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An administrative law judge’s analysis of a woman’s irrevocable trust as it relates to her Medicaid nursing home benefits eligibility was incomplete, the Court of Appeals of Indiana ruled in a Tuesday reversal.
According to court records, the case concerns several documents that Natalie Harves and her children — Karen Sue Cutter, Richard E. Harves and Ann Harves Bildner — signed on Jan. 25, 2019, when Natalie Harves was 91 years old. Harves appointed Karen as her “Health Care Surrogate” and attorney-in-fact and appointed Richard and Ann as the successor surrogates and attorneys-in-fact.
Natalie, Karen and Richard also signed a personal service contract in which Harves indicated her intent to compensate the children for “the time and expenses incurred” “in providing me with assistance and supervision in managing the affairs of my estate … .” According to Harves, the children gave her nearly $900,000 in services from January 2011 to January 2019 and continued providing services after the personal service contract was signed.
Additionally, the children signed an agreement creating an irrevocable trust, the N. Harves Family Heirs Trust. Harves’s assets — worth $557,240, according to Harves — were placed in the trust.
Four months later, in May 2019, Harves applied for Medicaid nursing home benefits.
The Indiana Family and Social Services Administration denied the application, finding that the assets of the trust were available to her, so her resources exceeded the threshold for Medicaid eligibility.
Harves filed an administrative appeal, and an administrative law judge affirmed the denial.
After FSSA issued a notice of final agency action affirming the ALJ’s order, Harves petitioned for judicial review.
The Decatur Circuit Court denied the petition, and Harves appealed.
The Court of Appeals reversed the denial and remanded the case to the trial court with instructions to grant the petition for judicial review and return the matter back to FSSA for further proceedings.
Judge Nancy Vaidik wrote the opinion for the appellate court.
Vaidik noted that the appellate court found a significant error in the ALJ’s analysis.
The appellate judge wrote that the ALJ was correct in concluding that the corpus of the trust must be considered resources available to Harves after finding that her assets were used to form the corpus of the trust, and the trust was established by a person with legal authority to act on her behalf.
However, according to Vaidik, a third element must be satisfied before the corpus of an irrevocable trust can be counted as available resources. That is, there must be circumstances under which payment from the trust could be made to or for the benefit of the individual.
The ALJ did not mention that element or discuss any language from the trust agreement that might satisfy it, and the trial court did not address the element in denying Harves’ petition for judicial review, Vaidik wrote.
“The parties address this third element in their appellate briefs, disputing whether certain provisions in the trust agreement mean that payment from the Trust could be made to Harves or for her benefit,” Vaidik wrote. “But the agency, not this Court, must adjudicate this issue in the first instance.”
Judges Paul Mathias and Rudolph Pyle concurred.
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