ELA Member Persuades Montana’s High Court That Irrevocable Trust Is a Non-Countable Asset

Reversing a lower court, the Supreme Court of Montana finds no circumstances under which the principal of an irrevocable trust could be made available to a Medicaid applicant, and thus rules that the trust is a non-countable asset. Montana ElderLawAnswers member attorney Sol Lovas represented the applicant’s estate. Estate of Scheidecker v. Montana Dept. of Public Health and Human Services (Mont., DA 20-0534, June 29, 2021).

In 2006, Marilyn Scheidecker bought a house in Billings, Montana, and moved into it with her sister. In early 2008, Ms. Scheidecker sold a one-half interest in the house to her sister.  The sisters then established an irrevocable trust and each transferred into it her half-interest in the house, the trust’s sole asset.  Both sisters continued to live in the house. The trust provides that the “Trustee has no power to invade principal for the Settlor's benefit and shall not do so under any circumstances.” 

In 2016, Ms. Scheidecker moved into a long-term care facility and applied for Medicaid the following year.  The Montana Department of Public Health and Human Services denied her application on the grounds that the trust was revocable, making Ms. Scheidecker's one-half interest in the trust's principal a countable resource.  The decision was upheld at a fair hearing and by the state’s Board of Public Assistance, after which Ms. Scheidecker appealed to court.

The trial court concluded that the trust is irrevocable but nonetheless upheld the benefit denial because it found circumstances under which payments of trust principal could be made to Ms. Scheidecker.  Specifically, the court ruled that if the trust were terminated, “the beneficiaries could thereafter, individually, jointly, directly, or indirectly, give Marilyn this trust property for her benefit.” [emphasis in original]  Ms. Scheidecker appealed, arguing that under the terms of the trust there are no circumstances through which she could access its principal.  (Ms. Scheidecker died during the pendency of the case, and her estate continued in her place.)

In what it says is an issue of first impression in the state, the Supreme Court of Montana reverses the lower court’s conclusion that the trust is a countable asset, finding no circumstances under which payment from the trust principal could be made for Ms. Scheidecker’s benefit.  The court rejects the Department’s various “imaginary or improbable circumstances” by which Ms. Scheidecker could retain ownership over the trust’s principal.  “As Amicus National Academy of Elder Law Attorneys, Inc., and Montana Elder Law, Inc., note,” the court writes, “a settlor's eligibility for Medicaid coverage is determined by looking at the terms of the trust, not by what the trustee or beneficiaries hypothetically could agree to do despite the terms of the trust.” [emphasis in original]

For the full text of this decision, click here.

ElderLawAnswers member attorney Sol Lovas and Janna Wittenberg, both of Legacy Law Center, P.C., in Billings, represented Ms. Scheidecker’s estate.

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