Petition of Estate of Thea Braiterman , 169 N.H. 217 ( 2016 )

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Department of Health and Human Services
No. 2015-0395
PETITION OF ESTATE OF THEA BRAITERMAN
(New Hampshire Department of Health and Human Services)
Argued: May 11, 2016
Opinion Issued: July 12, 2016
Braiterman Law Offices, of Concord (David J. Braiterman on the brief
and orally), for the petitioner.
Joseph A. Foster, attorney general (Megan A. Yaple, attorney, on the brief
and orally), for the New Hampshire Department of Health and Human Services.
DALIANIS, C.J. The petitioner, the Estate of Thea Braiterman, filed a
petition for writ of certiorari challenging a final decision of the Administrative
Appeals Unit (AAU) of the New Hampshire Department of Health and Human
Services (DHHS), that upheld the determination that the applicant, Thea
Braiterman, was ineligible for Medicaid-Old Age Assistance (Medicaid-OAA)
benefits because her assets exceeded the eligibility threshold. See Sup. Ct. R.
11; see also 42 U.S.C. § 1396p(h)(1) (2012) (explaining that, for the purpose of
determining Medicaid eligibility, the term “‘assets’” includes “all income and
resources of the individual and of the individual’s spouse”). On appeal, the
petitioner contends that the AAU erroneously found that the Thea G.
Braiterman Irrevocable Trust (the Trust) was includable as an asset for the
purpose of determining the applicant’s eligibility for Medicaid-OAA benefits.
The petitioner has argued, and DHHS has not disputed, that the petitioner’s
challenge is not moot even though the applicant is now deceased. Assuming
without deciding that the petition is not moot, we deny the petition for a writ of
certiorari.
I. Facts
A. Procedural Background
The applicant created the Trust in 1994, naming herself and her son,
David J. Braiterman, as trustees. The applicant resigned as a trustee in 2008.
However, the Trust authorized the applicant to appoint additional and
successor trustees, and the petitioner acknowledges that the applicant could
have resumed service as a trustee by appointing herself as an additional or
successor trustee.
The Trust named the applicant’s children — David, Ken Braiterman, and
Marta Tanenbaum — as the “Legatees.” Ken has since died, leaving no issue.
Thus, David and Marta are the remaining Legatees.
When the Trust was created, the applicant granted it all of her real
property interests, her personal property interests, and $1.00. The real
property included the furnished home in which the applicant and her husband
lived. The applicant and her husband lived in the home rent-free until he died
in 2004. At some point after her husband died, the applicant moved into an
assisted living facility. Thereafter, the furnished home was sold, and, in 2009,
the sale proceeds were transferred to an investment account.
In 2009, the investment account contained approximately $189,000. By
November 2013, the account contained between $130,000 and $135,000.
Between 2009 (when the applicant entered assisted living) and 2012, regular
disbursements from the Trust were made to undisclosed recipients for
undisclosed reasons. According to the AAU, the petitioner “equivocated” as to
whether either David or Marta used any of the disbursements from the Trust to
fund the applicant’s expenses. DHHS has not inquired as to whether the
disbursements were used to benefit the applicant.
The applicant resided in a nursing home from January 2014 until her
death in March 2016. In February 2014, she applied for Medicaid-OAA. In
March 2014, DHHS denied her application on the ground that her assets,
which included the Trust (then valued at $156,000), were “more than the limit
set for” Medicaid-OAA. The applicant appealed DHHS’s decision to the AAU.
Following a hearing, the AAU upheld the determination that the Trust was
includable as an asset for the purpose of assessing whether the applicant was
eligible for Medicaid-OAA benefits. The applicant unsuccessfully moved for
rehearing, and this petition followed.
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B. The Trust
The Trust Agreement contains 11 clauses, not all of which are relevant to
this appeal. The Trust Agreement refers to both the applicant and her son,
David, as “Trustee.” The applicant is also referred to as “Donor,” and David is
listed as one of the “Legatees.”
Clause 3 concerns the applicant’s reserved powers and rights as the
donor of the Trust. Under Clause 3.1, the applicant reserved the right “to alter
the order and number of the successor Trustees . . . or to name additional
Trustees or successor Trustees.” In Clause 3.2, the applicant reserved “the
power, exercisable at any time . . . , to appoint any part or all of the
undistributed income of the Trust Fund to any one or more of the Legatees,”
including “the power to make lifetime gifts.” In Clause 3.3, the applicant
reserved “the power, exercisable at any time . . . , to appoint any part or all of
the principal of the Trust Fund, outright or upon trusts, conditions or
limitations, to any one or more of the Legatees,” including “the power to make
lifetime gifts.” Under Clause 3.7, the applicant reserved “the power to require
the Trustee to accumulate any or all of the income of the Trust Fund.”
Clause 3.6 provides that the applicant did “not retain any interest in the
principal or income” of the Trust “by express reservation or by agreement
between or among, or assumption of,” the applicant, the trustee, and the
Legatees. Clause 3.8 provides that the applicant did “not reserve any power or
authority whatever to revoke or amend any provision” of the Trust Agreement.
Clause 4 concerns dispositions from the Trust during the applicant’s
lifetime. Pursuant to Clause 4.1, during the applicant’s lifetime, the Trustee
could “distribute, from time to time, to and among any one or more of the
Legatees as may be living, so much of the principal or income of the Trust
Fund at such time or times and in such amounts and proportions” as the
trustee, in his or her “uncontrolled discretion, [deemed] advisable.” Clause
4.1.1 provides:
If, at any time during the lifetime of the [applicant], the
[applicant] may lose or may lose eligibility for substantial cash
benefits or medical or other services by reason of the existence,
size or terms of this Trust, the [applicant] suggests that the
Trustee consider taking action to terminate the Trust by
distributing the principal and accumulated income of the Trust
Fund, if in the judgment of the Trustee such loss of eligibility
would likely necessitate expenditures from the Trust for or on
behalf of the [applicant] at a rate expected to deplete the Trust
substantially and to defeat its supplemental and long-term
purposes. The [applicant] expresses the hope that if the Trust is
terminated during the lifetime of the [applicant], any persons
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taking under this paragraph will use a portion of her gift to
supplement the income and the governmental benefits and services
to which the [applicant] may be entitled by reason of age, disability
or otherwise. It is not the intention of the [applicant], however, to
impose any legal obligation or trust.
Clause 7.13 provides:
Notwithstanding any other provisions of this instrument
except as specifically set forth herein, the discretionary power of
the Trustee . . . to distribute principal or income or to determine
the size of any such distribution shall not be exercised or
exercisable by any Trustee in a manner that will benefit the
Trustee personally or anyone whom the Trustee has a legal
obligation to support . . . .
II. Analysis
A. Standards of Review
“Certiorari review is an extraordinary remedy, granted not as a matter of
right, but rather at the court’s discretion when the substantial ends of justice
require it.” Petition of Maxi Drug, 154 N.H. 651, 655 (2006). “Certiorari review
is limited to whether the agency acted illegally with respect to jurisdiction,
authority or observance of the law, whereby it arrived at a conclusion which
could not legally or reasonably be made, or unsustainably exercised its
discretion or acted arbitrarily, unreasonably, or capriciously.” Id. at 655-56.
We exercise our power to grant such writs sparingly. Petition of Chase Home
for Children, 155 N.H. 528, 532 (2005). In this case, the extraordinary remedy
of certiorari is unwarranted.
Resolving the issues in this appeal requires that we interpret federal
Medicaid statutory and regulatory provisions. The interpretation of a statute or
a regulation is a question of law, which we review de novo. See Dube v. N.H.
Dep’t of Health & Human Servs., 166 N.H. 358, 364 (2014). We interpret
federal statutes and regulations “in accordance with federal policy and
precedent.” Id. When interpreting statutes and regulations, we begin with the
statutory or regulatory language, and, if possible, construe that language
according to its plain and ordinary meaning. See id.
B. Medicaid Eligibility in General
We begin with a general overview of Medicaid eligibility as it pertains to
an applicant’s assets. “Medicaid is a joint state and federal program under
which the federal government provides financial support to states that
establish and administer a state Medicaid program, in accordance with federal
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law, through an approved state plan.” Petition of Maxi Drug, 154 N.H. at 656;
see 42 U.S.C. §§ 1396 et seq. (2012 & Supp. II 2014). Medicaid “provides joint
federal and state funding for medical care for individuals who cannot afford to
pay their own medical costs.” Arkansas Dept. of Health and Human Servs. v.
Ahlborn, 547 U.S. 268, 275 (2006); see Ramey v. Reinertson, 268 F.3d 955,
958 (10th Cir. 2001) (explaining that, “[i]n structuring the Medicaid program,
Congress chose to direct [the] limited funds to persons who were most
impoverished” (quotation omitted)).
Because Medicaid is a “program for low-income individuals,” it requires
“applicants to meet certain financial eligibility criteria.” Appeal of Lowy, 156
N.H. 57, 60 (2007). “Generally, Medicaid provides assistance for two types of
individuals: the categorically needy and the medically needy.” Lewis v.
Alexander, 685 F.3d 325, 332 (3d Cir. 2012). The categorically needy are those
who qualify for public assistance under certain federal programs. See id.; see
also Appeal of Huff, 154 N.H. 414, 416-17 (2006). “The medically needy are
those who would qualify as categorically needy (because they are disabled, etc.)
but whose . . . assets are substantial enough to disqualify them.” Lewis, 685
F.3d at 332; see Appeal of Huff, 154 N.H. at 417.
“Every State participating in Medicaid must provide assistance to the
categorically needy.” Lewis, 685 F.3d at 332. Generally, “States need not
provide assistance to the medically needy.” Id. But see Appeal of Huff, 154
N.H. at 417 (explaining the circumstances under which a State is required to
provide benefits to the medically needy). If States make medical assistance
available to the medically needy, they are subject to various federal statutory
and regulatory restrictions “in determining to whom medical assistance should
be extended.” Lewis, 685 F.3d at 332; see also Thorson v. Nebraska DHHS,
740 N.W.2d 27, 30 (Neb. 2007). New Hampshire makes medical assistance
available to the medically needy. See RSA 167:6, VII (2014).
Under federal law, only the assets that are “available to the applicant”
are considered to determine her eligibility for Medicaid benefits. 42 U.S.C.
§ 1396a(a)(17) (Supp. II 2014) (emphasis added); see Thorson, 740 N.W.2d at
30-31. “If the applicant’s ‘available’ assets exceed a statutory ceiling, then
coverage is denied.” Ramey, 268 F.3d at 958.
1. Prior Law
Before 1986, courts “had ruled in various contexts that, if an individual
settled assets in an irrevocable trust and the disposition of those assets was at
the discretion of a trustee, no beneficiary of the trust would have a right to call
for them, and so the assets could not be considered available to the
beneficiary” for the purpose of determining the beneficiary’s eligibility for
Medicaid. Cohen v. Com’r of Div. of Med. Asst., 668 N.E.2d 769, 771 (Mass.
1996) (citing cases). Only assets that were actually available to the beneficiary
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because they had been distributed were counted toward Medicaid eligibility.
See id. at 771 n.7; see also Forsyth v. Rowe, 629 A.2d 379, 383 (Conn. 1993).
Accordingly, a “loophole” existed under the pre-1986 law, pursuant to
which “individuals anticipating the need for expensive long-term medical care
could impoverish themselves and qualify for [M]edicaid assistance while
preserving their resources for their heirs.” Forsyth, 629 A.2d at 385. To do so,
“[a]n individual could place assets in an irrevocable discretionary trust that
paid him the income for life until long-term medical care became necessary.”
Id. “At that point the trustee could exercise his discretion to withhold
payments to the beneficiary, thus, allowing the beneficiary to qualify for
[M]edicaid assistance while preserving assets for his heirs.” Id. By “put[ting]
large sums of money” in an irrevocable trust, individuals were able to “reduc[e]
(on paper) the amount of assets [they] owned.” Lewis, 685 F.3d at 332. In the
words of the Massachusetts Supreme Judicial Court, “[t]he grantor was able to
have his cake and eat it too.” Cohen, 668 N.E.2d at 772.
“Congress understandably viewed this as an abuse and began addressing
the problem with statutory standards.” Lewis, 685 F.3d at 332. Thus, in
1986, “in response to the prevalent use of irrevocable trusts by affluent persons
to qualify for Medicaid benefits,” Congress enacted 42 U.S.C. § 1396a(k) (1988)
(repealed 1993). Ramey, 268 F.3d at 961; see Cohen, 668 N.E.2d at 771-72.
The purpose of Section 1396a(k) was to “close the ‘loophole’ in the Medicaid act
so that assets in certain trusts would be counted in determining whether a
Medicaid applicant satisfied the maximum asset requirement.” Boruch v.
Nebraska Dept. of Health, 659 N.W.2d 848, 852 (Neb. Ct. App. 2003).
The trusts deemed countable for the purpose of determining an
applicant’s eligibility for Medicaid were called Medicaid qualifying trusts
(MQTs). See id. at 853; see also 42 U.S.C. § 1396a(k). Section 1396a(k)
defined a MQT as an inter vivos trust or similar legal device “under which the
individual [applying for Medicaid benefits] may be the beneficiary of all or part
of the payments from the trust and the distribution of such payments is
determined by one or more trustees who are permitted to exercise any
discretion with respect to the distribution to the individual.” 42 U.S.C.
§ 1396a(k)(2). The 1986 law deemed “available” to the applicant (the
beneficiary) “the maximum amount that could, at the trustee’s discretion, be
distributed to the beneficiary” from an irrevocable trust regardless of whether
the funds were actually distributed. Forsythe, 629 A.2d at 385; see 42 U.S.C.
§ 1396a(k)(1).
The House Committee on Energy and Commerce recommended passage
of § 1396a(k), along with other provisions, with the following statement:
The Committee feels compelled to state the obvious.
Medicaid is, and always has been, a program to provide basic
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health coverage to people who do not have sufficient income or
resources to provide for themselves. When affluent individuals use
Medicaid qualifying trusts and similar “techniques” to qualify for
the program, they are diverting scarce Federal and State resources
from low-income elderly and disabled individuals, and poor women
and children. This is unacceptable to the Committee.
H.R. Rep. No. 99-265, pt. 1, at 72 (1985). “With the passage of § 1396a(k),
MQTs were no longer a permissible means to shelter assets for purposes of
Medicaid eligibility.” Ramey, 268 F.3d at 959.
2. Current Law
In 1993, in reaction “to the sophisticated instruments used to
circumvent the MQT rules,” Congress repealed § 1396a(k) and enacted
§ 1396p(d) (1993), which was aimed at “more effectively curtail[ing] the use of
trusts or similar mechanisms to qualify for Medicaid.” Regan, Comment,
Medicaid Estate Planning: Congress’ Ersatz Solution for Long-Term Health
Care, 44 Cath. U.L. Rev. 1217, 1233, 1239 (1995); see Omnibus Budget
Reconciliation Act of 1993, Pub. L. No. 103-66, Title XIII § 13611(b), (d)(1)(C),
107 Stat. 312, 624-26, 627 (1993) (OBRA); see also Boruch, 659 N.W.2d at
853. “In the 1993 OBRA amendments, Congress established a general rule
that trusts would be counted as assets for the purpose of determining Medicaid
eligibility.” Lewis, 685 F.3d at 333. Although “Congress also excepted from
that rule three types of trusts meeting certain specific requirements,” id., none
of those trusts is here at issue, see 42 U.S.C. § 1396p(d)(4).
Section 1396p(d) is “even less forgiving” of inter vivos trusts designed to
shelter assets than § 1396a(k) had been. Ramey, 268 F.3d at 959. For
example, the restrictions upon the use of trusts to qualify for Medicaid “now
apply without regard to the purposes for which the trust was established,
whether the trustees have or exercise any discretion under the trust, or
whether there are any restrictions on the making, timing, or use of
distributions from the trust.” Miller v. SRS, 64 P.3d 395, 401 (Kan. 2003); see
42 U.S.C. § 1396p(d)(2)(C).
Because the Trust at issue was established after the effective date of
§ 1396p(d), it is governed by that provision. See Cohen, 668 N.E.2d at 773.
Section 1396p(d)(3)(B), which pertains to irrevocable trusts, such as the Trust,
provides:
(i) if there are any circumstances under which payment from the
trust could be made to or for the benefit of the individual [applying
for Medicaid benefits], 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,
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and payments from that portion of the corpus or income—
(I) to or for the benefit of the individual, shall be considered
income of the individual, and
(II) for any other purpose, shall be considered a transfer of assets
by the individual subject to subsection (c) of this section; and
(ii) any portion of the trust from which, or any income on the
corpus from which, no payment could under any circumstances be
made to the individual shall be considered, as of the date of
establishment of the trust (or, if later, the date on which payment
to the individual was foreclosed) to be assets disposed by the
individual for purposes of subsection (c) of this section, and the
value of the trust shall be determined for purposes of such
subsection by including the amount of any payments made from
such portion of the trust after such date.
42 U.S.C. § 1396p(d)(3)(B) (emphasis added). Thus, under the current law, “if
there are any circumstances under which payment from the trust could be
made to or for the benefit of the” applicant, then the irrevocable trust is
deemed countable for the purpose of determining her eligibility for Medicaid.
Id. (emphases added).
3. Applying the Current Law to the Trust
In determining whether the AAU erred when it upheld the determination
that the Trust was includable as an asset pursuant to the current Medicaid
law, see 42 U.S.C. § 1396p(d)(3)(B), we find informative The State Medicaid
Manual (Manual). See Ctrs. for Medicare and Medicaid Servs., The State
Medicaid Manual, Pub. No. 45, available at https://www.cms.gov/Regulations-
and-Guidance/guidance/Manuals/Paper-Based-Manuals-Items/
CMS021927.html. The Manual was developed by the federal Centers for
Medicare and Medicaid Services to “assist[ ] states in interpreting the complex
labyrinth of statutory and regulatory requirements that govern receipt of
Medicare and Medicaid benefits.” Zahner v. Secretary PA. Dept. of Human
Services, 802 F.3d 497, 501 (3d Cir. 2015); see Ahlborn, 547 U.S. at 275
(explaining that Medicaid administration “is entrusted to the Secretary of
Health and Human Services . . . , who in turn exercises his authority through
the Centers for Medicare and Medicaid Services”). It “serves as the official U.S.
Health and Human Services Department . . . interpretation of the Medicaid law
and regulations.” Zahner, 802 F.3d at 501 (quotation and brackets omitted).
Its instructions “are binding on Medicaid State agencies.” Manual, supra ch. 1,
Foreword (Rev. 1). Federal courts have held that the Manual, although not
controlling, “is entitled to respectful consideration in light of the agency’s
significant expertise, the technical complexity of the Medicaid program, and the
exceptionally broad authority conferred upon the Secretary [of the federal
agency] under the [Medicaid] Act.” S.D. ex rel. Dickson v. Hood, 391 F.3d 581,
8
590 n.6 (5th Cir. 2004); see Sai Kwan Wong v. Doar, 571 F.3d 247, 262 (2d Cir.
2009) (giving “substantial weight” to the statutory interpretation contained in
§ 3259.7 of the Manual (quotation omitted)); see also Skidmore v. Swift & Co.,
323 U.S. 134, 140 (1944) (setting forth rule regarding deference).
Contrary to the petitioner’s assertions, it is immaterial that the sections
of the Manual pertinent to this case became effective in December 1994,
months after the Trust was created. See Manual, supra ch. 3, § 3259.2 (Rev.
64). What matters is that the Manual contains the official federal agency
interpretation of the law that applies to the Trust. See Manual, supra ch. 3,
§ 3259.2 (Rev. 64).
The instant case turns upon whether, given the Trust provisions and the
facts of the case, there are “any circumstances” under which “payment” from
the Trust could have been “made to or for the benefit of” the applicant. 42
U.S.C. § 1396p(d)(3)(B)(i). A “payment” from a trust “is any disbursal from the
corpus of the trust or from income generated by the trust which benefits the
party receiving it.” Manual, supra ch. 3, § 3259.1(A)(8) (Rev. 64). A “payment”
from a trust “may include actual cash, as well as noncash or property
disbursements, such as the right to use and occupy real property.” Manual,
supra ch. 3, § 3259.1(A)(8) (Rev. 64).
Section 3259.6 of the Manual defines payments made “for the benefit” of
the individual applying for Medicaid benefits as
payments of any sort, including an amount from the corpus or
income produced by the corpus, paid to another person or entity
such that the individual derives some benefit from the payment.
For example, such payments could include purchase of clothing or
other items, such as a radio or television, for the individual. Also,
such payments could include payment for services the individual
may require, or care, whether medical or personal, that the
individual may need. Payments to maintain a home are also
payments for the benefit of the individual.
Manual, supra ch. 3, § 3259.6(D) (Rev. 64) (emphases added).
The Manual advises that “[i]n determining whether payments can or
cannot be made from a trust to or for an individual,” one should “take into
account any restrictions on payments, such as use restrictions, exculpatory
clauses, or limits on trustee discretion that may be included in the trust.”
Manual, supra ch. 3, § 3259.6(E) (Rev. 64). The Manual also gives the
following example:
For example, if an irrevocable trust provides that the trustee can
disburse only $1,000 to or for the individual out of a $20,000
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trust, only the $1,000 is treated as a payment that could be made
under the rules in [42 U.S.C. § 1396p(d)(3)(B)]. The remaining
$19,000 is treated as an amount which cannot, under any
circumstances, be paid to or for the benefit of the individual. On
the other hand, if a trust contains $50,000 that the trustee can
pay to the grantor only in the event that the grantor needs, for
example, a heart transplant, this full amount is considered as
payment that could be made under some circumstances, even
though the likelihood of payment is remote. Similarly, if a
payment cannot be made until some point in the distant future, it
is still payment that can be made under some circumstances.
Manual, supra ch. 3, § 3259.6(E) (Rev. 64) (emphasis added); see Heyn v.
Director of Office of Medicaid, 48 N.E.3d 480, 483 (Mass. App. Ct. 2016)
(explaining that to meet the “any circumstances” test, the circumstances “need
not have occurred, or even be imminent”); cf. Lebow v. Com’r of Div. of Medical
Assistance, 740 N.E.2d 978, 983 (Mass. 2001) (decided under 1986 law) (in
examining whether the trustees were allowed to exercise any discretion in
making distributions to the grantor, the court explains that “[t]he issue is not
whether the trustee has the authority to make payments to the grantor at a
particular moment in time,” but “[r]ather, if there is any state of affairs, at any
time during the operation of the trust, that would permit the trustee to
distribute trust assets to the grantor”).
With the Manual’s guidance in mind, which we find persuasive, see Sai
Kwan Wong, 571 F.3d at 260-62, we examine the Trust provisions. Under the
Trust, the applicant, as donor, “retain[ed] at least some powers over the trust
corpus,” Doherty v. Director of Office of Medicaid, 908 N.E.2d 390, 392 (Mass.
App. Ct. 2009), including the powers “to appoint any part or all of the
undistributed income of the Trust Fund to any one or more of the Legatees”
and “to appoint any part or all of the principal of the Trust Fund, outright or
upon trusts, conditions or limitations, to any one or more of the Legatees.” See
id. In addition, the Trust reserved to the applicant, as donor, the power to
require the Trustee “to accumulate any or all of the income of the Trust Fund.”
See id. The Trust Agreement did not limit the applicant’s ability to impose
conditions upon the appointment of Trust principal to any one of the Legatees.
Also, in her capacity as donor, the applicant reserved to herself the “right to
alter the order and number of the successor Trustees . . . , or to name
additional Trustees or successor Trustees.”
In her capacity as Trustee, the applicant had even more authority. For
instance, she had the “uncontrolled discretion” to adjust between income and
principal. See id. at 391-92. As trustee, the applicant also had the authority,
without limitation, to “terminate the Trust by distributing the principal and
accumulated income of the Trust Fund,” if, in her judgment, she might “lose
eligibility for substantial cash benefits or medical or other services” because of
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the Trust and if, in her judgment, “such loss of eligibility would likely
necessitate expenditures from the Trust for or on [her] behalf [as the donor] at
a rate expected to deplete the Trust substantially and to defeat its
supplemental and long-term purposes.”
Further, although Clause 4.1.1 does not constitute a “legal obligation,” it
evinces the applicant’s general intent that Trust disbursements be used for her
benefit. See id. at 392. That clause expresses the applicant’s “hope” that if the
Trust is terminated during her lifetime, the Legatees will use Trust assets “to
supplement the income and the governmental benefits to which [she] may be
entitled by reason of age, disability or otherwise.”
Additionally, once the applicant resigned as Trustee in 2008, there was
nothing in the Trust Agreement to preclude her from requiring her children, as
a condition of their receipt of the Trust principal, to use those funds for her
benefit. After the applicant’s resignation, the only limitation under the Trust
Agreement was that David could not make a distribution that benefitted him
personally or “anyone whom [he] ha[d] a legal obligation to support.” The
petitioner observes that David had no obligation to support the applicant.
Although the petitioner argues otherwise, the fact that the applicant was
not a Trust beneficiary is not dispositive. In contrast to the pre-1993 law, see
42 U.S.C. § 1396a(k), an irrevocable trust is a countable asset under the
current law even when the applicant is not a beneficiary, provided that there
are “any circumstances under which payment from the trust could be made
. . . for the benefit of the [applicant],” 42 U.S.C. § 1396p(d)(3)(B)(i). Given the
Trust’s provisions and the specific facts of this case, we hold that the AAU
lawfully and reasonably concluded that there were circumstances under which
payment from the Trust could be made to benefit the applicant. See Petition of
Maxi Drug, 154 N.H. at 655-56.
The cases from New York upon which the petitioner relies to argue for a
different result are distinguishable. See Verdow ex rel. Meyer v. Sutkowy, 209
F.R.D. 309, 310 (N.D.N.Y. 2002); Spetz v. New York State Dept. of Health, 737
N.Y.S.2d 524 (Sup. Ct. 2002). The issue in both cases was whether the
grantor’s retained power to change the trust beneficiaries made the trusts
“available” for the purpose of determining Medicaid eligibility. See Verdow, 209
F.R.D. at 315-16; Spetz, 737 N.Y.S.2d at 525-26. Under a New York statute,
“any trust can be revoked, provided that all beneficiaries consent, in writing, to
the revocation.” Verdow, 209 F.R.D. at 315; see Spetz, 737 N.Y.S.2d at 526.
The appellate argument in both cases was that the grantors could use their
retained power to change beneficiaries to individuals who were amenable to
revoking the trusts, and, therefore, that the trusts were actually revocable and
available for Medicaid eligibility purposes. Verdow, 209 F.R.D. at 315; Spetz,
737 N.Y.S.2d at 526. The courts in both cases rejected the argument, finding
that the claim that the grantor would collude with the beneficiaries in this way
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was speculative. Verdow, 209 F.R.D. at 316; Spetz, 737 N.Y.S.2d at 526-27.
Both courts declined to conclude that the speculative possibility of collusion
rendered the trusts revocable, and, therefore, “available” to the grantors for the
purpose of determining Medicaid eligibility. Verdow, 209 F.R.D. at 316; Spetz,
737 N.Y.S.2d at 526-27.
In this case, unlike Verdow and Spetz, there is no dispute that the Trust
is an irrevocable trust. Moreover, unlike the grantors in Verdow and Spetz, the
applicant in this case retained broad powers over the Trust, in her capacity
both as donor and as Trustee, including the power to make a distribution to a
legatee conditioned upon that legatee using the distribution for the applicant’s
benefit. In addition, although there is no evidence of collusion in this case,
collusion is arguably encouraged by Clause 4.1.1, which provides that, in the
event that the Trust’s existence disqualifies the applicant for Medicaid benefits,
the applicant “suggests” that the Trust be terminated and that the Legatees
(her children) use Trust assets “to supplement the income and . . .
governmental benefits and services to which [she] may be entitled.” By virtue
of these provisions and others, the circumstances under which payments from
the Trust could be made to benefit the applicant in this case are not “entirely
speculative,” Verdow, 209 F.R.D. at 316, but, rather, are specifically
anticipated under the Trust Agreement.
In a motion to submit late authority, the petitioner relies upon Heyn, 48
N.E.3d 480. Although we grant the petitioner’s motion to submit Heyn for our
review, we do not find it persuasive.
In Heyn, the trust corpus consisted of the applicant’s former residence in
which she retained a life estate. Heyn, 48 N.E.3d at 482. At some point after
the trust was created, the applicant moved into a skilled nursing facility, where
she lived until her death in 2013. Id. The state agency had found the
applicant ineligible for Medicaid benefits because her former residence was
countable as an asset and exceeded the allowable limit. Id. A hearing officer
had upheld that decision, and, ultimately, the appellate court reversed the
hearing officer’s ruling. Id. at 482-83.
Whether the applicant’s life estate rendered her ineligible for Medicaid
benefits was not an issue in the appeal. Id. at 482 n.3. Nor was there a
question concerning the applicant’s receipt of income from the trust. Id. at 485
n.11. The sole issue in the case was whether trust principal was countable as
an asset for the purpose of determining the applicant’s eligibility for Medicaid.
See id. at 483-84. The hearing officer had reasoned, in part, that because the
trust allowed the applicant to appoint all or any part of the trust principal to
her issue, free of trust, she “could direct conveyance of the trust property to
one of her children, who could in turn convey it to her.” Id. at 486. In
rejecting this reasoning, the court explained that a provision that makes “trust
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principal available to persons other than the [applicant] does not by its nature
make it available to the [applicant].” Id.
Heyn is distinguishable from this case. Unlike the Trust here, the trust
in Heyn expressly precluded the trustee from distributing any part or all of the
principal to the applicant. Id. at 484 n.8. Moreover, unlike the Trust in this
case, which conceivably allows the applicant to condition a distribution to a
Legatee upon that Legatee using the distribution for her benefit, the trust in
Heyn did not authorize the applicant to impose any conditions upon the
appointment of principal to her issue. See id. at 486. Further, Clause 4.1.1 of
the Trust in this case evinces the applicant’s general intent that Trust
disbursements be used for her benefit, see Doherty, 908 N.E.2d at 392; there is
no indication that the trust in Heyn contained a similar clause. Nor is there
any evidence that the applicant in Heyn was ever one of the trust’s trustees.
Finally, the petitioner argues that our decision in Appeal of Lowy is
dispositive. The trust in that case was a “special needs trust.” Appeal of Lowy,
156 N.H. at 58. Such trusts fall within the exception to the general rule that
trusts are counted as assets for the purpose of determining Medicaid eligibility.
See Lewis, 685 F.3d at 333; see also 42 U.S.C. § 1396p(d)(4). Pursuant to 42
U.S.C. § 1396p(d)(4)(A), a State must exclude a special needs trust as an asset
in eligibility determinations “only if, among other considerations, the state will
be repaid from the trust’s corpus upon the beneficiary’s death for medical
assistance provided to the beneficiary during his lifetime.” Appeal of Lowy, 156
N.H. at 58.
The primary issue in Appeal of Lowy was whether the “payback
provision” in the special needs trust was sufficient under federal law to render
the trust not countable as an asset. See id. at 58-59. The trust’s payback
provision stated that, upon the beneficiary’s death, any amounts remaining in
the trust estate were to be paid to the State “to the extent required by law.” Id.
(quotation and emphasis omitted). The AAU had found that the phrase “to the
extent required by law” impermissibly conditioned “the obligation to repay on
the future existence of an independent legal requirement of repayment, which
might not occur,” and, therefore, because the trust did “not contain the
unconditional repayment obligation required for exclusion,” the trust was
countable as an asset. Id. (quotation omitted). We disagreed. See id. at 61-62.
We concluded that to construe the phrase “as referencing anything other than
a general requirement that the promise contained in the payback provision be
construed in accordance with the law would require us to ignore the settlors’
clear intent,” which was to create a trust that qualified for exclusion under 42
U.S.C. § 1396p(d)(4)(A). Id. at 62.
The petitioner contends that, consistent with Lowy, we must interpret
the Trust at issue to “give[ ] meaning to the intention[ ] of the [applicant] . . . to
keep the Trust assets out of inclusion as countable Medicaid resources.” This
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we cannot do. The issue of whether the Trust assets are countable for the
purpose of determining the applicant’s eligibility for Medicaid is governed by
federal law. Contrary to the petitioner’s assertions, to determine whether there
were circumstances under which payment from the Trust could have been
made for the applicant’s benefit, see 42 U.S.C. § 1396p(d)(3)(B)(i), we have not
“ventured into the land of melodramas and fantasy,” but rather, we have
examined the record in the case and interpreted the Trust’s provisions
consistent with their plain meaning.
Although it might be argued that the provisions upon which we rely “are,
at most, economically meaningless administrative boilerplate, that . . . do not
confer upon the trustees any discretionary authority to invade principal for [the
applicant’s] benefit, . . . we remain unconvinced that [the Legatees were]
unable, in any reasonably foreseeable circumstance, to invade trust assets for
[her] benefit.” Doherty, 908 N.E.2d at 392. “When considered as a whole, what
strikes us most strongly is that [the Trust] constitutes a remarkably fluid legal
vehicle, intelligently structured to provide both [the applicant] and the trustee[ ]
maximum flexibility to respond to [her] changing life needs.” Id. In this light,
we cannot say that the AAU’s conclusion that the Trust constitutes a
“countable asset” for the purpose of determining the applicant’s Medicaid
eligibility is infirm as a matter of law. See id.
III. Conclusion
Given the facts of this case, we cannot say that there are no
circumstances under which payments from the Trust could be made “for the
benefit” of the applicant. 42 U.S.C. § 1396p(d)(3)(B)(i); see Doherty, 908 N.E.2d
at 392. “Finally, we take this opportunity to stress that we have no doubt that
self-settled, irrevocable trusts may, if so structured, so insulate trust assets
that those assets will be deemed unavailable to the settlor.” Doherty, 908
N.E.2d at 393. The Trust in this case is not such a vehicle. In our view, the
Trust, as structured, allows the applicant “a degree of discretionary authority
that would . . . permit [her] to enjoy her assets, preserve those assets for her
heirs, and receive public assistance, to, in effect, have her cake and eat it too.”
Id. (quotation and brackets omitted). Congress has declared a contrary intent
— “that Medicaid benefits be made available only to those who genuinely lack
sufficient resources to provide for themselves.” Id. “We perceive no reason in
this case to deviate from that mandate.” Id.
Petition denied.
HICKS, CONBOY, LYNN, and BASSETT, JJ., concurred.
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