State Can Recover From SNT Even Though Beneficiary Is Under 55 Years Old

In a case argued by Academy of Special Needs Planners National Director Kevin Urbatsch, a California appeals court rules that the state has the right to recover over $400,000 from a first-party special needs trust established for a beneficiary under the age of 55 because the statute preventing recovery for services provided to people under 55 only applies to recovery from their estates and not recovery from (d)(4)(A) trusts. Herting v. California Department of Health Care Services (Cal.App.Ct. (6th. Dist.), No. H040220, March 27, 2015).

Alexandria Pomianowski was seriously injured in a car crash in 2009 when she was 19 years old. In 2011, $1,424,019.39 from a settlement related to that crash was placed into a first-party special needs trust for Alexandria's benefit with her mother, Deborah Herting, serving as trustee. Alexandria died in January 2013 with $1,294,453.23 left in the trust. The Department of Health Care Services filed a $417,812.43 claim for Medicaid reimbursement against the trust.

Ms. Herting petitioned the court to terminate the trust and to deny the Department's reimbursement claim, arguing that state and federal law prevent the Department from recovering for services provided to Medicaid beneficiaries who were under the age of 55 when they received care. The Department opposed the request to deny its claim, arguing that the under 55 restriction did not apply when the Medicaid recipient was the beneficiary of a trust that 1) specifically provided for Medicaid reimbursement and 2) was expressly designed to enable the beneficiary to qualify for Medicaid in the first place. The court granted Ms. Herting's petition to settle the trust but also granted the Department's claim. Ms. Herting appealed.

The Court of Appeals of California, 6th District, upholds the trial court's decision. The court determines that all of the language in the state and federal laws preventing recovery for services provided to under 55-year-old Medicaid beneficiaries "apply to recovery from the aid recipient's estate, whereas the Department's claim was made pursuant to the statutes governing special needs trusts and the terms of the trust at issue. We agree with the Department that this distinction controls the outcome of the parties' dispute. Alexandria's trust was not estate property but an instrument created for the specific and exclusive purpose of ensuring that she qualify for Medi-Cal benefits and have enough resources to supplement those benefits and enhance her compromised quality of life."  

For the full text of this decision, go to: https://scholar.google.com/scholar_case?q=+Herting+v.+California+Department+of+Health+Care+Services&hl=en&as_sdt=40000006&case=5185990615097449222&scilh=0

Did you know that the ElderLawAnswers database now contains summaries of more than 2,000 fully searchable elder law decisions dating back to 1993?  To search the database, click here.