Trusts Controlled By the Beneficiary are Considered Resources for Medicaid Eligibility Determination Purposes

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Medicaid Attorney

From the title of the article alone, you would think this blog post is a no-brainer.  Medicaid looks back five years to determine if you made transfers of resources out of your name to someone else for less than fair market value.  Property received from a trust for the applicant’s benefit is considered available income for determining Medicaid eligibility.  Estate of Berto v. D.S.H.S., a Medicaid appeal from Washington State, demonstrates a case of simple statutory interpretation that reaffirmed basic principles of applying to the Medicaid program.

Ms. Berto and her husband had all their assets in a living trust, including their house.  Both were beneficiaries and trustees of the trust.  Berto’s husband died in 2009, and his will created a testamentary trust, (trust found in a Last Will) where all his assets were transferred.  This trust named Berto as the beneficiary and trustee, but another trustee was appointed.  She also was not allowed to determine how much money she would get.  She sold the marital home and transferred a portion of the proceeds from the living trust to the testamentary trust.  She then applied for state assistance, and was denied in part due to the money in the testamentary trust available to her as a resource.  She challenged the finding that the testamentary trust is an available resource.

As I mentioned earlier, if the applicant is a beneficiary of the trust, it does not matter how the property is issued to her.  All of the property is considered an asset for the purpose of determining eligibility.  Berto hangs her argument on a specific regulation concerning trusts created by the individual or her spouse.  Should a spouse or the applicant establish a trust with his or her assets, and the trust is not created by a will, the trust is treated as if the trust was created by the individual.  In this case, the assets contributed by the applicant or spouse to the trust are available unless contributed by will, which Berto says applies here as her husband’s will stated all property was to go to this trust.  But the court points out that there is a qualifier for this regulation.  THIS PROVISION ONLY APPLIES WHEN THE TRUST ASSETS ARE CONTRIBUTED BY PEOPLE OTHER THAN THE APPLICANT OR SPOUSE. So because no money was added into the trust through operation of the will of somebody other than Berto or her husband, the assets are countable for purposes of Medicaid eligibility.

One of the reasons why this case was only 6 pages long was because the argument failed when Berto hung her hat on a regulation that didn’t apply to her situation, so for the court this case is easy.  But there are a ton of statutes and regulations that only an experienced Medicaid attorney knows and has worked with.  It’s cases like these that show that you need an experienced Medicaid attorney on your side to navigate this system.

To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.