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Proper Trust Language Can Save Medicaid Eligibility

Medicaid Trust

Proper Trust Language Can Save Medicaid Eligibility

George Wilson worked for many years for Van Roy and Carolyn Miller. Then Mr. Miller died, and George, although continuing to work for Mrs. Miller, began to experience the infirmities of his own advancing age. He worried about how he would support himself and his wife when he was no longer able to work.

Mrs. Miller worried too, and she determined to leave some money in trust for George and his wife Hazel. She did not, however, want to supplant any government benefits to which George and Hazel might be entitled. In particular, she did not want the trust to disqualify them for Medicaid benefits.

Applicable Statutes

Under Missouri law (§ 208.010.2 RSMo Supp. 1990), unmarried individuals who have $1,000 or more in resources and married couples who have more than $2,000 are not eligible for Medicaid benefits.

The federal Medicaid Act requires states to determine whether Medicaid applicants have “available” to them resources in excess of the limits.

The question facing Mrs. Miller was whether the trust she proposed for George and Hazel would make the trust corpus “available” to them and so disqualify them for Medicaid. Her attorney found the answer. With the following language he crafted a trust which benefitted George and Hazel but left them eligible for Medicaid:

The Language That Worked

“[F]or many years George H. Wilson … has been employed by [Miller] … but is now approaching an age when he will no longer be able to work and is apprehensive as to means for the support of himself and his wife …; and in appreciation of this long and faithful period of service and to dispel any … apprehensions, [Miller] wishes to provide for said George H. Wilson and his wife, Hazel Wilson, an income adequate for their needs as long as they shall live, and in order to accomplish this wishes to establish a trust for their benefit as hereinafter provided.”

The trust was funded with a one-time payment of $90,000. The agreement further provided:

“[T]he Trustee shall pay and distribute to . . . Wilson a pension at the rate of $5,200 per year, to be paid in monthly installments of $433.33 each month, from the income of the trust to the extent its income is available for that purpose, or from corpus to the extent the income is insufficient. Such payments shall continue as long as … Wilson shall live; and if he shall be survived by his wife, Hazel Wilson, then from and after his death payments at the same rate shall thereafter be made to his wife, Hazel Wilson, as long as she shall live.”

The agreement continued:

“If at any time or from time to time, in the sole discretion of the Trustee, the aggregate of the payments to George H. Wilson or Hazel Wilson hereunder and the funds available from all other sources should be insufficient to provide adequately for the support, maintenance and health of said beneficiaries or their funeral expenses in the event of the death of either of them, the Trustee may pay to either of them or expend for the purposes mentioned such sum or sums out of the income, if available, or out of the corpus of the trust estate as the Trustee, in its sole discretion shall deem advisable for such purpose.

Settlor’s Intent

That’s the language that worked. The Missouri Court of Appeals’ Western District held on January 26 that whether the assets of a trust are “available” within the meaning of the Medicaid restrictions depends on the settlor’s intent.

The court found that Mrs. Miller’s intent was to supplement, not supplant, other financial support for the Wilsons.

“Neither the settlor in Tidrow [v. Director, Missouri State Division of Family Services, 688 S.W.2d 9 (Mo. App. 1985)] nor Miller had a legal obligation to provide for their respective trust beneficiaries. Each intended for their trusts to be used for the beneficiary’s lifetime, and both anticipated that the trust corpus would be available for remaindermen. Both provide the trustees with discretionary power over the trust funds.”

The trust corpus was held not “available” to George Wilson, and the Division of Family Service’s denial of Medicaid benefits was reversed.

The Case

The case is In Re: Missouri Division of Family Services v. Wilson, MLW No. DW-5055, handed down January 26.

The Tip

Do not attempt a Medicaid-proof trust without consulting the Wilson and Tidrow cases. Within the parameters set by those cases it can be done.

Other Cases

Other cases decided in 1992 and reported in Missouri Lawyers Weekly concerning the “availability” of resources to Medicaid applicants are:

* West v. Director, Missouri Division of Family Services, MLW No. DS-0979, (cash surrender value of a life insurance policy, not the death benefit, is “available” as a resource).

* In Re: Dueker v. Missouri Division of Family Services, MLW No. DE-4450, (cash value of a life insurance policy is not an “available” resource once it has been borrowed against and the money paid out to the applicant’s nursing home).

* Emerson v. Steffen, et al., MLW No. A-1608, (income used to make court-ordered child support payments is an “available” resource).