Donna G., as mother and next friend of Eric S.. A MINOR CHILD, APPELLANT,
NEBRASKA DEPARTMENT of Health and Human Services and Calder A. Lynch, director, Division of Medicaid and Long-Term Care, appellees.
Administrative Law: Judgments: Appeal and
Error. A judgment or final order rendered by a
district court in a judicial review pursuant to the
Administrative Procedure Act may be reversed, vacated, or
modified for errors appearing on the record.
___: ___. When reviewing an order of a district court under
the Administrative Procedure Act for errors appearing on the
record, the inquiry is whether the decision conforms to the
law, is supported by competent evidence, and is neither
arbitrary, capricious, nor unreasonable.
Judgments: Appeal and Error. Whether a
decision conforms to law is by definition a question of law,
in connection with which an appellate court reaches a
conclusion independent of that reached by the lower court.
Trusts: Intent. Whether a testamentary trust
amended by a probate court order pursuant to Neb. Rev. Stat.
§§ 30-24, 123 and 30-24, 124 (Reissue 2016) remains
a testamentary trust is a question of law.
Trusts: Medical Assistance: Intent. When a
testamentary trust is modified by a court-approved compromise
agreement, the question whether it retains its testamentary
character for purposes of determining a beneficiary's
Medicaid eligibility will depend on both the nature of the
parties' agreement and the court's order approving
___: ___. When analyzing the terms of a testamentary trust to
determine if the trust corpus is "available" for
purposes of Medicaid eligibility, courts look to whether the
trust is a support trust or a discretionary trust.
Neb. 839] 7. Trusts: Medical
Assistance. When a testamentary support trust allows
a beneficiary to compel distributions of income, principal,
or both, for expenses necessary for the beneficiary's
support, the trust may be considered as an available asset
when evaluating Medicaid eligibility.
___. When a testamentary trust grants the trustee
uncontrolled discretion over payments to the beneficiary, it
is considered a discretionary trust for purposes of Medicaid
eligibility. Because the beneficiary of a discretionary trust
does not have the ability to compel distributions from the
trust, only those distributions of income, principal, or both
actually made by the trustee may be considered as available
assets when evaluating Medicaid eligibility.
from the District Court for Lancaster County: Andrew R.
Fair, of Dudden & Fair, P.C., L.L.O., for appellant.
Douglas J. Peterson, Attorney General, and Ryan C. Gilbride
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik,
and Freudenberg JJ.
Nebraska Department of Health and Human Services (DHHS)
terminated the Medicaid benefits of Eric S., and the district
court affirmed. Eric's court-appointed guardian and
conservator appeals. The primary issue on appeal is whether
the corpus of a trust is available to Eric for purposes of
determining his Medicaid eligibility. For the reasons set
forth below, we reverse, and remand with directions.
a young man with cerebral palsy. Before July 1, 2016, he was
receiving "Aid to the Aged, Blind or Disabled''
Medicaid waiver services. The date Eric began receiving such
services is not clear from the record.
Neb. 840] In 2012, Eric's grandmother, Lois Branting,
executed her last will and testament. Branting's will
devised all of her property, in equal shares, to her
grandchildren living at the time of her death. The will
further provided that "should any of my grandchildren be
under the age of thirty (30) years at the date of my death,
then all of my property shall instead be distributed to my
Trustee to be held pursuant to the provisions of paragraph 5
below." Paragraph 5 of the will was titled
"Grandchildren's Trust" and provided in
5.1 My trustee shall hold all property devised to my trustee
for the benefit of my grandchildren who shall survive me and
of the then living issue of any of my grandchildren who shall
not survive me, upon the following terms and conditions:
5.2 During the term of this trust, my trustee shall apply
such part of the net income and principal of this trust as
shall from time to time be necessary or appropriate to the
support, care, maintenance, medical expense, educational
expense and general welfare of my trust beneficiaries in such
amounts and proportions as my trustee, in the sole and
uncontrolled discretion of my trustee, shall deem advisable,
and shall accumulate and add to principal any net income not
used for such purposes.
5.3 At such time as my youngest living grandchild shall reach
the age of thirty (30) years, this trust shall terminate and
all principal and accumulated income, after the payment of
closing expenses, shall be distributed in equal shares, to my
then living grandchildren and the then living issue of any
grandchild of mine who shall then be deceased, so that there
shall be one such equal share for each living grandchild of
mine and one such equal share for the then living issue of
any grandchild of mine who shall then be deceased to be
shared by said issue by right of representation.
Branting died on November 29, 2014, she was survived by four
grandchildren, all of whom were minors.
Neb. 841] In December 2015, the parents of Branting's
grandchildren entered into a written agreement with
Branting's personal representative to split the
Grandchildren's Trust into two separate trusts: one
solely for the benefit of Eric (Eric's Trust), and
another for the benefit of the remaining three grandchildren.
That agreement recited in part:
[T]he four grandchildren . . . who are the beneficiaries of
the . . . Grandchildren's Trust ... are in very different
situations and will have very different needs in the future.
[The parents] have further determined that it would be best
for the grandchildren ... if the [Grandchildren's Trust]
was separated into one Trust for the benefit of [Eric] and
another separate Trust for the benefit of [the other three
grandchildren]. Specifically, [Eric] would be best benefitted
if his separate Trust had special needs provisions which
would enable for him to receive property from the [Branting
Estate] without significantly reducing the benefits which he
receives from various government agencies as a result of his
physical and mental disabilities. They have further
determined that it would be best for the beneficiaries of the
two new Trusts if the Trust for the Benefit of [Eric] were to
receive the 25% of the Estate to which he is entitled in cash
to the fullest extent possible, and the Trust for [the other
three grandchildren] would receive the Real Estate still
owned by the Estate which includes the residence in which
they have been and will be raised together with any remaining
assets together totaling 75% of whatever assets remain in the
Estate on the date of distribution.
referencing "special needs provisions" for Eric,
the agreement did not include additional trust terms for the
split trusts, but merely recited the pertinent provisions of
Branting's will, including the sections establishing and
setting out the terms of the Grandchildren's Trust.
the agreement was reached, Branting's personal
representative petitioned the probate court, pursuant to Neb.
Rev. [301 Neb. 842] Stat. § 30-24, 124 (Reissue 2016),
to approve the agreement and split the Grandchildren's
Trust. The probate court did so in an order entered December
28, 2015, which provided:
Pursuant to the provisions of Neb. Rev. Stat.
§30-24. 124 the Court finds that the effect of the
provisions of the Agreement upon the interests of the
interested persons is just and reasonable and therefore the
Agreement is . . . approved, and the Petitioner as Personal
Representative of the Estate shall make all further
disposition of the Estate in accordance with the terms of the
the probate court's order was entered, the separate
trusts were funded in accordance with the agreement and
separate trustees were appointed for the two trusts. The
probate court's order was not appealed, and no party to
the instant appeal has questioned the provisions of the
probate order or the procedure followed in the probate court.
balance of Eric's Trust was $512, 380.39 as of May 16,
2016. DHHS regulations establish that the maximum available
resources one may own and still be considered eligible for
Medicaid is $4, 000. Eric's mother, Donna G., serves as his
court-appointed guardian and conservator.
April 2016, Donna informed DHHS that Eric had what she
referred to as a "Special Needs Trust." One month
later, DHHS determined that the entire corpus of Eric's
Trust was an available resource for purposes of determining
his Medicaid eligibility. In June, DHHS mailed a notice of
action advising that Eric's Medicaid coverage and
Medicaid waiver services would end effective July 1, 2016,
because he was ineligible for Medicaid due to excess
response to the notice of action, Donna requested and was
given an administrative hearing, after which DHHS affirmed
its decision terminating benefits. Donna timely filed a
petition for judicial review in the Lancaster County [301
Neb. 843] District Court, challenging DHHS' decision
pursuant to the Administrative Procedure Act.
district court affirmed DHHS' decision to terminate
benefits, finding that the entire corpus of Eric's Trust
was an available resource for purposes of determining his
Medicaid eligibility. The court first considered the nature
of Eric's Trust. The court concluded it was not a
testamentary trust, reasoning it was the product of action
taken in the probate court. And it concluded Eric's Trust
was not a special needs trust, because it lacked the
necessary special needs provisions. Thus, by process of
elimination, the court found Eric's Trust was properly
characterized as an "irrevocable trust created after
August 11, 1993."
court next considered the DHHS regulation governing treatment
of such a trust, which provides:
If there are any circumstances under which payment from the
trust corpus could be made to or for the benefit of the
client ... the portion of the corpus from which payment to or
for the benefit of the client . . . could be made must be
considered a resource available to the client.
this standard, the district court found there were
circumstances under which the trust corpus could be paid to
Eric, and thus concluded the corpus was an available resource
for purposes of determining his Medicaid
the district court reasoned that even if Eric's Trust was
a testamentary trust, it would still be considered an
available resource for purposes of determining his Medicaid
eligibility. The court noted the language of Eric's
Trust had elements of both a support trust and a
discretionary trust, and concluded it was the type of hybrid
'"discretionary support [301 Neb. 844]
trust'" this court discussed in Smith v.
Smith In Smith, we held that "the
trustee of a discretionary support trust can be compelled to
carry out the purposes of the trust in good
faith."Applying this principle, the court reasoned
that if Eric could compel his trustee to carry out the
purpose of Eric's Trust in good faith, he could also
compel the trustee to make distributions from it for his
medical expenses. Thus, the court concluded that even if
Eric's Trust was considered testamentary, the entire
corpus was still an available resource for purposes of
determining his Medicaid eligibility.
timely appealed the district court's judgment, and we
moved the case to our docket on our own motion.
ASSIGNMENTS OF ERROR
assigns, restated, that the district court erred when it
included Eric's Trust as an available resource for
purposes of determining his Medicaid eligibility, because (1)
the trust is testamentary and (2) the trust is discretionary.
STANDARD OF REVIEW
judgment or final order rendered by a district court in a
judicial review pursuant to the Administrative Procedure Act
may be reversed, vacated, or modified for errors appearing on
reviewing an order of a district court under the
Administrative Procedure Act for errors appearing on the
record, the inquiry is whether the decision conforms to the
law, is supported by competent ...