Irrevocable Trust Set Up by Medicaid Applicant's Children Is Available Asset

A Wisconsin appeals court rules that a Medicaid applicant who transferred funds to her children, who then put them in an irrevocable trust for her benefit, is ineligible for Medicaid because the trust is an available asset under state law, even though the transfer occurred 17 years before she applied for Medicaid. Hedlund v. Wisconsin Dept. of Health Services (Wis. Ct. App., No. 2010AP3070, Oct. 13, 2011).

In June 1991, Lucille Hedlund transferred all of her assets except one checking account to her children. On the same day, the children transferred the assets to an irrevocable trust to benefit Mrs. Hedlund. In June 2008, Mrs. Hedlund entered a nursing home and applied for Medicaid benefits.

The state found that the trust was an available asset under state law and denied her benefits. Under state law, a trust is available if the applicant's assets were used to fund the trust and if the trust was formed under the direction of the applicant. Mrs. Hedlund appealed the denial, arguing that her assets were not used to form the trust because she had transferred her assets to her children. The state denied the appeal, and the trial court affirmed. Mrs. Hedlund appealed.

The Wisconsin Court of Appeals affirms, holding that the trust is an available asset. The court rules that state law does not require the applicant to have legal ownership of the assets used to form the trust at the time the trust is formed. According to the court, the fact that Mrs. Hedlund's children put the transferred assets in a trust to benefit Mrs. Hedlund on the same day they were transferred created a reasonable inference that her children created the trust at her direction.

For the full text of this decision, go to: https://www.wicourts.gov/ca/opinion/DisplayDocument.pdf?content=pdf&seqNo=72249

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