Medicaid Living Trusts

by Ira M. Leff, Esq.

July 19, 2009

I have been retained by a large trust company to advise them about a revocable living trust set up by a Medicaid applicant's (A/R) deceased husband on December 3, 1997. According to its terms, the trustee shall pay to or for the benefit of Settlor's spouse a portion, all, or none of the net income and principal as needed for Settlor's spouse's maintenance, support, education and health.

The question is how should Georgia Medicaid treat this trust? Is it an OBRA '93 trust subject to the rules of MEDICAID MANUAL § 2337, or does it fall outside of that definition and is it subject to the rules of MEDICAID MANUAL § 2338?

An OBRA '93 Trust is defined as a trust created on or after 8-11-93 by an individual, spouse, or someone acting on his/her behalf, with his/her own funds, and with his/her named as beneficiary of the trust. MEDICAID MANUAL § 2338-1. I quote this rule verbatim (even with its improper grammar) because its interpretation is critical to resolving this matter.

MEDICAID MANUAL § 2337-1 instructs DFCS caseworkers to consider all trusts created by the A/R or spouse which were created with the A/R's resources AND/OR with the A/R as beneficiary. Under this language, it clearly appears that the trust in question is an OBRA '93 trust. It that is a correct interpretation of the law, then any portion of the trust from which it is possible to make a disbursement to the A/R counts as a resource. If instead, this trust falls outside of the OBRA '93 definition, then the trust principal is not a resource since the A/R is not legally empowered to revoke the trust and use the principal for her support. MEDICAID MANUAL § 2338-2.

In my opinion MEDICAID MANUAL §§ 2338 and 2337 have not been written in compliance with Federal Law. Next week I will explain my reasoning. If any of you have any thoughts on this topic, please let me know.

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