Pre-OBRA Supplemental Trust Is Countable by Medicaid

The Supreme Court of Nebraska affirms a lower court ruling that an irrevocable trust giving the trustee the power to supplement government benefits is an available asset in determining the beneficiary's Medicaid eligibility. Thorson v. Nebraska D.H. & H.S. (274 Neb. 322 Neb. 2007).

Betty L. Thorson executed an irrevocable trust on December 2, 1989. Ms. Thorson is the grantor and beneficiary of the corpus of the trust and her son is the trustee. At his sole discretion, the trustee may use income and principal "only to supplement other benefits received by or available to [Ms. Thorson]." On December 19, 2003, Ms. Thorson applied for Medicaid. Attached to her application was an accounting of her trust's assets, totaling $69,740.68. Her application was subsequently denied.

The Nebraska Department of Health and Human Services (DHHS) affirmed the denial on the grounds that Ms. Thorson was ineligible due to the availability of her trust's assets. The district court affirmed DHHS' ruling. Ms. Thorson appealed, arguing that the trust language indicates the clear intent that the trust income and principal be used only to supplement, not replace, other benefits received by Ms. Thorson.

The Nebraska Supreme Court affirms, ruling that where a trustee has any discretion to distribute assets, the trust is an available asset. "We cannot say," the court writes, "that a distribution of the Trust's assets to Thorson if she were to receive any governmental assistance would be an abuse of the trustee's discretion. Accordingly, we cannot say that DHHS was wrong in determining that the assets of the Trust were an available resource."

To download the full text of this decision in PDF format, go to: https://www.supremecourt.ne.gov/opinions/2007/october/oct19/s06-223.pdf
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