8th Circuit Rules on Transfers to Pooled TrustsApril 25, 2012 9:36 pm Medicaid Planning
The 8th Circuit in Center for Special Needs Trust Administration, LLC v. Olson ruled last week that transfers to a pooled trust by a person over age 65 are subject to a penalty for Medicaid purposes. The Court reviewed each of the exempt transfer provisions of 42 U.S.C. 1396p(d) and held, “When all paragraphs of the statute are read together, a disabled individual over 65 may establish a type “C” pooled trust, but may be subject to a delay in Medicaid benefits. Despite the lack of an age limit within paragraph 1396p(d)(4)(C) for purposes of counting resources, Congress intended to exempt transfers of assets into pooled trusts from the transfer penalty rules of subsection 1396p(c)(1) only if the transfers were by those under age 65. 42 U.S .C. § 1396p(c)(2)(B)(iv).”
It is noted in the opinion that the South Dakota Supreme Court has also taken this position.
What will these mean for other states that currently do not penalize transfers to pooled trusts by persons over age 65? Those states have either specifically noted it in their Medicaid eligibility rules, or through common practice do not assess a penalty and instead treat the transfer as an exempt transfer. CMS has not made a formal rule change in the State Medicaid Manual, but it did urge states to penalize transfers to pooled trusts in a 2008 letter to the states. Interestingly, 7 years earlier another official at CMS took a completely different position and stated that there was no age limit for a transfer to a trust that falls under 42 U.S.C. 1396p(d)(4)(C) (the pooled trust statute). See footnote 3 in the Olson case for exact language of these letters.
It is anyone’s guess what other states will do following this decision. If Congress intended to exclude transfers by persons over age 65 from the statute, it would seem logical that an age limit would have been added to 42 U.S.C. 1396p(d)(4)(C). However, as shown in the Olson opinion, there is certainly more than one way to analyze this issue.