New Case Illustrates Importance Of Proper Trust Drafting
By Mark D. Munson
December 22, 2008
The Wisconsin Court of Appeals recently determined that the assets within an irrevocable trust (a type of trust that cannot be revoked or amended by the person who creates it) were available to the trust-maker and had to be used for nursing home and related long-term care expenses. The case underscores the importance of having a well-drafted trust that meets the various laws, rules, and regulations regarding eligibility for medical assistance. In the case of Wisnyski v. Wisconsin Department of Health and Family Services, the trust-maker, Edmund Wisnyski, established an irrevocable trust and funded it with $35,000 in February 2001. Mr. Wisnyski named himself as a beneficiary of the trust. At the time, Wisconsin’s guidebook for medical assistance caseworkers erroneously interpreted federal and state law by stating that assets within an irrevocable trust were not available assets. If an asset is determined to be unavailable, it cannot be used on health care expenses. Mr. Wisnyski applied for medical assistance in August 2005 and began receiving benefits in February 2006. Wisconsin’s medical assistance guidebook was updated in April 2007. One of the updates included an interpretation that assets in an irrevocable trust are available to the person who established the trust if that person is also a beneficiary of the trust. This interpretation is consistent with federal and state medical assistance laws regarding irrevocable trusts. As a result, Mr. Wisnyski was determined to be ineligible for medical assistance benefits as of August 2007 and was required to spend down the trust’s assets before becoming eligible for benefits once again. From a legal standpoint, the case stands for the proposition that laws trump administrative rules and guides. If a law says one thing and a rule or guide says another, the law will prevail. From a practical standpoint, the case stands for the proposition that the law must be followed when it comes to irrevocable trusts, medical assistance eligibility, and asset protection planning. It is important to realize that this case does not eliminate irrevocable trusts as an asset protection strategy. A properly-drafted irrevocable trust can still provide tremendous asset protection benefits and they should be considered by anyone who is concerned about medical assistance eligibility.
If you currently have a trust, our team of attorneys can review it to determine whether it will protect your assets from long-term health care costs. In addition, if you are interested in learning more about asset protection planning, please contact any of the attorneys in the Trusts & Estates Practice Group of Ruder Ware.
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