Minnesota Reports
IN RE: DECISION OF COMM. OF HUMAN SER., A06-559 (Minn.App.
12-19-2006) In RE: Appeal of Decision of Commissioner of
Human Services, In the Appeal of Lillian Flygare for
Medical Assistance. No. A06-559. Minnesota Court of
Appeals. Filed: December 19, 2006.
Appeal from the Nicollet County, District Court, File No.
52-CV-05-438.
SYLLABUS
A support trust is an available asset for purposes of
determining eligibility for medical assistance and any
trust provision limiting the trustee’s ability to make
payments if the beneficiary is eligible for public
assistance is unenforceable as against public policy under
Minn. Stat. § 501B.89, subd. 1 (2004).
Christopher E. Sandquist, Gislason & Hunter, LLP, Mankato,
MN (for appellant Lillian Flygare).
Kenneth R. White, Assistant County Attorney, Nicollet
County Attorney’s Office, St. Peter, MN (for respondent
Nicollet County).
Mike Hatch, Attorney General, Robin C. Vue-Benson,
Assistant Attorney General, St. Paul, MN (for respondent
Commissioner of Human Services).
Considered and decided by KLAPHAKE, Presiding Judge, ROSS,
Judge, and HARTEN, Judge.[fn*].
[fn*] Retired judge of the Minnesota Court of Appeals,
serving by appointment pursuant to Minn. Const. art. VI,
§ 10.
OPINION
KLAPHAKE, Judge.
Appellant Lillian Flygare, through her son and
attorney-in-fact Marcus Flygare, challenges the denial of
her application for medical-assistance benefits. Her
application was initially denied after respondent Nicollet
County determined that she has assets available from a trust
established by her deceased husband. Following a hearing,
an appeals referee recommended affirming the county’s
decision; that recommendation was adopted by respondent
Commissioner of Human Services. On appeal, the district
court affirmed the commissioner’s determination of
ineligibility.
Because we conclude that the trust is a support trust under
Minnesota law, it is an available asset for purposes of
determining appellant’s eligibility for medical assistance.
And, because the trust provision restricting the trustee’s
ability to make payments if appellant becomes eligible for
public assistance is unenforceable as against public policy
under Minn. Stat. § 501B.89 (2004), appellant can
compel the trustee to provide for her support. We therefore
affirm the district court’s determination that appellant is
ineligible to receive medical-assistance benefits.
FACTS
On August 20, 1993, appellant’s husband, Ronald Flygare,
executed his last will and testament. The will provided
that if appellant survived him, a portion of his estate,
designated as the “Marital Share,” would be paid directly
to appellant; the marital share consisted of the amount of
the estate that was allowed to pass tax free because it
qualified for a marital deduction. The will further
provided that the remaining assets of the estate designated
as the “Family Share” would be deposited into a
testamentary trust.
Ronald Flygare died on December 17, 1993. As provided by
the will, the marital share of decedent’s estate was
distributed to appellant outright. The family share was
placed in trust, with appellant and her son, Marcus
Flygare, appointed as trustees.
By 2004, appellant had less than $3,000 in personal assets
remaining and because her health had deteriorated, she
required additional care. On August 26, 2004, her son,
acting as her attorney-in-fact and authorized
representative, applied for medical assistance benefits
through the county. At the time of her application, the
principal in the trust totaled approximately $300,000.
On December 23, 2004, the county notified appellant that
her application was denied. The county explained that
because appellant had failed to prove that the trust was
unavailable, the trust was counted as an asset and put
appellant over the $3,000 limit. See Minn. Stat. §
256B.056 (2004).
On March 15, 2005, appellant challenged the county’s denial
and a hearing was held before a referee. See Minn. Stat.
§§ 256.045, .0451 (2004) (providing for
administrative and judicial review of certain human
services matters, including applications for medical
assistance and setting forth hearing procedures). At the
hearing, appellant’s attorney argued that the trust was
intended to supplement rather than supplant public
assistance and that it could not be considered an available
resource for purposes of medical-assistance eligibility.
The referee concluded that the trust is contrary to public
policy because its unambiguous language expressly limits
any payment from the “Family Share” of the trust to
appellant “in the event she would be eligible for
assistance under any government funded program.” See Minn.
Stat. § 501B.89, subd. 1 (2004) (making
unenforceable as against public policy trust provisions
that allow for limitation or suspension of payments if
beneficiary is determined eligible for public assistance).
The referee’s recommendation that the county’s eligibility
denial be affirmed was adopted by the commissioner on May
25, 2005.
On appeal, the district court affirmed the final
determination of the commissioner. In a detailed
memorandum, the district court concluded that the trust
clearly violates Minn. Stat. § 501B.89 because it
requires the trustee to withhold distributions to appellant
should she become eligible for public assistance. The court
further explained its rejection of appellant’s attempt to
reform the trust so as to allow appellant to receive
supplemental distributions from the trust while receiving
public assistance. On appeal to this court, appellant
concedes that the trust violates Minn. Stat. §
501B.89, but insists that when the unenforceable provision
is removed and the remaining trust provisions are analyzed
under common law, the trust must be characterized as a
discretionary trust and therefore the assets are not
available to appellant for purposes of determining her
eligibility for medical assistance benefits.
ISSUE
Did the agency err in determining that appellant is
ineligible for medical assistance benefits because the
assets of the trust are available for her support?
ANALYSIS
Standard of Review
This court will review an agency’s medical-assistance
eligibility determination independently, without deference
to the district court’s review. Atkinson v. Minn. Dep’t of
Human Servs., 564 N.W.2d 209, 213 (Minn. 1997). We may
reverse only if the challenging party establishes that the
agency’s decision contains errors of law, is unsupported by
substantial evidence, or is arbitrary and capricious. Minn.
Stat. § 14.69 (2004); In re Kindt, 542 N.W.2d 391,
394 (Minn.App. 1996).
Issues involving the interpretation of language in a
statute or in a testamentary trust are issues of law that
we review de novo. See Atkinson, 564 N.W.2d at 213
(acknowledging that this court is not bound by agency’s
interpretation of governing statute, even though we often
give deference to that interpretation); Smith v. Smith, 517
N.W.2d 394, 397-98 (Neb. 1994). The issue of whether
resources in a trust are available to a beneficiary for
determining his or her eligibility for medical assistance
purposes is also a question of law. In re Carlisle, 498
N.W.2d 260, 263 (Minn.App. 1993). The trust beneficiary has
the burden to establish that a trust is not an available
asset. Id.
Enactment of Minn. Stat. § 501B.89
Minnesota courts have long recognized that placing assets
in a trust for the support of another person but
withholding consideration of those resources for that
person’s medical assistance eligibility is generally
disfavored as against public policy. McNiff v. Olmsted
County Welfare Dep’t, 287 Minn. 40, 44-45, 176 N.W.2d 888,
892 (1970). The broad policy is clear: persons who have the
means should pay for their health care and not shelter
available resources in order to enrich their heirs. See
Kindt, 542 N.W.2d at 398.
In 1992, the Minnesota legislature enacted Minn. Stat.
§ 501B.89, to solidify its position concerning
trusts that were structured to limit payments in cases
where a beneficiary was eligible for public assistance.
1992 Minn. Laws ch. 513, art. 7, § 129. In
particular, this statute states that
a provision in a trust that provides for the suspension,
termination, limitation, or diversion of the principal,
income, or beneficial interest of a beneficiary if the
beneficiary applies for, is determined eligible for, or
receives public assistance or benefits under a public
health care program is unenforceable as against the
public policy of this state, without regard to the
irrevocability of the trust or the purpose for which the
trust was created.
Minn. Stat. § 501B.89, subd. 1 (2004).
The statute was further amended during the 1993 legislative
session to allow a narrow exception for “supplemental
needs” trusts, which are designed to assist people with
disabilities when public assistance programs would fall
short of meeting their basic needs and reasonable living
expenses. Minn. Stat. § 501B.89, subd. 2. To qualify
as a special needs trust, the person must be disabled when
the trust is created, the trust’s general purpose “must be
to provide for the reasonable living expenses and other
basic needs of a person with a disability when benefits
from publicly funded benefit programs are not sufficient to
provide adequately for those needs,” and the trust “must
contain provisions that prohibit disbursements that would
have the effect of replacing, reducing, or substituting for
publicly funded benefits. “Minn. Stat. § 501B.89,
subd. 2(d).
Minn. Stat. § 501B.89, including the 1993
amendments, applies to all trusts created after July 1,
1992. Because the trust at issue here was created in 1993,
it is subject to this statute.
Flygare Trust Provisions
In relevant part, the trust provides:
D. The FAMILY SHARE shall be transferred to my trustees .
. . and shall be administered and distributed as follows:
First: The net income of this trust shall be paid to my
spouse in quarterly or other convenient installments;
provided that if my trustee, Marcus R. Flygare, determines
that my spouse has adequate other income, said trustee may
withhold all or any part of that income and may
distribute all or any part thereof to and among my
children and their issue in whatever proportions are
deemed advisable by my said trustee. Any net income which
is not so distributed shall be accumulated and added to
principal for reinvestment.
Second: In addition to the benefits hereinbefore provided
for my spouse, my trustee, Marcus R. Flygare, acting alone
and without my spouse for the purposes of this subdivision
. . . may in his sole and exclusive discretion during the
time this trust is being held for the benefit of my
spouse, withdraw installments of principal from this trust
from time to time and pay the same to or for the benefit
of my spouse as my trustee, Marcus R. Flygare, deems
necessary and advisable in order to provide for the proper
support and maintenance of my spouse; provided,
nevertheless, that no such sums of principal or income
shall be paid to or applied for the benefit of my spouse,
except for the assets available to the trustee, in the
event my spouse would be eligible for assistance under any
government funded program and in such event, no such trust
funds shall be so expended, and to or for the benefit of
my children, for their support and maintenance.
Appellant concedes that certain language in the trust
violates Minn. Stat. § 501B.89, subd. 1, and cannot
be given effect. Appellant insists that the offending
language should simply be stricken or deleted from the
trust document and that the settlor’s intent should be
reevaluated without that stricken language. Appellant
argues that reconsideration of the trust document without
the stricken language makes it clear that the settlor
intended the trust to be a discretionary trust, not a
support trust, and that its assets should be deemed
unavailable to appellant for purposes of determining her
eligibility for medical assistance.
While the parties offered different analyses of the issues,
at oral arguments appellant and the commissioner agreed
that the initial focus should be on the type of trust
involved: if the trust is a true discretionary trust, its
assets are not available for purposes of determining
eligibility for medical assistance and the analysis would
end there; but if the trust is a support trust, its assets
are available and Minn. Stat. § 501B.89 makes any
provisions to the contrary unenforceable.[fn1]
The issue of whether a trust is a support trust or a
discretionary trust is generally an issue of law that we
can determine de novo by examining the “four corners of the
instrument.” McNiff, 287 Minn. at 43, 176 N.W.2d at 891;
see In re Fiske’s Trust, 242 Minn. 452, 460, 65 N.W.2d 906,
910 (1954) (absent ambiguity, intention of settlor is
ascertained from trust instrument in its entirety). A
support trust directs the trustee to distribute trust
income or principal as necessary for the support and
maintenance of the beneficiary; a discretionary trust, on
the other hand, gives the trustee complete discretion to
distribute all, some, or none of the trust income or
principal to the beneficiary as the trustee sees fit.
Carlisle, 498 N.W.2d at 264 (citing Restatement (Second) of
Trusts §§ 154, 155 (1959)).
The trust here includes language giving the trustee some
discretion, but that discretion is limited: the trustee is
directed to act as he “deems necessary and advisable to
provide for the proper support and maintenance of my
spouse. “While the trustee maintains discretion to
determine the total amount and perhaps the extent of proper
support and maintenance, he must consider appellant’s basic
needs and has no discretion with regard to making
expenditures to meet those basic needs. See McNiff, 287
Minn. at 43, 176 N.W.2d at 891. The clear purpose of this
trust was to insure that appellant’s basic needs are met:
she thus has the ability to bring an action to compel the
trustee to make payments as necessary to provide for her
proper support and maintenance. See United States v.
O’Shaughnessy, 517 N.W.2d 574, 577 (Minn. 1994) (even when
vested with complete discretion, trustee cannot violate
settlor’s intent or trust’s purpose without committing
abuse of discretion). We therefore conclude as a matter of
law that this trust is a support trust rather than a
discretionary trust.
Appellant relies heavily upon Carlisle and In re Horton,
668 N.W.2d 208 (Minn.App. 2003), two cases involving trusts
created prior to 1992 and enactment of Minn. Stat. §
501B.89, subd. 1. In Carlisle, 498 N.W.2d at 262, the trust
expressly excluded payments for the basic necessities of
life — food, clothing, and shelter — and the
trustee was under no obligation to make any payments to the
beneficiary. As a result, this court concluded that the
trust was discretionary. Id. at 264-65. In Horton, 668
N.W.2d at 214, the trust provided that the trustee “may
pay” amounts necessary to provide for the proper support
and maintenance of the donor or his family. Nothing in the
trust required that the trustee determine the needs of the
beneficiaries or insure that those needs were met, and the
entire document was in the permissive form. Id. at 215. As
a result, this court concluded that the trust was
discretionary. Id. at 214-15.
Here, the trust requires the trustee to consider
appellant’s needs and make payments to meet those needs.
Nothing in the trust gives the trustee discretion to ignore
appellant’s needs or to refuse to make payments to provide
for her basic support. Accordingly, we distinguish this
trust from the trusts in Horton and Carlisle. We therefore
conclude that because the trust is properly characterized
as a support trust, the agency did not err in determining
that it is an available asset for purposes of determining
appellant’s eligibility for medical assistance.
DECISION
We affirm the determination that appellant is not eligible
for medical assistance benefits. The county properly
determined that the trust of which she is a beneficiary is
an asset that is available to provide for her support.
Affirmed.
[fn1] The county, however, took a slightly different stance,
one with which we do not entirely agree. The county asserts
that if Minn. Stat. § 501B.89, subd. 1, applies,
then the trust assets are available regardless of whether
the trust is a discretionary or support trust.