State May Be Reimbursed From SNT Only for Assistance Paid After Trust's Creation

A New York appeals court rules that the state may obtain reimbursement from a supplemental needs trust only for medical services provided after the trust's creation, even though the beneficiary had received Medicaid for years prior to the trust's establishment. In Matter of Ruben N. v. Elizabeth T. (N.Y. App. Div., 2d Dept., No. 2006-05776, September 16, 2008).

Ruben N., a Medicaid recipient since 1992, was born with Down syndrome. In 1997, he was injured during an operation and was partially paralyzed. Ruben continued to receive Medicaid benefits, and in 2002 he collected a $1.6 million medical malpractice settlement. Ruben paid $102,423.56 to settle a Medicaid lien that had been placed on the award, and the remainder of the settlement was placed in a court-approved (d)(4)(A) or supplemental needs trust containing the typical Medicaid payback provisions.

When Ruben died in 2003, the state Department of Social Services (DSS) attempted to recover approximately $632,000 from the trust, representing the total amount of medical care paid by the state since 1992. The trustee of the trust claimed that the state was entitled to only $50,226.63, the amount paid by the state after the creation of the trust. The trustee argued that the reimbursement language in the trust did not overrule language in state and federal law that allows recovery from before a trust was created only in certain circumstances, typically relating to long-term care. The state claimed that the trust explicitly authorized recovery for all medical services paid for during the beneficiary's lifetime, regardless of when they occurred. A trial court agreed with the trustee, and the state appealed.

The Appellate Division of the Supreme Court of New York upholds the trial court's decision on broader grounds. The court determines that the "quid pro quo for disregarding those [trust] assets for purpose of eligibility is that the State will be reimbursed from the corpus of the trust, if any, for the assistance provided while the assets were disregarded" (emphasis added). Since Ruben had no assets to disregard until after the settlement was approved, the court finds that DSS may seek recovery only for services rendered once the trust existed, thereby allowing Ruben to remain eligible for services.

For the full text of this decision, go to: https://www.courts.state.ny.us/courts/ad2/calendar/webcal/decisions/2008/D17722.pdf

Latest Articles

Medicaid Applicant Failed to Exhaust Administrative Remedies

The Court of Appeals of Indiana affirmed a trial court's ruling that the appellant was not entitled to judicial review of the Indiana Family and Social Services Administration's (FSSA) Medicaid eligibility determinations and imposition of a transfer penalty. The court...

READ MORE
No Jurisdiction Over Trust Where Trustee Not Named in Suit

The Texas Court of Appeals conditionally granted the relator's writ of mandamus and ordered the trial judge to vacate its order for the return of equipment and proceeds issued against the relator in his capacity as trustee, even though the...

READ MORE
ElderLaw Answers

The Academy of Special Needs Planners provides attorneys and financial professionals with the tools they need to develop their special needs planning practices and position themselves as valuable resources for families and organizations.

Questions or Comments? Click here.

©WealthCounsel, LLC 2025

FROM THE KNOWLEDGE BANK

Using Technology to Assist Clients Remotely

State's Medicaid Lien Has Priority Even Though It Was Filed After Recipient Died