Medicaid has Continually Interpreted that the State be the Remainderman of all Trusts

The administrative regulations (N.J.A.C. 10.71-4.10(f)) require that in order for a trust for the "sole benefit of" a spouse (subject to the c.s.r.a.), disabled child or disabled individual under the age of 65 to be exempt, the State must be the first remaining beneficiary. That is, the reimbursement requirement imposed by New Jersey applies to all "sole benefit of" trusts. Response to Comment 33 of the OBRA Regulations indicates so long as the Medicaid claim is satisfied, the trust can provide for other remainder beneficiaries.

This interpretation that the State be the remainderman is a requirement based upon a misunderstanding of the federal statute.

OBRA '93 requires that the state be reimbursed from trusts known as "(d)(4)(A)" trusts (trusts for disabled individuals under 65, Miller Trusts, pooled income trusts) - 42 U.S.C. 1396p(d)(4). These trusts are known as exempt trusts. Miller Trusts no longer exist. It is noted that the only "sole benefit of" trust referenced under this federal statute relates to a trust for a disabled individual under the age of 65. The exemption from the transfer rules for transfers for the "sole benefit of" a spouse or for the "sole benefit of" a disabled child is not based upon the aforementioned federal statute dealing with exempt trusts. The exemption for these transfers is based upon the federal statute which sets forth the list of exempt transfers - 42 U.S.C. 1396p(c)(2). While the federal statute requires that the remainderman of "(d) (4) (A)" exempt trusts be the State, there is obviously no such requirement in the transfer provisions and Medicaid is being more restrictive than the federal law.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2010, Post 114