In re Ruby G. Owen Trust, 2012 Ark. App. 381

PBNB sought court consent to modify the Ruby G. Owen Trust into a special-needs trust to qualify Kristian for public benefits.
Kristian Owen, granddaughter of Ruby Owen, is a resident of Alaska and was diagnosed with schizophrenia in 2010; a guardian was appointed.
Ruby Owen died in April 2010, one month after creating the trust.
June 2011, PBNB as successor trustee filed petition for modification; hearing held, post-hearing brief submitted.
September 21, 2011, trial court declined the modification citing public-policy against sequestration of resources for Medicaid; PBNB appealed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether modification is permissible under Arkansas law	PBNB argues statutory authority for equitable deviation allows modification.	Court should enforce public policy against using trusts to sequester assets for government benefits.	Affirmed; modification not allowed.
Whether Alaska law should govern the analysis	Alaska law should govern due to beneficiary residence and benefits-related issues.	Arkansas law should apply since the matter involves Arkansas trust law.	We declined to address Alaska-law argument.
Whether the modification would be void as contrary to Arkansas public policy	Modification would respect grantor intent and provide general family benefit.	Modification risks sequestering assets to obtain public benefits, violating public policy.	Modification would be void; court affirmed denial.

Thomas v. Ark. Dept. of Human Servs., 319 Ark. 782 (Ark. 1995) (trusts may not be used to qualify for Medicaid via resource sequestration)
Ark. Dept. of Human Servs. v. Donis, 280 Ark. 169 (Ark. 1983) (trust funds remain accessible and affect eligibility for benefits)
Riddell Testamentary Trust, 157 P.3d 892 (Wash. Ct. App. 2007) (supersedes state limitations; focus on settlor intent and equitable deviation)
Winchel v. Craig, 55 Ark.App. 378 (Ark. App. 1996) (equity jurisdiction and de novo review in trust matters)