Donna G. v. Nebraska Dept. of Health & Human Servs.
920 N.W.2d 668
Neb.2018Background
- Eric S., a young man with cerebral palsy, received Medicaid waiver services; his benefits were terminated after DHHS treated a $512,380.39 trust corpus as an available resource.
- The trust originated from Lois Branting’s 2012 will creating a Grandchildren’s Trust; at her death (2014) four minor grandchildren were beneficiaries.
- In December 2015 the grandchildren’s parents agreed (and the probate court approved under Neb. Rev. Stat. §§ 30-24,123–124) to split the testamentary Grandchildren’s Trust into two trusts: one solely for Eric (Eric’s Trust) and one for the other three grandchildren.
- The split trusts’ terms were not newly drafted documents; the agreement recited and adopted Branting’s will provisions (including a clause granting the trustee "sole and uncontrolled discretion" to apply income and principal for beneficiaries’ support).
- DHHS classified Eric’s Trust as an available resource and ended his Medicaid effective July 1, 2016; the district court affirmed DHHS. Eric’s guardian (Donna) appealed to the Nebraska Supreme Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the split trust is still a testamentary trust | Donna: probate approval did not convert the will-created trust into an irrevocable/self-settled trust; it remained testamentary | DHHS: probate court action and §30-24 procedures made the split a court- or self-settled irrevocable trust | Held: Trust remained testamentary — the split adopted will terms and was funded solely by the estate, so its testamentary character survived approval |
| Whether the trust corpus is an "available resource" for Medicaid | Donna: trust language grants trustee uncontrolled discretion; beneficiary cannot compel corpus distribution, so corpus is not available | DHHS: even if testamentary, hybrid support/discretionary language allows circumstances under which corpus could be paid, so entire corpus is available under the "any circumstances" regulation | Held: Applying Pohlmann, the trust is discretionary; beneficiary cannot compel distribution of corpus, so corpus is not an available resource (only actual distributions can count) |
Key Cases Cited
- Pohlmann v. Nebraska Dept. of Health & Human Servs., 271 Neb. 272, 710 N.W.2d 639 (analysis of support vs. discretionary testamentary trusts for Medicaid availability)
- Smith v. Smith, 246 Neb. 193, 517 N.W.2d 394 (treatment of hybrid discretionary support trusts and the trustee's obligation to carry out trust purposes in good faith)
- In re Trust Created by Hansen, 274 Neb. 199, 739 N.W.2d 170 (question whether type of trust created is one of law)