Thursday, December 5, 2013

Pennsylvania: Renunciation of Interest in Trust Triggers Ineligibility for Medicaid

Calling it a "matter of first impression," an intermediate appellate court in Pennsylvania has ruled that a woman's renunciation of her interest in a dissolved marital support trust was a transfer "for less than fair consideration,"  thus triggering ineligibility when she entered a nursing home and applied for Medicaid. 

As reported in Schell v. Pa. Department of Public Welfare, decided December 4, 2013 by the Pennsylvania Commonwealth Court, a testamentary trust was dissolved in 2009, leaving approximately $300,000 to be distributed to the settlor's widow.  The widow formally renounced her interest in the distribution, permitting the sum to be divided equally between the couple's two children, one of whom was disabled.  Two years later, in 2011, the widow entered a nursing home and applied for Medical Assistance. 

While DPW accepted the widow's "hardship" argument regarding the half distributed to the disabled daughter, the Court upheld DPW's challenge to the distribution of the other half to the son. The Court rejected the widow's argument that the penalty period could not apply to a trust created more than five years before her nursing home admission, on the ground that the key event was termination of the trust within the Medicaid lookback window:

"Once the trust was dissolved, Petitioner became entitled to any remaining income and principal therein. This income and principal was available for Petitioner to use for her support, but she made an affirmative decision not to receive the same, without any good cause explanation for so doing. . . . Upon Petitioner’s renunciation, the trustee distributed half of the remaining income and principal from the trust, $151,231.76, to her son. Petitioner received nothing in return, and, thus, the [Bureau of Hearings and Appeals] properly concluded that this transfer was for less than fair market value, thereby resulting in the imposition of a penalty period of 582 days."

Estates and Trusts, Federal Statutes/Regulations, Health Care/Long Term Care, Medicaid, State Cases | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Pennsylvania: Renunciation of Interest in Trust Triggers Ineligibility for Medicaid: