The Supreme Court of the United States issued a ruling last week that dictates that a state’s Medicaid agency can recoup funds for benefits paid against an injured party’s settlement award for future medical expenses.

In this case, a Florida student was tragically injured and left in a vegetative state when she was hit by a truck after she stepped off her school bus. Her personal injury suit settled with an $800,000 award, of which roughly $35,000 was designated for past medical expenses. Instead of taking the amount designated for past medical expenses, the state Medicaid agency tried to attach $300,000 of the settlement proceeds.

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.

A big part of elder law is helping clients get eligible for Medicaid since that government program has strict rules about an applicant’s assets, income, and prior transfers. There are a variety of legal strategies to employ to meet the eligibility rules and obtain long-term care benefits. However, is submitting a seemingly one-sided consent judgment a viable strategy? Can the judge reject the consent judgment because Medicaid qualification might be a motivating factor for the parties? This issue was recently litigated in Michigan.