In the Matter of the George G. BARKEMA TRUST.
Gayle Torgerson and Dianne Gille, Beneficiaries, Appellants,
v.
Richard G. Barkema, Trustee, and Health Management Systems, Inc., An Agent for Iowa Department of Human Services, Appellees.
Supreme Court of Iowa.
*52 James A. Brewer of Newbrough, Johnston, Brewer, Maddux & Howell, L.L.P., Ames, for appellants.
Thomas J. Miller, Attorney General, and Barbara E.B. Galloway, Assistant Attorney General, for appellees Iowa Department of Human Services and Health Management Systems, Inc.
Gary J. Groves, Webster City, for appellee trustee.
CADY, Justice.
In this appeal, we must decide if the corpus of a support trust is included in the estate of the beneficiary of the trust upon death for purposes of a claim for recovery of Medicaid benefits provided to the trust beneficiary during her lifetime for nursing home care. The district court found the trust was included within the estate. Upon our review, we affirm.
I. Background Facts and Proceedings
George Barkema established a trust in his will. He left one quarter of the residue of his estate to three of his children, Richard, Doris, and Rose, to hold in trust for his fourth child, Lois. His will directed, "If possible, only the income from said share shall be used for Lois, however, if necessary for her proper support and maintenance, then the corpus of said trust may be invaded to the extent said trustees deem necessary." George's will failed to specify what was to become of the remainder of the trust corpus after Lois's death. After George died, his children entered into an agreement providing that in the event of Lois's death, the trust corpus was to be distributed in equal shares to Lois's children, Dianne Gille and Gayle Torgenson. This agreement was filed with the court in 1978.
Years later, Lois began living in a nursing home. In 1998, Richard helped her apply for Title XIX Medicaid to pay for her medical expenses. Between the time when Lois began receiving Medicaid benefits and her death on April 14, 2003, the State Medicaid program paid approximately $55,000 for her care. However, the State never attempted to obtain income *53 payments from the trustee or compel the trustee to invade the corpus for Lois's support during Lois's lifetime.
On June 2, 2003, Richard, as trustee, filed a final report, recommending that the remaining corpus of the trust (approximately $18,000) be distributed to Dianne and Gayle, pursuant to the 1978 agreement between the siblings. On June 25, 2003, Health Management Systems, Inc., on behalf of the Iowa Department of Human Services (hereinafter the Department), filed both a claim in the trust and an objection to the final report. It claimed it was entitled to the remaining corpus of the trust under Iowa Code section 249A.5(2) (2003). On October 8, 2003, the district court granted the Department's claim and ordered Richard to pay to it the remaining corpus of the trust and interest thereon. The district court based its decision on policy reasons and on what it perceived to be George's intent. Dianne and Gayle appeal.
II. Standard of Review
This case was tried by the probate court in equity. See In re Roehlke's Estate,
III. Discussion
Iowa Code section 249A.5(2) provides:
The provision of medical assistance to an individual who is fifty-five years of age or older, or who is a resident of a nursing facility, intermediate care facility for persons with mental retardation, or mental health institute, who cannot reasonably be expected to be discharged and return to the individual's home, creates a debt due the department from the individual's estate for all medical assistance provided on the individual's behalf, upon the individual's death.
Iowa Code § 249A.5(2) (2003). Thus, the Medicaid benefits provided by the Department to Lois created a $55,000 debt due to the Department upon her death. See id. This debt is payable from Lois's "estate," which is defined as
any real property, personal property, or other asset in which [she] ... had any legal title or interest at the time of [her] death, to the extent of such interests, including but not limited to interests in jointly held property, retained life estates, and interests in trusts.
Id. § 249A.5(2)(c) (emphasis added).
The Department argues the $18,000 remaining corpus of the trust is an "interest in [a] trust[]," id., and is part of Lois's estate, from which it can collect its $55,000 debt. Dianne and Gayle, however, contend that the trust terminated upon Lois's death and that she therefore had no interest in the trust "at the time of her death." See id.
Our first task is to classify the trust at issue. Because the corpus of the trust could only be invaded "if necessary for [Lois's] proper support and maintenance," the corpus of the trust was held in a form of support trust. See Austin Wakeman Scott, Abridgement of the Law of Trusts § 154 (1960) [hereinafter Scott on Trusts] (defining a support trust as one in which the trustee is directed to distribute so much "as is necessary for the education or support of the beneficiary"); accord Strojek v. Hardin County Bd. of Supervisors, *54
A settlor creates a pure support trust "[i]f a trustee is directed to pay or apply trust income or principal for the benefit of a named person, but only to the extent necessary to support him, and only when the disbursements will accomplish support." Bogert on Trusts § 229 (emphasis added). In contrast, a settlor creates a discretionary support trust if "the stated purpose of the trust is to furnish the beneficiary with support, and the trustee is directed to pay to the beneficiary whatever amount of trust income [or principal] the trustee deems necessary for his support." Bogert on Trusts § 229; see also Smith,
the beneficiary has a right that the trustee pay him the amount which in the exercise of reasonable discretion is needed for his support ...; and the beneficiary can transfer this interest or his creditors may reach it, unless it is protected by a spendthrift clause.
Bogert on Trusts § 229; see also Bureau of Support v. Kreitzer,
The language used by George Barkema created a discretionary support trust. The trust agreement contained a support provision and provided directions for the trustee to use the trust corpus if necessary for Lois's support and maintenance. By using the words "to the extent said trustees deem necessary," it gave the trustees some discretion as to whether to invade the corpus, see Bohac v. Graham,
Having determined that the trust at issue was a discretionary support trust, we must next determine whether Lois's interest in the discretionary support trust is the kind of interest encompassed by section 249A.5(2)(c). In construing a statute,
[o]ur goal is to determine the intent of the law, gleaned generally from the statutory language. We also consider the statute's "subject matter, the object sought to be accomplished, the purpose to be served, underlying policies, remedies provided, and the consequences of the various interpretations."
Cox v. State,
The phrase "interests in trusts" is not defined in chapter 249A. See Iowa Code ch. 249A. However, the legislature clearly intended to define "estate" broadly, and to include more than legal title, because it defined it to include any "legal title or interest." Id. § 249A.5(2)(c) (emphasis added). It also chose to define "estate" more broadly than the federal Medicaid law. The federal statute provides that "estate" "shall include all real and personal property and other assets included within the individual's estate, as defined for purposes of State probate law." 42 U.S.C. § 1396p(b)(4)(A) (2000). However, the federal statute provides that "estate" "may include, at the option of the State ..., any other real and personal property and other assets in which the individual had any legal title or interest at the time of death." Id. § 1396p(b)(4)(B). It appears our legislature sought to exercise its option by including interest in addition to legal title.
We next consider the purpose of the Medicaid recovery statute. As one court explained,
Congress mandated that [states participating in the Medicaid program] adopt estate recovery provisions and permitted states to adopt an expansive definition of "estate" to address the increased demand for Medicaid benefits from the nation's aging population. In doing so, Congress intended to give states "wide latitude" in seeking estate recoveries. "Allowing states to recover from the estates of persons who previously received assistance furthers the broad purpose of providing for the medical care of the needy; the greater amount recovered by the state allows the state to have more funds to provide future services."
Estate of DeMartino v. Div. of Med. Assistance & Health Servs., 373 N.J.Super 210,
With this in mind, we find that a person has an "interest" in the trust to the extent the assets of a trust are actually available to a trust beneficiary, as that term is used in section 249A.5(2)(c). Cf. Linser v. Office of Attorney Gen.,
The Barkema Trust was a discretionary support trust that contained enough of a distribution standard to create an interest of the beneficiary in the corpus. The trustee was required to pay Lois, during her lifetime, "the amount which in the exercise of reasonable discretion [was] needed for [her] support." Bogert on Trusts § 229. This gave Lois the legal ability to compel the trustee to invade the corpus of the trust and make distributions to her for her support. Consequently, she had an "interest" in the corpus of the trust.[1] We next consider whether the interest was present at the time of her death.
Under the Medicaid recovery statute, the Department can collect its debt from Lois's interest in the trust that she had "at the time of [her] death." Iowa Code § 249A.5(2)(c). Gayle and Dianne argue that "at the time of her death" means "at the precise moment she died." They claim Lois had no interest at the time of her death because the corpus passed to them upon her death by operation of law. We reject this argument for the reason expressed by the Minnesota Court of Appeals: "`[A]t the time of death' must be construed to mean a point in time immediately before death. Any other reading of this phrase would render the estate recovery statute meaningless because upon death, property immediately passes to beneficiaries." In re Estate of Gullberg,
Thus, the Department acquired Lois's "right that the trustee pay [her] the amount which in the exercise of reasonable discretion is needed for [her] support." Bogert on Trusts § 229. Richard, the trustee of the trust, conceded that the Medicaid benefits the Department provided to Lois were necessary for her support. Accordingly, the Department's $55,000 debt may be collected from the remaining corpus of the trust.
IV. Conclusion
For the foregoing reasons, we affirm the ruling of the district court.
AFFIRMED.
NOTES
Notes
[1] We confine our holding to the specific trust agreement at issue in this case and do not consider the extent to which other trusts are included in the definition of "estate" under section 249A.5(2)(c).