Monday, July 30, 2018

Indiana Appellate Court Compels Accident Settlement Funds Be Paid To Special Needs Trust

On July 26, 2018, the Indiana Court of Appeals ruled unanimously that a trial judge was wrong in refusing to fund a severely injured adult's special needs trust with $6.75 million in funds from settlement of tort suit. 

The trial judge had resisted, saying he disagreed with the legislative policy for special needs trusts, calling it a "legal fiction of impoverishment" that unfairly shifted costs of care to taxpayers.  The trial judge would allow only $1 million in settlement funds to be placed in trust.  

In the final paragraphs of In re Matter of Guardianship of Robbins, the appellate court concluded:   

The trial court may well have a genuine disagreement with the policy decisions of our state and federal legislators, but it is still bound to abide by them. . . . 

 

Here, there are no constitutional concerns preventing the legislature's policy choices from being enforced. Both our federal and state legislators have made an express policy decision to allow for a “legal fiction of impoverishment” by placing assets in a special needs trust, knowing full well that it has the potential to shift expenses to the taxpayer, but trying to ameliorate that cost by requiring that any remaining trust proceeds be repaid to the State upon the disabled person's death. While the trial court is free to disagree as to the wisdom of the legislature's policy choices, the trial court exceeded the bounds of its authority by refusing to enforce this policy choice based on that disagreement.

 

The trial court also refused to place the full amount of the settlement proceeds into the special needs trust because it concluded that the trust was solely for the benefit of the Guardian and Timothy's descendants. This is a mistake of law. As a matter of law, a special needs trust must contain a provision declaring that, upon the death of the disabled trust beneficiary, the total amount of Medicaid benefits must be paid back firstbefore any distributions to heirs are made. 42 U.S.C. § 1396p(d)(4)(A)I.C. § 12-15-2-17(f). Additionally, the special needs trust must be administered for the exclusive benefit of the disabled individual beneficiary for his or her lifetime. . . .  Consequently, it is a legal impossibility that Timothy's special needs trust is designed to “benefit” either the Guardian or Timothy's descendants, and the trial court's conclusion in this regard was erroneous.

The trial court's ruling on the special needs trust was reversed and the case was remanded "with instructions to direct that the full, available amount of settlement proceeds be placed in Timothy's special needs trust."

https://lawprofessors.typepad.com/elder_law/2018/07/indiana-appellate-court-compels-accident-settlement-funds-be-paid-to-special-needs-trust.html

Cognitive Impairment, Current Affairs, Estates and Trusts, Ethical Issues, Federal Statutes/Regulations, Health Care/Long Term Care, Medicaid, Medicare, Property Management, Social Security, State Cases, State Statutes/Regulations | Permalink

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