Can Incompetency Clause in Revocable Trust Protect Assets from Medicaid Eligibility Consideration?

A trigger trust, in the Medicaid-trust world, is one in which access to trust funds is removed once a triggering event occurs, such as the grantor entering a nursing home. Since the Omnibus Budget Reconciliation Act of 1993, trigger trusts are not allowed for Medicaid planning, as such trust would violate the any circumstances rule of 42 U.S. Code § 1396p(d)(3)(B). However, in a new case out of Connecticut, a court analyzes whether a trigger trust keeps trust assets from being counted for Medicaid eligibility purposes. Let’s take a look at the facts and see how the court analyzes the case.

Antonio and Antoinetta, husband and wife, established a Declaration of Trust in 2001. Per the terms of the trust, each grantor had the right to withdraw his or her portion of trust property only if the pertinent grantor was “alive and competent”. In the event a grantor was not competent, the trust could not be revoked and trust assets could not be accessed, not even by the grantor’s legal representative.

In 2019, Antonio entered a nursing home facility. A few months thereafter, he filed for Medicaid benefits. In September 2020, the state Medicaid agency sent a notice to Antonio denying his application for being over-resourced. The state contended that the assets in the trust were countable. An appeal was filed.

At the fair hearing, Antonio’s attorney filed an affidavit stating that it was her opinion that Antonio was not competent. She had been Antonio’s personal attorney since 1995. She claimed that Antonio was not able to understand or conduct his own business matters. The fair hearing officer ruled in favor of the state and there is an unpublished opinion from the Superior Court of Connecticut.

The Superior Court did take note of Connecticut General Statutes 17b-261 (c), which states: “For the purposes of determining eligibility for the Medicaid program, an available asset is one that is actually available to the applicant or one that the applicant has the legal right, authority or power to obtain or to have applied for the applicant's general or medical support.” The court further noted that it is the applicant’s responsibility to prove “his eligibility for Medicaid benefits, the inaccessibility of any asset, and any alleged incapacity.”

In this case, the only proof offered at the fair hearing was the applicant’s attorney’s testimony and affidavit. An attorney, by nature, advocates for their client, and so the evidence was not impartial. Even though not strictly required, medical evidence would have been more compelling. (Also, Rule 3.7 of the Model Rules of Professional Conduct prohibits an attorney from testifying about a material issue in a case in which they are also an advocate.) The judge also noted that Antonio signed his Medicaid application himself, indicating his capacity. In this case, the judge said that the hearing officer weighed the evidence and found it insufficient to conclude that Antonio was incapacitated. Antonio was unable to show that the fair hearing decision was clearly erroneous, arbitrary, or capricious. In the end, Antonio loses his case and the trust property is countable for his Medicaid-eligibility analysis.

What is interesting is that the judge didn’t automatically render trust assets countable due to the any circumstances rule. The judge made it sound like if Antonio’s team could have proven he was incompetent through other evidence, trust assets may have been non-countable. If the trust language or Antonio’s incapacity was irrelevant due to the any circumstances rule, why would the court go through any further analysis? The state won’t appeal, since the ruling was in their favor. And Antonio’s team likely won’t appeal due to the lack of evidence. So, we will never know if such a clause would have held up in Antonio’s case.