I am the Chairman of the Litigation Committee of the National Academy of Elder Law Attorneys, commonly known as NAELA. NAELA has approximately 4,500 members nationwide. NAELA’s membership consists of attorneys throughout the United States who have a shared interest in legal issues affecting the elderly and disabled.
Being a member of the Litigation Committee is a privilege. I am able to discuss legal issues affecting the elderly and disabled with some of the most experienced elder law attorneys our nation has to offer. The Litigation Committee fields requests for assistance from elder law attorneys throughout the country who request the assistance of NAELA with litigation in which they are engaged.
Recently, a friend of mine on the Committee–Rene Reixach, Esq., a lawyer from upstate New York who has a storied history litigating various elder law issues–told me about a recent case of his. The litigation occurred in Connecticut, but the impact of the litigation may stretch well beyond the borders of that state.
Medicaid is a medical payment plan for needy individuals. If a person qualifies for Medicaid, Medicaid will pay for many of his medical needs. As an elder law attorney, I frequently see people who want to qualify for Medicaid because they are residing in a nursing home or assisted living residence, and they want Medicaid to pay for the nursing home or assisted living residence.
From time-to-time, a person who is already on Medicaid or who is seeking to qualify for Medicaid will be the beneficiary of a trust that a family member established for them. For instance, let’s assume that Joe Smith is disabled as the result of a car accident and requires assistance that can only be provided in a nursing home. Joe qualifies for Medicaid, and Joe has been a Medicaid beneficiary for the past two years.
Joe’s mother dies. Joe’s mother never changed her last will and testament after Joe’s accident, and her Will leaves the entirety of her estate to Joe. Before his accident, Joe was having problems with alcohol, which contributed to his car accident, so his mother put a trust in her Will for Joe’s benefit.
Joe’s cousin is the trustee of the trust. The money in the trust is to be used for Joe’s health, maintenance, and support. The trust contains what they call a “spendthrift clause,” which is words in the trust/Will that prevents Joe and Joe’s creditors from accessing the money in the trust until such time as Joe’s cousin-trustee distributes the money from the trust to Joe.
Now, in the past, if a person came to me with a trust such as this, I’d tell them that the trust caused a problem for Joe’s continued Medicaid eligibility because the trust is a “support trust”; the terms of the trust say that the trustee shall distribute money to Joe for his health, maintenance, and support. Such a trust has traditionally been thought to disqualify a person from Medicaid benefits because the money in the trust can be used to pay for the things (such as the nursing home) for which Medicaid is paying.
But after my friend’s recent federal court case in Connecticut, I am re-thinking my attitude on such a trust. Under New Jersey law, Joe, as beneficiary, could potential sue if his cousin fails to make distributions to him from the trust, but Joe’s suit is not a guarantee that he will get additional money from the trust. The cousin, as trustee, may be acting appropriately; moreover, Joe would have to sue in a court.
Medicaid does not make a person sue to gain access to assets, so if he has to sue, then the money is unavailable. In addition, because of the existence of the spendthrift clause, the money in the trust is unavailable to Joe until actually distributed.
Because of my friend’s case, I believe these type of trusts should not disqualify a Medicaid beneficiary from benefits.
Recent litigation continues to shape how courts and Medicaid agencies view trusts established for disabled beneficiaries. While support trusts have traditionally raised concerns about Medicaid eligibility, evolving legal decisions may change how these trusts are treated. Families relying on trusts to provide for loved ones should have their documents reviewed to determine how current law may affect Medicaid planning and long-term care benefits.