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Ham v. Colvin

United States District Court, D. Nebraska

April 17, 2015

IAN HAM, by and through his Legal Guardian, SANDRA HAM, Plaintiff,
CAROLYN W. COLVIN, Acting Commissioner of the Social Security Administration, Defendant.


JOHN M. GERRARD, District Judge.

The plaintiff, Ian Ham, appeals from a decision of the Social Security Administration (SSA) finding that his special needs trust was a countable resource of sufficient value to require suspension of his supplemental security income (SSI) benefits. The Court has considered the parties' filings and the administrative record, and will affirm the Commissioner's decision.


Before relating the particular facts of this case, it will help to understand the statutory framework. Under Title XVI of the Social Security Act, "[e]very aged, blind, or disabled individual who is determined... to be eligible on the basis of his income and resources shall... be paid benefits by the Commissioner of Social Security." 42 U.S.C. § 1381a. But if such a person is unmarried and his or her countable resources exceed $2, 000, he or she loses eligibility for SSI benefits. 42 U.S.C. § 1382(a)(3)(B). Some assets are exempt from being counted, however, including special needs trusts as they are defined by 42 U.S.C. § 1396p(d)(4)(A). 42 U.S.C. § 1382b(e)(5). Specifically, a trust is not countable under § 1396p(d)(4)(A) if it is

[a] trust containing the assets of an individual under age 65 who is disabled... and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State [Medicaid] plan....

The plaintiff in this case is a disabled adult who began receiving SSI benefits in 1991. T14. The plaintiff's mother is his legal guardian. T18-21. The plaintiff was injured in an accident at the Beatrice Community Hospital and sued the hospital and a doctor in state court. T33. The hospital and doctor, and their insurer, offered to settle the claim. T33. In August 2011, the county court approved the settlement, which provided for a sum of money to be placed into a special needs trust. T34, T118. The Ian Ham Trust was created for that purpose. T23-31.

The plaintiff's mother was established as the trustee of the Trust. T23. The Trust instrument also expressly named the plaintiff's mother as the grantor of the Trust. T23. As relevant, art. II(f) of the Trust provided that upon the plaintiff's death, the trustee would use the Trust principal to pay the plaintiff's final expenses, then distribute the remaining principal to the plaintiff's heirs. T25. But as required by § 1396p(d)(4)(A), the Trust also provided that notwithstanding art. II(f), "upon the distribution date, the trustee shall reimburse to the State (or other Medicaid payor) all amounts remaining in the trust, up to the total amounts of medical assistance paid, if any, to or on behalf of the beneficiary." T25.

Another provision of the Trust, however, provided for early termination of the Trust under certain circumstances. Art. II(e), titled "Shielding trust from third parties, " provided:

The trustee shall have no power to pay or apply trust income or principal to pay or reimburse any governmental or institutional agency, payor or provider or "public resources". In the event and to the extent (i) any such governmental or institutional agency, payor or provider shall determine, that provisions of this trust are ineffective or are to be disregarded for purposes of determining the beneficiary's eligibility for statutorily provided "public resources" or (ii) a court of competent jurisdiction shall determine... that this trust is or may be subject to garnishment, attachment, levy, execution, or bankruptcy proceeding instituted by any creditor against the beneficiary, then, in the trustee's discretion, this trust may thereupon terminate and its then principal shall be distributed free of trust (i) to such one or more persons or tax-exempt charitable organizations as the grantors or the survivor of them or, after the surviving grantor's death, the then acting trustee, shall appoint by written instrument delivered to the trustee, or, in default of effective appointment, (ii) in accordance with provisions of [art. II(f)] to such person therein described who shall then be living in the same manner as though the beneficiary's death had then occurred.

T25. That provision is the source of the trouble.

In September 2011, the SSA notified the plaintiff that his SSI benefits would be suspended because he had resources worth more than $2, 000. T40. The notice specifically identified the Trust as the asset that exceeded the resource limit. T49. The plaintiff asked for reconsideration. T73. But the SSA regional office found that art. II(e) of the Trust-the early termination provision-did not provide reimbursement to the State for medical assistance upon early termination. T76, T81. Therefore, the Trust was a countable resource. T76-77, T81. So, the SSA denied reconsideration. T78.

The plaintiff asked for a hearing by an administrative law judge (ALJ). T82. Attached to the hearing request form was a letter from plaintiff's counsel, and attached to the letter was a copy of a letter to the plaintiff's mother from the Nebraska Department of Health and Human Services (NDHHS), indicating that a copy of the Trust had been forwarded to NDHHS's "Central Office Program Specialist in Lincoln" and that "they have stated that the trust is an excluded resource." T84-86. And the plaintiff submitted a brief to the ALJ arguing that the Trust was a viable "Special Needs Trust within the meaning of 42 U.S.C. § 1396p(d)(4)(A)." T90.

But, after a hearing, the ALJ concluded that the Trust did not satisfy the requirements for exclusion, and that the plaintiff's SSI benefits were correctly suspended. T14-17. The ALJ found that the early termination clause did not comply with the recapture requirement of § 1396p(d)(4)(A) because the grantor, whom the ALJ found to be the plaintiff's mother, had discretion to dispose of the Trust proceeds in the event of early termination. T16. And the ALJ rejected the plaintiff's argument that the SSA should defer to the decision of the NDHHS regarding the excludability of the Trust, stating that he was not bound by determinations made by separate government entities. T16.

The plaintiff sought review by the Appeals Council of the SSA, which denied the plaintiff's request. T3-9. The plaintiff's complaint seeks review of the ALJ's decision as the final decision of the ...

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