Irrevocable Trust was not an available resource when determining Medicaid eligibility

In Geyen v. Commissioner of Minnesota Department of Human Services, 964 N.W.2d 639 (2021), Dorothy Geyen’s application for Medicaid was denied. In 2011, Geyen established two substantially identical irrevocable trusts. Each trust provided that the trustee could not make loans to Geyen and could not make gifts to her. Nonetheless, the Department took the position both trusts were available resources when determining her eligibility for Medicaid. In part, the Commissioner relied on a state statute purporting to make irrevocable trusts revocable when the settlor applies for Medicaid. See Minn. Stat. § 501C.1206(b). The Commissioner also took the position that the trust failed the any circumstances test and was, therefore, available under 42 U.S.C. § 1396p(d)(3)(B).

The any circumstances test, found at 42 U.S.C. § 1396p(d)(3)(B), provides that assets in an irrevocable trust established by an individual are available for purposes of Medicaid eligibility as follows:

[I]f there are any circumstances under which payment from the trust could be made to or for the benefit of the individual, the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be made shall be considered resources available to the individual….

Courts have interpreted the “any circumstances” language in 42 U.S.C. § 1396p(d)(3)(B)(i) broadly. See, e.g., Daley v. Sec’y of Exec. Office of Health & Human Servs., 477 Mass. 188, 74 N.E.3d 1269, 1274 (2017) (explaining that “[t]he effect of the [any circumstances] test is that if the trustee is afforded even a peppercorn of discretion … the entire amount that the applicant could receive” is counted as income (quotation omitted)). If the trustee has any “leeway to respond to emergency and unexpected circumstances, the total amount available to be paid to address such circumstances is counted as fully available to the grantor.” 2 Harvey L. McCormick, Medicare and Medicaid Claims and Procedures § 27:6 (4th ed. 2020) (quotation omitted). Courts look to the terms of the trust agreement in determining whether there are any circumstances under which payment from the trust could be made to or for the benefit of the individual. See, e.g., Daley, 74 N.E.3d at 1276-81 (interpreting trust agreements to determine whether payment could be made to benefit individual under any circumstances).

Although the trust expressly prohibited gifts and loans to Geyen, the Commissioner argued that the trustee had discretion under other provisions of the trust to benefit Geyen. The court found otherwise. The Court held “because the trust agreements did not permit the trustees to make payments to or for the benefit of Geyen under any circumstances, the commissioner erred by concluding that the trust funds were available to Geyen under 42 U.S.C. § 1396p(d)(3)(B).”

The Court also held that Minn. Stat. § 501C.1206(b) could not make the trust irrevocable because it was preempted by 42 U.S.C. § 1396p(d)(3)(B). The statute goes beyond merely making an irrevocable trust revocable under state law. Because it was included in the statute which is part of Minnesota’s methodology for determining Medicaid eligibility, it violated 42 U.S.C. § 1396a(a)(10)(C)(i)(III) as a policy more restrictive than the requirements for eligibility under the SSI program.