Title: Abel v. Kowalski

State: arkansas

Issuer: Arkansas Supreme Court

Document:

ARKANSAS DEPARTMENT of HUMAN SERVICES
Division of Economic and Medical Services v.
Idell WILSON and Farmers Bank & Trust
Company, as Trustee of the Idell Wilson
Irrevocable Trust

95-905                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered January 22, 1996


1.   Administrative law & procedure -- standard of review. --  The
     rules governing judicial review of decisions of administrative
     agencies by both the circuit and appellate courts are the
     same; review is not directed toward the circuit court but
     toward the decision of the agency recognizing that
     administrative agencies are better equipped by specialization,
     insight through experience, and more flexible procedures than
     courts, to determine and analyze legal issues affecting their
     agencies; if it is found that the administrative decision is
     supported by substantial evidence and is not arbitrary,
     capricious or characterized by an abuse of discretion, it will
     be upheld; substantial evidence is valid, legal and persuasive
     evidence; such relevant evidence as a reasonable mind might
     accept as adequate to support a conclusion; to have
     administrative action set aside as arbitrary and capricious,
     the party challenging the action must prove that it was
     `willful and unreasoning action,' without consideration and
     with a disregard of the facts or circumstances of the case.

2.   Administrative law & procedure -- when decision will be
     affirmed or set aside. -- The construction of a statute by an
     administrative agency is not overturned unless it is clearly
     wrong; however, where the statute is plain and unambiguous,
     the court will interpret the statute to mean only what it
     says.

3.   Statutes -- meaning of statute clear -- appellee not
     disqualified from receiving Medicaid benefits. -- Under the
     plain wording of Ark. Code Ann.  28-69-102(b), appellee was
     not disqualified from receiving Medicaid benefits; appellee's
     trust did not limit the availability of, or provide directly
     or indirectly for the suspension, termination, or diversion of
     the principal, income, or beneficial interest of appellee in
     the event that she should apply for medical assistance or
     require medical, hospital, or nursing care or long-term
     custodial, nursing, or medical care.

4.   Administrative law & procedure -- appellant's regulation not
     applicable to appellee trust. -- The appellant's regulation,
     Medical Services Policy 3332.2, did not provide that the
     principal of appellee's trust should be considered in
     determining whether she was qualified for Medicaid benefits;
     the policy did not provide for consideration of the principal
     of a trust when the trustee is not allowed to make any
     distributions from the principal until the death of the
     grantor, as was done in the present case.

5.   Statutes -- act's purpose clear -- retroactive application of
     law intended.-- Arkansas Code Ann.  28-69-102 expressly
     prohibited persons from artificially impoverishing themselves
     in order to become eligible for Medicaid, the General Assembly
     intended to declare such trust provisions void and to allow
     the State to recover any benefits that might have been
     obtained with the use of such provisions; it was apparent that
     the legislative intent was to give the Act retroactive effect. 
     
6.   Trusts -- trust's goal was not to force the taxpayers to
     maintain appellee in a nursing home while she preserved her
     assets for her heirs  -- purpose simply to help widow manage
     her affairs. -- It did not appear from the trust agreement
     that appellee's goal in establishing the trust was to force
     the taxpaying public to maintain her in a nursing home while
     she preserved her assets for her heirs, the record did not
     support the conclusion that appellee acted surreptitiously in
     creating the trust, she was not in poor health or in need of
     long-term care when she executed the trust, nor did it appear
     that she was anticipating the need for long term care; instead
     appellee established the trust as an estate-planning device
     for the purpose of avoiding probate costs and as a means of
     managing her affairs. 

6.   Statutes -- language clear and unambiguous -- principal of
     appellee's trust should not have been considered in
     determining eligibility for Medicaid. -- Where appellee's
     trust did not contain any provisions limiting the distribution
     of funds in order to assure that the beneficiary qualified for
     Medicaid benefits, the language of the statute was plain and
     unambiguous in providing that provisions in trusts that limit
     the availability of funds should the grantor apply for medical
     assistance or require medical or long-term care shall be void
     as against public policy, yet no such provision existed here,
     the Department's regulation was plain and unambiguous and did
     not provide for consideration of the principal of the
     appellee's trust in determining whether appellee was eligible
     for Medicaid assistance.


     Appeal from Columbia Circuit Court; David F. Guthrie, Judge;
affirmed.
     Richard B. Dahlgren, DHS Senior Attorney for appellant.
     Bell Law Firm, by:  Rebecca A. Jones, for appellees.

     Robert H. Dudley, Justice.
     




ARKANSAS DEPT. OF HUMAN
SERVICES DIVISION OF ECONOMIC
AND MEDICAL SERVICES,
                    APPELLANT,

V.

IDELL WILSON AND FARMERS BANK &
TRUST COMPANY, AS TRUSTEE OF
THE IDELL WILSON IRREVOCABLE
TRUST,
                    APPELLEES.



95-905


APPEAL FROM THE COLUMBIA COUNTY
CIRCUIT COURT,
NO. CIV. 94-119,
HON. DAVID F. GUTHRIE, JUDGE,




AFFIRMED.






     On appeal, the circuit court ruled that the Department of
Human Services arbitrarily determined that Idell Wilson was
ineligible for benefits under the Arkansas Medical Assistance
Program.  We affirm the circuit court's ruling.   
     On August 1, 1986, Idell Wilson executed an irrevocable trust
agreement and created the Idell Wilson Trust.  The agreement
designated the Farmers Bank and Trust Company as the trustee.  Mrs.
Wilson contributed in excess of $20,000 to the principal of the
trust.  Under the terms of the trust, the trustee is to manage and
invest the trust property and collect and receive the income. 
After deducting the expenses of the administration of the trust,
the trustee is to distribute the net income to the grantor, Idell
Wilson.  The trustee is to determine the times at which to
distribute the income, but is required to at least make quarterly
distributions.  The trust is irrevocable and is to terminate upon
the death of Idell Wilson.  At that time, the principal and the
accumulated income are to be distributed to Bobby Don Wilson,
Jackie Wilson Mooney, Mary Jo Wilson Rogers, and Jimmy Porter
Wilson.  The trust contains the following paragraph:
          8.  Irrevocability of Trust.  This Trust shall be
     irrevocable, and the Grantor hereby expressly waives all
     rights and powers, whether alone or in conjunction with
     others and regardless of when and from what source she
     may have acquired such rights or powers, to alter, amend,
     revoke, or terminate the Trust, or any of the terms of
     this Agreement, in whole or in part.  
     Mrs. Wilson entered a nursing home on March 5, 1993, and
subsequently applied to the Department of Human Services for
Medicaid long-term care benefits.  Medicaid is a governmental
program designed to provide assistance to the aged, blind, and
disabled and to dependent children whose incomes or resources are
not sufficient to meet the costs of necessary medical care and
services.  Mrs. Wilson was approved to receive long-term care
benefits.  At the time of the application for long-term care
benefits, the principal of the trust amounted to $21,733.57.  The
application was approved with benefits to commence on March 1,
1993.  
     On May 18, 1994, appellant Department of Human Services
Division of Economic and Medical Services sent a notice of action
to Mrs. Mooney, Mrs. Wilson's niece who had cared for her.  The
notice stated that Mrs. Wilson's case would be closed effective May
28, 1994, and gave the following reason:
     New policy has come out to relook at all trust funds held
     by Long Term Care patients.  We were exempting these
     funds as a resource, but now we are having to count the
     total value.  The amount of her trust was verified 4-26-
     94, in the amount of 21,733.57.  This is over the
     resource limit allowed for Long Term Care, therefore her
     case will be closed.  
Mrs. Mooney requested a hearing about the closing of Mrs. Wilson's
case.  
     An administrative hearing was held on August 15, 1994.  A
service representative testified that the Office of Chief Counsel
of the Department had reviewed Mrs. Wilson's trust and determined
that the trust should be considered a resource, which caused Mrs.
Wilson to exceed the resource limit.  The Office of Chief Counsel
sent a notice of its decision to the case worker who made the
decision to take adverse action on Mrs. Wilson's case.      
     Mrs. Mooney testified that the trust was created from the sale
of farm equipment and from a certificate of deposit.  The trust was
established with money owned solely by Mrs. Wilson.  Mrs. Mooney
testified that Mrs. Wilson was in good health for a woman of her
age at the time she set up the trust.  Mrs. Mooney testified that
the individuals designated to receive the principal of the trust
after Mrs. Wilson's death are her nieces and nephews.  
     The hearing officer entered a final order determining that the
county office acted correctly and in accordance with the current
Medical Services Policy when it proposed the closure of Mrs.
Wilson's long-term care case.  
     The trustee timely filed a petition for judicial review in the
circuit court.  It was uncontested that the quarterly income from
the trust is a resource available to Mrs. Wilson.  The contest
involved only the Department's ruling that the principal of the
trust constituted a resource available for Mrs. Wilsons care and
maintenance.  The circuit court determined that the agency's
decision was arbitrary and granted the trustees' petition.  The
Department raises one point on appeal. 
     The Department asserts that the agency correctly analyzed the
"Idell Wilson Trust" in light of current laws and rules and
regulations governing eligibility for Medicaid benefits and
determined that the trust posed a bar to eligibility.  The argument
is without merit.  
     The agency erroneously interpreted and applied Ark. Code Ann.
 28-69-102.  In addition, the agency erred in applying its
regulation, and in applying the case of Arkansas Department of
Human Services v. Walters, 315 Ark. 204,