California's Medicaid program (Medi-Cal) may not be reimbursed from the assets of a (d)(4)(A)special needs trust upon the beneficiary's death if the sole recipient of the beneficiary's estate is an adult disabled child.
Etoria Hatcher received lawsuit settlement proceeds, which were placed in a court-approved special needs trust (SNT). Mrs. Hatcher's daughter, Brenda Arnold, who is permanently and totally disabled, was the SNT's settlor and trustee. The trust was created pursuant to California Probate Code section 3600 et seq, which provides that such trusts will reimburse the Department of Health Services from the remaining trust assets after the beneficiary's death. Mrs. Hatcher subsequently began receiving Medi-Cal (Medicaid) program benefits until her death in September 1999. Ms. Arnold, who was the sole recipient of her mother's estate, did not notify the Department of the death and withdrew nearly all the remaining trust assets. Upon learning of Mrs. Hatcher's death, the Department demanded reimbursement. Ms. Arnold refused to pay the Department's claim, arguing that any property distributed to her was exempt from reimbursement claims because she was Mrs. Hatcher's sole surviving child and disabled. The trial court entered judgment in favor of the Department and Mrs. Arnold appealed.
The Court of Appeal of California reverses, concluding that under state and federal law an SNT beneficiary's adult disabled child is exempt from Medi-Cal's reimbursement claims. "We can discern no reason that the remaining assets of a court-approved special needs trust should be treated differently than any other assets of an estate," the court writes.
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