A federal district court grants a Medicaid beneficiary’s request for a preliminary injunction preventing the Connecticut Department of Social Services from treating two trusts established for the beneficiary by her deceased mother as countable resources before they were decanted into supplemental needs trusts.  Simonsen v. Bremby (D.Ct., No. 15-cv-1399, Dec. 23, 2015).

Joy A. Miller established two inter vivos trusts for her daughter, Dawn Simonsen, that were funded when Ms. Miller died in 2003.  The trusts, established in Florida, gave the trustee the ability to “pay to [Dawn] or utilize for her benefit so much of the income and principal of her trust as the trustee deems necessary or advisable from time to time for her health, maintenance in reasonable comfort, education and best interest considering all of her resources known to the trustee . . . the trustee is encouraged to be liberal in its use of the funds for her even to the extent of the full expenditure thereof.”  

Ms. Simonsen, a quadriplegic on a ventilator, was admitted to a nursing home in October 11, 2013, and she applied for Medicaid on July 31, 2014.  On August 29, 2014, the trustee of the two trusts successfully petitioned a Florida court for permission to decant the two trusts into two new supplemental needs trusts.  Although the Connecticut Department of Social Services (DSS) initially approved Ms. Simonsen’s Medicaid application, it subsequently determined that the original trusts were countable resources and assessed a seven year transfer of assets penalty for the decanting into the clearly inaccessible supplemental needs trusts.  Ms. Simonsen appealed DSS’s decision and while that appeal was pending filed a request for a preliminary injunction with the federal district court asking it to prohibit the state from terminating her Medicaid benefits and to hold that the previous trusts were not accessible resources, voiding the transfer penalty.

Referring to the Social Security Administration’s Program Operations Manual System (POMS), the U.S. District Court for the District of Connecticut grants the motion for a preliminary injunction, finding that the original trusts are not countable resources because they “do not contain terms providing the beneficiary with any right or authority to direct any payments, and instead empowered the Trustee with the sole discretion to determine when to make a distribution . . . Moreover, the Predecessor Trusts contained a valid spendthrift clause . . . In short, if a trust contains a spendthrift clause, the beneficiary has no legal right or authority to access the trust principal, and, therefore, it is not counted as an available resource for SSI, and consequently Medicaid, eligibility purposes.”

To read the full text of the court’s decision, go to:  https://scholar.google.com/scholar_case?case=5632158145355900320&hl=en&lr=lang_en&as_sdt=1ffffffffffffffffffffffffffffffffe000000000000001f000001ffffffecfff87fe3fffffff00108000800000000004&as_vis=1&oi=scholaralrt