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In re Lennon5/23/1996
Civil Action
This matter is before the court on plaintiffs' verified complaint for the determination of the mental incompetency of Matthew Lennon (Matthew), appointment of a guardian, and for advice and direction concerning a certain trust established under a Declaration of Trust pursuant to a judgment of the Superior Court of New Jersey in 1987, which Matthew is the beneficiary. Plaintiffs now seek court authorization to amend the trust's terms so that the trust funds will only be used to meet those needs which cannot be met through any public or private program of financial entitlements, services, or other benefits.
Plaintiff's are Matthew's parents. John W. Cooper is Matthew's court appointed counsel.
This court adjudicated Matthew a mental incompetent on January 31, 1996 and appointed plaintiffs as guardians of his personand property. The court reserved decision on the remaining issue pending receipt of briefs.
Matthew received approximately $565,000 from a medical malpractice settlement and judgment in 1981 followed by the Declaration of Trust in 1987. After careful investing with the help of a financial advisor, the trust is now valued at approximately $1,700,000. Plaintiffs are the trustees.
Plaintiffs assert that their intent, and that of the court, in initially approving the Declaration of Trust was that the trust provide for the lifelong protection of Matthew and only be used to supplement other resources available to Matthew by meeting those needs which cannot be met through other sources, including but not limited to, any government or private program of financial entitlements, services, or other benefits. Plaintiffs further allege that the current assets held in trust are grossly insufficient to meet all of Matthew's lifetime needs. According to his report, Mr. Cooper is in favor of amending the trust's terms. He did not, however, express an opinion as to how public assistance would view the changes sought. Therefore, it is necessary that the court clarify the purposes for which the funds can be used and determine how any changes may affect Medicaid eligibility.
Plaintiffs rely on the applicable statutes and case law over incompetents and minors for the proposition that a supplemental needs trust (SNT) can be created by the court in order to do whatever is in the best interests of the incompetent.
As noted earlier, the incompetent received a settlement/judgment in 1981, which was later modified by the Declaration of Trust. The current law regarding SNTs is 42 U.S.C. § 1396p(d)(4)(A) which permits such a trust to be created. However, this rule was enacted as part of the Omnibus BudgetReconciliation Act of 1993 amendments (OBRA 93), Pub.L. 103-66, § 13611(a) & (b), 107 U.S. Stat 622-626. Section 13611(e)(2)(C) of Pub.L. 103-66 provides that the amendments relating to these new SNTs shall not apply with respect to trusts established on or before August 10, 1993. Therefore, 42 U.S.C. § 1396a(k) determines whether such a trust should be permitted under the Medicaid rules.
According to section 1396a(k), in the case of a Medicaid Qualifying Trust (MQT), the amounts from the trust deemed available to a grantor for Medicaid eligibility purposes are the maximum amount of payments that may be permitted under the terms of the trust to be distributed to the grantor, assuming the full exercise of discretion by the trustee for the distribution of the maximum amount to the grantor. Under the terms of Matthew's trust, the trustee can expend all of the income for his support and may invade the corpus with court approval. Therefore, assuming maximum discretion, the entire amount of the trust is available for
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