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Barham v. Rubin8/19/1991
At the age of 34, Phillip W. Barham suffered traumatic brain injury which left him permanently disabled and unable to care for himself. Jay W. Barham, Phillip's father, filed a personal injury lawsuit in Colorado on Phillip's behalf. The suit was settled for $310,000 in cash and an annuity which created an income stream of $3000 a month for life.
A Colorado probate court approved the settlement pursuant to the creation of a trust for Phillip. In establishing the irrevocable trust, the Colorado probate court deemed itself the settlor and Jay Barham the trustee. Pertinent provisions of the trust agreement provided, that although the trustee had discretion to use the income and principal for any of Phillip's needs, trust funds were not to be used to supplant or replace any public assistance benefits available to Phillip. As a matter of fact, the trustee is obligated to take whatever steps necessary to continue public assistance eligibility of Phillip.
Prior to the settlement of the lawsuit and creation of the trust, Phillip had applied for and received financial, medical, and food stamp assistance in Hawaii. Once the trust began receiving the $3000 monthly income, the department of human services (DHS) notified Phillip that he was no longer eligible for medicaid benefits because his income exceeded the allowable medicaid limit.
A fair hearing officer concurred with DHS as did the circuit court acting in an appellate capacity. Phillip appeals. We affirm.
II.
Whether Phillip is eligible for medicaid benefits depends on whether the trust fund amounts are considered "resources" to be used for his support and maintenance. This determination turns on whether the trust is a "medicaid qualifying trust" (MQT). If it is an MQT, then the $3000 per month income stream must be "spent down" before Phillip becomes eligible for medicaid assistance.
"medicaid qualifying trust" is a trust or similar legal device, established (other than by will) by an individual (or an individual's spouse) under which the individual may be the beneficiary of all or part of the payments from the trust and the distribution of such payments is determined by one or more trustees who are permitted to exercise any discretion with respect to the distribution to the individual.
42 U.S.C.A. ยง 1396a(k)(2) (West Supp. 1990).
III.
Barham argues that the trust in question is not an MQT because it was not established by Phillip himself or his spouse. In support of his argument, Barham urges this court to adopt the holding of the Colorado federal district court in Miller v. Ibarra , 746 F. Supp. 19 (D. Colo. 1990). There, the court held that trusts created by Colorado probate courts to protect the assets of incompetents were not MQT's because they were established by a court and not by the individual who was also the beneficiary of the trust. Although the circumstances of the creation of the trusts in Miller are substantially similar to this case, there are different factors and considerations involved which dissuade us from adopting the Miller holding.
The Miller opinion involved four consolidated cases. In each case a Colorado probate court had created a trust to protect the incompetent's assets. Each trustee had full discretion to disburse funds up to a level $20.00 below the applicable medicaid maximum income eligibility level. The trust documents provided that trust funds could be used only to supplement other benefits received by the beneficiary, not to supplant them. The question was whether these trusts were MQTs. The court held they were not.
The opening paragraph of Miller v. Ibarra , states:
Page 1 2 3 Hawaii Personal Injury Attorneys
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