Reversing all lower court rulings in the case, New York's highest court holds that a Medicaid applicant did not have the potential to receive the assets of a pre-1992 "trigger trust" simply because she failed to exempt herself as a remainder beneficiary of the trust. In Re Ferrugia v. New York State Dept. of Health (N.Y., No. 25, Sept. 2, 2004).
In 1986, Martha Ferrugia established an irrevocable "trigger trust," which provided Ms. Ferrugia with income and principal as long as she was not in a nursing home. (Such trusts are now not permitted unless created before 1992.) Once she entered such a facility, the trust would terminate and the remaining assets would be distributed to the beneficiaries. The trust reserved for Ms. Ferrugia the right to change remainder beneficiaries and did not exempt Ms. Ferrugia herself as among those who could be remainder beneficiaries. When Ms. Ferrugia applied for Medicaid benefits, the Chautauqua County Department of Social Services determined that because she failed to take action to obtain the trust proceeds to pay for her medical care, she had made a transfer to qualify for Medicaid.
The Department of Health upheld the determination, as did the trial court, which ruled that given Ms. Ferrugia's power to claim for herself all remaining assets of the trust at termination by naming herself as beneficiary, the trust assets were within her control and constituted available resources for Medicaid purposes. (See Ferrugia v. New York State Dep't of Health (N.Y. Sup. Ct. 192 Misc.2d 709).) The Appellate Division of the New York Supreme Court affirmed. (See In Re Ferrugia v. New York State Dep't of Health (N.Y. App. Div., 4th, CA 03-01169, March 19, 2004).
New York's highest court, the Court of Appeals, reverses. The court states only that it adopts the reasoning of the two Appellate Division dissenters, who characterized the Department's determination that the trust assets were available to Ms. Ferrugia as "irrational." "[B]ecause petitioner is the grantor," the dissenters wrote, "she cannot be a remainder beneficiary, and the fact that she is limited to appointing remainder beneficiaries forecloses her from providing for the reversion of the trust property to herself."
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