Resources Transferred to a Trust Established by a Medicaid Applicant Are Countable, Preventing Medicaid Eligibility

In this case, the Division of Medical Assistance and Health Services (DMAHS), New Jersey’s state Medicaid agency, affirmed the denial of a Medicaid application filed by Grace M. Vinci (G.V.) by the Monmouth County Division of Social Services (MCDSS) finding that G.V. had resources in excess of $2,000 available to her, namely, resources contained in a trust. G.V. v. DMAHS

G.V. filed an application for Medicaid benefits with the MCDSS in July 2016. The caseworker denied the application, concluding that a trust created by G.V. more than 5 years before she filed the Medicaid application and containing her assets did not meet all the requirements in the Medicaid statute. G.V. filed an appeal. Before a hearing was held, G.V. filed a motion for summary judgment. Oral argument of the summary judgment motion was heard in January 2017.

After hearing oral argument on the petitioner’s summary judgment motion, the administrative law judge (ALJ) found the following facts:

  1. In May 2011, G.V. executed the “Grace M. Vinci Income Only Trust,” an irrevocable trust. The trust named the petitioner as the grantor and the petitioner’s daughter as the trustee.
  2. In the first article of the trust, the trustee was required to pay all of the net income from the trust to or for G.V. for her lifetime.
  3. In the third article of the trust, the trustee, in her sole discretion, was empowered to distribute the principal of the trust to the remainder beneficiaries, but not to the grantor.
  4. In the fourth article of the trust, the trustee was empowered to terminate the trust at any time in the trustee’s sole discretion.
  5. Two weeks after the trust was executed, the trustee acquired real property, a home that G.V. lived in.
  6. 62 months after the house was purchased by the trust, petitioner filed for Medicaid.

Based upon those facts, the ALJ concluded that the assets in the trust were countable. The ALJ held that, under the Medicaid statute, “resources contained in irrevocable trust funds are excluded (from consideration by Medicaid) only if they are inaccessible to an individual through no fault of his or her own.” Explaining those statutory terms, the ALJ held as follows:

Under both federal and state law, trusts established by a Medicaid applicant through his or her own actions cannot, for Medicaid purposes, be ‘irrevocable’ and are available and countable assets and will prevent Medicaid eligibility as being violative of public policy for diverting scarce federal and state resources from the low income elderly, the disabled, poor women and children.

Since the petitioner would have had access to the trust assets but for her decision to create a trust over which she had no control, the ALJ held that the trust assets were countable by Medicaid, thereby upholding the caseworker’s decision denying Medicaid eligibility.

The decision of the ALJ was reviewed by the Director of DMAHS. The Director upheld the ALJ’s decision denying Medicaid eligibility, in particularly broad terms. In that regard, the Director held as follows:

[A] trust containing the assets of the Medicaid applicant is a countable[,] available resource regardless of the purpose for which the trust was established, regardless of whether the trustees have or exercise discretion under the trust, regardless of any restrictions on when or whether distributions may be made from the trust, and regardless of any restrictions on the use of distributions from the trust. Any funds that individual places in his or her own trust are still counted as that person’s resources even when they are in a trust.

The case is annexed here – G.V. v. DMAHS

UPDATED ON NOVEMBER 22, 2017: Plaintiff filed a complaint in federal district court in New Jersey seeking a judgment prohibiting DMAHS from denying eligibility for Medicaid based upon the reasoning in Final Agency Decision filed by the Director, i.e., that assets transferred by a Medicaid applicant to an irrevocable trust are countable no matter how long ago the transfer was made. Initially, plaintiff sought a preliminary injunction for the relief sought. A hearing on the preliminary injunction application was held on October 25, 2017 in federal court. At the conclusion of the argument, the Court denied plaintiff’s preliminary injunction application. Soon thereafter, the parties settled the lawsuit. Under the Consent Order settling the case, the Director of DMAHS indicated that plaintiff’s medicaid application was denied not because plaintiff transferred her assets to a trust. Rather, the application was denied because, under the terms of the trust, the trustee was permitted to pay plaintiff’s rent. Thus, the very broad language used by the Director in the Final Agency Decision to hold countable all assets transferred by a Medicaid applicant to a trust was narrowed greatly.

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