National Bank v. Department of Social Services

Griffin, P.J.

(concurring in part and dissenting in part). I agree with the majority that petitioner’s trust income may be included in the Medicaid qualifying trust formula for determining eligibility. Further, I agree that the lower court did not clearly err in finding the installment payments to be principal rather than income. However, I disagree and respectfully dissent from the majority’s reversal of the circuit court’s decision regarding the trust principal.

Contrary to the majority, I find no clear error in the circuit court’s conclusion that the trustee possesses no discretion under the trust instrument to expend amounts of trust principal. While the trustee has discretion to distribute principal to petitioner for the specific purposes of buying a home, a business, or a honeymoon or wedding trip, the trustee is not allowed to distribute principal to petitioner for any other purpose, at least as long as the trust corpus exceeds $50,000. Similarly, the termination provisions of the trust do not provide the trustee with the requisite discretion that would allow the principal to be considered a countable asset for Medicaid purposes. One termination clause allows the trustee to distribute trust principal only when the principal value is $50,000 or less. At the time of the pertinent proceedings below, the principal amount far exceeded $50,000; therefore, the limited discretion provided to the trustee was unavailable. Although the second termination provision of the trust grants the trustee discretion to distribute both principal and income to petitioner, that discretion is only available after all appeals of the ineligibility determination have been exhausted and consequently was inapplicable to the *366 present circumstances. As noted by the original hearing referee, C. David Jones:

I do not believe the trustee has the discretion to disL tribute any of the principal under this section. Under the current circumstances, such distribution would be an unreasonable abuse of discretion. Since claimant is comatose and needs care in a nursing home, she is not able to take a trip, to engage in a business, alone or in association with others, or to live in a private home. The trust contemplates claimant’s engaging in business herself not through her conservator. Since there is no indication claimant is engaged, she has no need for a wedding or a honeymoon.

Pursuant to the analysis in Cohen v Comm’r of the Division of Medical Assistance, 423 Mass 399, 411-412; 668 NE2d 769 (Mass, 1996), the circumstances under which the principal can be distributed are “completely fixed for all circumstances,” and petitioner’s comatose state and subsequent death eliminated even the remote possibility of any of these circumstances occurring.

In Kokoska v Comm’r of the Division of Medical Assistance, the most closely analogous of the four separate actions decided sub nom Cohen, supra at 420-424, the court determined that the full amount of the interest and principal of the trust established for the benefit of the petitioner who, like petitioner in the instant case, was rendered comatose as a result of medical malpractice, was available when determining eligibility for Medicaid benefits. The court, while noting that “Kokoska’s situation is in some ways different from and more sympathetic than that of the other plaintiffs,” Cohen, supra at 423, nonetheless concluded:

*367 The terms of the trust give the trustee discretion to pay both income and principal to the beneficiary for a wide and generally defined range of purposes, limiting that discretion only to assure Kokoska’s eligibility for public assistance in spite of the resources otherwise available to her. Accordingly, . . . the measure of the trustee’s discretion is the full amount of the trust, both principal and income, and that is the amount deemed available to her for purposes of determining her Medicaid eligibility.

* * *

. . . [Although the Kokoska trust limits the trustee’s discretion, the MQT statute as we interpret it requires that the division disregard such a limitation when assessing availability. The statute asks only what the maximum amount of funds available to the beneficiary are in any circumstances pursuant to the exercise of the trustee’s discretion. That amount, as we have seen, is the full amount of the interest and principal of the trust. [Id. at 421-424.]

By contrast, the instant trust narrowly prescribes the trustee’s discretion to disperse the trust principal, limiting that discretion to situations that, by virtue of petitioner’s comatose condition, realistically would never arise. Given that petitioner’s condition was obviously known and contemplated when these trust provisions were created, I will not ignore these circumstances and view the trust instrument in a vacuum. To do so would stretch Cohen beyond its rationale. A more reasonable interpretation and application of Cohen to the present case is the conclusion that the trust instrument does not confer discretion on the trustee to distribute the trust principal to the beneficiary, thereby making the principal unavailable for Medicaid eligibility purposes.

In sum, because the terms of the trust in question do not give the trustee discretion to distribute the *368 trust principal, the trial court did not clearly err in holding the principal is not available as a countable asset for purposes of Medicaid eligibility. 42 USC 1396a(k); Cohen, supra. However, the trust instrument does grant the trustee more latitude with respect to expenditures of income. Therefore, I conclude that the trial court clearly erred to the extent it included trust income within the scope of unreachable assets. Whether the income of the trust exceeded the monetary limit for Medicaid eligibility during the applicable period is a question of fact that must be determined on remand by the circuit court.

I would affirm in part, reverse in part, and remand for further proceedings.