A federal appeals court affirms a lower court’s ruling that a beneficiary’s interest in two predecessor trusts were not available resources for purposes of the Connecticut Medicaid plan. Simonsen v. Bremby (2d Cir., No. 16-204-cv, Feb. 15, 2017).
Dawn Simonsen, a quadriplegic on a ventilator, was the beneficiary of two predecessor trusts that the trustee decanted into two supplemental needs trusts. The Connecticut Department of Social Services (DSS) determined that the two decanted trusts were accessible resources for purposes of determining Ms. Simonsen’s eligibility for Medicaid, denied her Medicaid benefits and penalized her for decanting the trusts into clearly inaccessible supplemental needs trusts. Ms. Simonsen appealed DSS’s decision to the federal district court.
The district court looked to the Social Security Administration’s Program Operations Manual System (POMS) to determine that the original trusts were not countable resources. The court preliminarily enjoined DSS from imposing a penalty and from denying Ms. Simonsen Medicaid benefits. The DSS, through Commissioner Bremby, appealed the district court’s ruling.
On appeal to the circuit court, DSS argued that the predecessor trusts were “support trusts,” recognizable under Connecticut law as an available resource for the beneficiary. The DSS relied on language in those trusts that directed the trustee to liberally use the funds for the benefit of Ms. Simonsen’s “health, maintenance in reasonable comfort, education and best interests”. Ms. Simonsen argued that the existence of a spendthrift clause in the original trusts exempted them as countable resources under the SSI program.
The U.S. Court of Appeals for the Second Circuit affirms the district court’s ruling. The court finds that the language in the predecessor trusts granted Ms. Simonsen no authority to control the trust principal, either on her own or by ordering actions by the trustee. Guided by the POMS, the court concludes that “even if the Predecessor Trusts do constitute ‘support trusts,’ as DSS argues, Simonsen remains ‘legally restricted from using’ the trust funds except as disbursed to her in the discretion of the trustee.” That language is sufficient grounds to uphold the lower court’s decision. The order granting preliminary injunctive relief is affirmed.
For the full text of the Second Circuit’s summary order, click here.
Subscribe to the Knowledge Bank.
