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Kegel v. State3/5/1992
MINZNER, Judge.
Robert Kegel, the father and next friend of his minor son, Eric Kegel, appeals the termination of Eric's health care benefits by the Human Services Department (the Department). The sole appellate issue is whether the Department erred in determining that the trust of which Eric is a beneficiary is a "Medicaid qualifying trust" under 42 U.S.C. Section 1396a(k) (1989) and that the trust estate, proceeds of a personal injury settlement, was "available" under 42 U.S.C.A. Section 1396a(17)(B) (Supp. 1991). We conclude that the trust of which Eric is a beneficiary is not a Medicaid qualifying trust because there is insufficient evidence in the record to support a determination that he should be characterized as the grantor, and we reverse.
I. FACTS.
Eric, who is seven years old, was born with cerebral palsy and a seizure disorder. He is severely physically disabled and will "most likely always need total care." The record indicates that his "cognitive abilities are an unknown factor." Eric has been a recipient of health care benefits through the Department since July 1987.
Eric's injuries were the basis of a malpractice action filed by his parents. Eric became an additional plaintiff, and the district court appointed a conservator for him pursuant to NMSA 1978, Section 45-5-401 (Repl. Pamp. 1989) (conservatorship proceedings). The case was settled prior to trial. The settlement agreement provided for a "trust fund to be established in Eric Kegel's behalf" of which his conservator would be trustee.
In the settlement process, several checks were issued. With the exception of one check, which was payable to the Department, the checks were issued jointly to Eric's parents, his conservator, and their attorneys. On one of the three checks contained in the record, each parent is listed "Individually and as natural guardian of Eric Kegel." On the others, they are named payees without any qualifying language after their names. Each of the checks lists Eric's conservator by name and title. As part of the settlement process, as well, the defendants in the malpractice action assigned an annuity to "Eric Kegel, a minor/Margaret Burgess as the next friend and Conservator of the Estate of Eric Kegel, a minor, Suzanne Bakewell Kegel, individually and Robert Kegel, individually."
Eric's father used a portion of the initial lump sum received in settlement to pay medical bills. The remaining money and an annuity were placed in a trust, which is evidenced by a written trust agreement that designates Eric's conservator as both "Grantor" and "Trustee." Both the trust and the settlement agreement were signed in December 1988.
The agreement describes the trust as "providing discretionary supplemental benefits/support to the beneficiary beyond those available to him through any Federal, State, local, or other private programs or funds[.]" The trust provides that "no trust income or principal shall be distributed for the benefit of the beneficiary as long as the Trustee determines that sufficient funds or benefits are thus otherwise available." Nothing in the record documents the transfer of the funds represented by checks or any interest in the annuity from Eric's parents to his conservator, but both parents signed written consents to the creation of the trust.
Upon learning of the trust and the monthly annuity subject to the trust, the Department notified Eric's father of its intent to terminate Eric's benefits. After a hearing, the Department concluded that Eric was ineligible because (1) the trust was a Medicaid qualifying trust, (2) the maximum amount ava
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