Nursing Home Resident Denied Medicaid Due to a Trust Established by Children

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October 19, 2011

A Wisconsin Court of Appeals recently issued an important decision upholding a lower court ruling to deny medical assistance benefits to a nursing home resident. The denial was made because assets of a trust established by the applicant’s children for her benefit were deemed an available resource.
In June 1991, Lucille Hedlund (“Lucille”) and her husband (now deceased) transferred most of their assets to their children. On the same day, their children created an irrevocable trust and transferred the same assets they received from their parents to the trust. Under the terms of the trust, the trustee has the discretion to make distributions of the trust’s assets to provide for Lucille’s welfare and general support. In 2008, Lucille entered a nursing home.
Under Wisconsin law, the assets within an irrevocable trust will be deemed an available resource to an applicant of medical assistance benefits if all of the following are true:

An irrevocable trust is established by an individual at the request of the applicant;
Assets of the applicant are transferred into the trust; and
Payments (or distributions) can be made from the trust to the applicant or for the benefit of the applicant.

In this case, the appellate court concluded that Lucille directed her children to establish the trust for her benefit and Lucille ‘s assets were used to fund the trust.
This case illustrates the importance of making sure gifts to children and trusts for the purpose of medical assistance eligibility, long-term care planning, and asset protection are done properly. With a properly drafted trust, Lucille could have achieved the outcome she desired.
If you would like to explore planning opportunities, we invite you to contact one of our Elder Law attorneys.

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