Connecticut's Supreme Court rules that the creation of a testamentary trust is not a disqualifying transfer of assets under Medicaid law. Skindzier v. Commissioner of Social Services (Sup. Ct. Conn., SC 16471, Dec. 4, 2001).
Victoria Skindzier was in a nursing home from June 1995 until her death on October 20, 2000. Her husband, Bernard, executed a will two months before his death on May 20, 1996. Under the will's terms most of Mr. Skindzier's property passed to the trustee of two trusts. The will required that the trustee pay the income from the trusts to Mrs. Skindzier during her lifetime and, upon her death, distribute the trust assets to various individuals. When Mrs. Skindzier applied for Medicaid benefits in late 1997, the Department of Social Services denied the application on the grounds that the creation of the trusts constituted a disqualifying transfer of assets under Medicaid rules.
The trial court reversed the Department's decision. The court based its ruling on its interpretation of the interaction between 42 U.S.C. § 1396p (c) and (d). Section 1396p (c) (1) (B) (i) provides that the look-back period for transfers of assets is 36 months "(or, in the case of payments from a trust or portions of a trust that are treated as assets disposed of by the individual pursuant to paragraph [3] [A] [iii] or [3] [B] [ii] of subsection [d] of this section, 60 months) . . ." Section 1396p (d) (2) (A), meanwhile, pertains only to trusts established "other than by will." Reading these subsections together, the court concluded that the exemption of testamentary trusts from the provisions of subsection (d) also operated to exempt such trusts from the general asset transfer provisions of subsection (c).
The Department appealed, arguing that because subsection (c) specifically exempts certain trusts from its disqualifying transfer of assets provisions, the fact that a specific exemption for testamentary trusts is not included in that section indicates an intent to subject them to the transfer provisions.
The Supreme Court of Connecticut affirms the trial court, finding that testamentary trusts are exempt from the asset transfer rules that pertain to trusts. "We conclude," the court writes, "that Congress did not need to include a specific exemption for testamentary trusts in subsection (c) because it had already specifically exempted them from subsection (d), which section subjects trusts to the disqualifying transfer of assets rules of subsection (c) in the first instance. . . . We can perceive no reason for Congress to have exempted testamentary trusts from the rule that trust assets that could have been, but were not, paid to an individual are to be considered available to the individual, but not to have exempted them from the rule that when trust assets cannot be paid out under any circumstances, they are to be considered assets disposed of by the individual." However, the court rejects the Skindzier estate's claim for attorney's fees, finding that the Department was "substantially justified" in its interpretation.
To download this decision in PDF format, go to: https://www.jud.state.ct.us/external/supapp/Cases/AROcr/258cr7.pdf
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