Trust Naming Medicaid Applicant as Co-Trustee Is Available Asset

If planning for long-term care involves Medicaid eligibility planning, the applicant must turn over ownership and control of assets.  Otherwise, the assets will be countable, and the applicant will be ineligible for Medicaid. A most recent example comes from the State of Washington.  A  Washington appeals court recently ruled that a testamentary trust that named a Medicaid applicant as the beneficiary is an available asset because the applicant retained some control over the trust and because the funds in the trust came from either herself or her husband. Matter of Estate of Berto v. State (Wa. Ct. App., Div. 3, No. 33591-7-111, July 19, 2016).

Margaret Berto's husband died, leaving a testamentary trust that named her as co-trustee and the only beneficiary. The trust permitted distributions only at the discretion of the trustees, but provided that Ms. Berto could not be the sole trustee and could not solely determine distributions. Ms. Berto sold her home and deposited some of the proceeds in the trust.

Ms. Berto thereafter applied for Medicaid, and the state counted the trust as an available asset and denied Ms. Berto benefits. Ms. Berto appealed, arguing that the trust was not an available asset because she had limited control over the trust and there were restrictions on distributions.

The Washington Court of Appeals affirmed the state's decision, holding that the trust is an available asset. The court ruled that the trust does not fall under any of the exemptions for trusts in the state Medicaid regulations because "Ms. Berto had some control over the trust and all of the funds came from either her husband or herself."