, but under no circumstance could they exceed $10,000 in a 12 month period. Because the entire corpus (principal of the fund) could eventually be distributed, $60,000 would be considered an available non-exempt asset for Doug’s Medicaid eligibility determination, even if the trustee decides not to make any actual disbursements.
…
The policies described above also do not apply to irrevocable trusts created by a will, unless the terms of the trust permit the individual/beneficiary to require that the trustee distribute principal or income to him or her.
MEH, 16.6.4 (bold emphasis added). In its written submission, the agency failed to address this express exclusion for irrevocable testamentary trusts. At hearing, the agency representative stated that the entirety of the agency’s argument is in the written submission. Thus, I have received no argument from the agency to counter the petitioner’s interpretation.
Because the Trust was created by a will, and the terms of the Trust do not permit the beneficiary to distribute principal or income to her, the Trust is an unavailable asset. Thus, the agency erred in counting this as an available asset.
Conclusions of Law
The agency erred in counting this as an available asset.
THEREFORE, it is
Ordered
That the matter is remanded to the agency for a redetermination of eligibility without consideration of the irrevocable testamentary trust as an available asset. This redetermination shall be completed within 10 days. If otherwise eligible, petitioner’s benefits shall be retroactive to her application date.
[Request for a rehearing and appeal to court instructions omitted.]