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301 Nebraska Reports

DONNA G. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS.

Cite as 301 Neb. 838

Donna G., as mother and next friend of Eric S., 

a minor child, appellant, v. Nebraska Department

of Health and Human Services and Calder A. 

Lynch, director, Division of Medicaid and

Long-Term Care, appellees.

___ N.W.2d ___

Filed December 14, 2018. No. S-17-712.

1. Administrative Law: Judgments: Appeal and Error. A judgment or 

final order rendered by a district court in a judicial review pursuant to 

the Administrative Procedure Act may be reversed, vacated, or modified 

for errors appearing on the record.

2. ____: ____: ____. When reviewing an order of a district court under 

the Administrative Procedure Act for errors appearing on the record, the 

inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.

3. Judgments: Appeal and Error. Whether a decision conforms to law 

is by definition a question of law, in connection with which an appellate court reaches a conclusion independent of that reached by the 

lower court.

4. Trusts: Intent. Whether a testamentary trust amended by a probate 

court order pursuant to Neb. Rev. Stat. §§ 30-24,123 and 30-24,124 

(Reissue 2016) remains a testamentary trust is a question of law.

5. Trusts: Medical Assistance: Intent. When a testamentary trust is modified by a court-approved compromise agreement, the question whether it 

retains its testamentary character for purposes of determining a beneficiary’s Medicaid eligibility will depend on both the nature of the parties’ 

agreement and the court’s order approving it.

6. ____: ____: ____. When analyzing the terms of a testamentary trust to 

determine if the trust corpus is “available” for purposes of Medicaid 

eligibility, courts look to whether the trust is a support trust or a discretionary trust.

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

01/04/2019 08:07 AM CST
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7. Trusts: Medical Assistance. When a testamentary support trust allows 

a beneficiary to compel distributions of income, principal, or both, for 

expenses necessary for the beneficiary’s support, the trust may be considered as an available asset when evaluating Medicaid eligibility.

8. ____: ____. When a testamentary trust grants the trustee uncontrolled 

discretion over payments to the beneficiary, it is considered a discretionary trust for purposes of Medicaid eligibility. Because the beneficiary 

of a discretionary trust does not have the ability to compel distributions 

from the trust, only those distributions of income, principal, or both 

actually made by the trustee may be considered as available assets when 

evaluating Medicaid eligibility.

Appeal from the District Court for Lancaster County: 

Andrew R. Jacobsen, Judge. Reversed and remanded with 

directions.

Randy Fair, of Dudden & Fair, P.C., L.L.O., for appellant.

Douglas J. Peterson, Attorney General, and Ryan C. Gilbride 

for appellees.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, 

Papik, and Freudenberg JJ.

Stacy, J.

The Nebraska Department of Health and Human Services 

(DHHS) terminated the Medicaid benefits of Eric S., and the 

district court affirmed. Eric’s court-appointed guardian and 

conservator appeals. The primary issue on appeal is whether 

the corpus of a trust is available to Eric for purposes of determining his Medicaid eligibility. For the reasons set forth below, 

we reverse, and remand with directions.

I. BACKGROUND

Eric is a young man with cerebral palsy. Before July 1, 

2016, he was receiving “Aid to the Aged, Blind or Disabled” 

Medicaid waiver services.1 The date Eric began receiving such 

services is not clear from the record.

1 See Neb. Rev. Stat. §§ 68-1002 to 68-1005 (Reissue 2009).
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In 2012, Eric’s grandmother, Lois Branting, executed her last 

will and testament. Branting’s will devised all of her property, 

in equal shares, to her grandchildren living at the time of her 

death. The will further provided that “should any of my grandchildren be under the age of thirty (30) years at the date of my 

death, then all of my property shall instead be distributed to 

my Trustee to be held pursuant to the provisions of paragraph 

5 below.” Paragraph 5 of the will was titled “Grandchildren’s 

Trust” and provided in pertinent part:

5.1 My trustee shall hold all property devised to my 

trustee for the benefit of my grandchildren who shall survive me and of the then living issue of any of my grandchildren who shall not survive me, upon the following 

terms and conditions:

5.2 During the term of this trust, my trustee shall apply 

such part of the net income and principal of this trust as 

shall from time to time be necessary or appropriate to the 

support, care, maintenance, medical expense, educational 

expense and general welfare of my trust beneficiaries in 

such amounts and proportions as my trustee, in the sole 

and uncontrolled discretion of my trustee, shall deem 

advisable, and shall accumulate and add to principal any 

net income not used for such purposes.

5.3 At such time as my youngest living grandchild 

shall reach the age of thirty (30) years, this trust shall 

terminate and all principal and accumulated income, after 

the payment of closing expenses, shall be distributed in 

equal shares, to my then living grandchildren and the then 

living issue of any grandchild of mine who shall then be 

deceased, so that there shall be one such equal share for 

each living grandchild of mine and one such equal share 

for the then living issue of any grandchild of mine who 

shall then be deceased to be shared by said issue by right 

of representation.

When Branting died on November 29, 2014, she was survived 

by four grandchildren, all of whom were minors.
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DONNA G. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS.

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In December 2015, the parents of Branting’s grandchildren 

entered into a written agreement with Branting’s personal representative to split the Grandchildren’s Trust into two separate 

trusts: one solely for the benefit of Eric (Eric’s Trust), and 

another for the benefit of the remaining three grandchildren. 

That agreement recited in part:

[T]he four grandchildren . . . who are the beneficiaries 

of the . . . Grandchildren’s Trust . . . are in very different 

situations and will have very different needs in the future. 

[The parents] have further determined that it would be 

best for the grandchildren . . . if the [Grandchildren’s 

Trust] was separated into one Trust for the benefit of 

[Eric] and another separate Trust for the benefit of [the 

other three grandchildren]. Specifically, [Eric] would be 

best benefitted if his separate Trust had special needs provisions which would enable for him to receive property 

from the [Branting Estate] without significantly reducing 

the benefits which he receives from various government 

agencies as a result of his physical and mental disabilities. They have further determined that it would be best 

for the beneficiaries of the two new Trusts if the Trust 

for the Benefit of [Eric] were to receive the 25% of the 

Estate to which he is entitled in cash to the fullest extent 

possible, and the Trust for [the other three grandchildren] 

would receive the Real Estate still owned by the Estate 

which includes the residence in which they have been and 

will be raised together with any remaining assets together 

totaling 75% of whatever assets remain in the Estate on 

the date of distribution.

Beyond referencing “special needs provisions” for Eric, the 

agreement did not include additional trust terms for the split 

trusts, but merely recited the pertinent provisions of Branting’s 

will, including the sections establishing and setting out the 

terms of the Grandchildren’s Trust.

After the agreement was reached, Branting’s personal representative petitioned the probate court, pursuant to Neb. Rev. 
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Stat. § 30-24,124 (Reissue 2016), to approve the agreement 

and split the Grandchildren’s Trust. The probate court did so in 

an order entered December 28, 2015, which provided:

Pursuant to the provisions of Neb. Rev. Stat. §30-24, 124

the Court finds that the effect of the provisions of the 

Agreement upon the interests of the interested persons is 

just and reasonable and therefore the Agreement is . . . 

approved, and the Petitioner as Personal Representative of 

the Estate shall make all further disposition of the Estate 

in accordance with the terms of the Agreement.

After the probate court’s order was entered, the separate trusts 

were funded in accordance with the agreement and separate 

trustees were appointed for the two trusts. The probate court’s 

order was not appealed, and no party to the instant appeal has 

questioned the provisions of the probate order or the procedure 

followed in the probate court.

The balance of Eric’s Trust was $512,380.39 as of May 16, 

2016. DHHS regulations establish that the maximum available 

resources one may own and still be considered eligible for 

Medicaid is $4,000.2 Eric’s mother, Donna G., serves as his 

court-appointed guardian and conservator.

In April 2016, Donna informed DHHS that Eric had what 

she referred to as a “Special Needs Trust.” One month later, 

DHHS determined that the entire corpus of Eric’s Trust was 

an available resource for purposes of determining his Medicaid 

eligibility. In June, DHHS mailed a notice of action advising 

that Eric’s Medicaid coverage and Medicaid waiver services 

would end effective July 1, 2016, because he was ineligible for 

Medicaid due to excess resources.

In response to the notice of action, Donna requested and 

was given an administrative hearing, after which DHHS 

affirmed its decision terminating benefits. Donna timely 

filed a petition for judicial review in the Lancaster County 

2 See 477 Neb. Admin. Code, ch. 21, § 001.17 (2014).
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District Court, challenging DHHS’ decision pursuant to the 

Administrative Procedure Act.3

The district court affirmed DHHS’ decision to terminate 

benefits, finding that the entire corpus of Eric’s Trust was an 

available resource for purposes of determining his Medicaid 

eligibility. The court first considered the nature of Eric’s Trust. 

The court concluded it was not a testamentary trust, reasoning 

it was the product of action taken in the probate court. And it 

concluded Eric’s Trust was not a special needs trust, because it 

lacked the necessary special needs provisions. Thus, by process of elimination, the court found Eric’s Trust was properly 

characterized as an “irrevocable trust created after August 

11, 1993.”4

The court next considered the DHHS regulation governing 

treatment of such a trust, which provides:

If there are any circumstances under which payment from 

the trust corpus could be made to or for the benefit of the 

client . . . the portion of the corpus from which payment 

to or for the benefit of the client . . . could be made must 

be considered a resource available to the client.5

Applying this standard, the district court found there were circumstances under which the trust corpus could be paid to Eric, 

and thus concluded the corpus was an available resource for 

purposes of determining his Medicaid eligibility.6

Alternatively, the district court reasoned that even if Eric’s 

Trust was a testamentary trust, it would still be considered an 

available resource for purposes of determining his Medicaid 

eligibility.7 The court noted the language of Eric’s Trust had 

elements of both a support trust and a discretionary trust, and 

concluded it was the type of hybrid “‘discretionary support 

3 Neb. Rev. Stat. §§ 84-901 to 84-920 (Reissue 2014).

4 See 477 Neb. Admin. Code, ch. 21, § 001.15A13b (2014).

5 § 001.15A13b(1)2.

6 See § 001.15A13b(1) and (2).

7 See 477 Neb. Admin. Code, ch. 21, § 001.15A12 (2014).
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trust’” this court discussed in Smith v. Smith.8 In Smith, we 

held that “the trustee of a discretionary support trust can be 

compelled to carry out the purposes of the trust in good faith.”9

Applying this principle, the court reasoned that if Eric could 

compel his trustee to carry out the purpose of Eric’s Trust in 

good faith, he could also compel the trustee to make distributions from it for his medical expenses. Thus, the court concluded that even if Eric’s Trust was considered testamentary, 

the entire corpus was still an available resource for purposes of 

determining his Medicaid eligibility.

Donna timely appealed the district court’s judgment, and we 

moved the case to our docket on our own motion.10

II. ASSIGNMENTS OF ERROR

Donna assigns, restated, that the district court erred when it 

included Eric’s Trust as an available resource for purposes of 

determining his Medicaid eligibility, because (1) the trust is 

testamentary and (2) the trust is discretionary.

III. STANDARD OF REVIEW

[1] A judgment or final order rendered by a district court in 

a judicial review pursuant to the Administrative Procedure Act 

may be reversed, vacated, or modified for errors appearing on 

the record.11

[2] When reviewing an order of a district court under 

the Administrative Procedure Act for errors appearing on the 

record, the inquiry is whether the decision conforms to the law, 

is supported by competent evidence, and is neither arbitrary, 

capricious, nor unreasonable.12

8 Smith v. Smith, 246 Neb. 193, 517 N.W.2d 394 (1994).

9 Id. at 198, 517 N.W.2d at 398.

10 Neb. Rev. Stat. § 24-1106 (Supp. 2017).

11 § 84-918; J.S. v. Grand Island Public Schools, 297 Neb. 347, 899 N.W.2d 

893 (2017).

12 J.S., supra note 11.
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[3] Whether a decision conforms to law is by definition 

a question of law, in connection with which an appellate 

court reaches a conclusion independent of that reached by the 

lower court.13

IV. ANALYSIS

We begin with an overview of the regulatory framework 

that governs our analysis. Medicaid is a joint federal and state 

funding program that provides medical care for individuals 

whose resources are insufficient to meet the cost of necessary medical care.14 The program provides federal financial 

assistance to states that choose to reimburse certain costs of 

medical treatment for needy persons.15 A state is not obligated 

to participate in the Medicaid program; however, once a state 

has elected to participate, it must comply with standards and 

requirements imposed by federal statutes and regulations.16

Nebraska adopted the federal Medicaid scheme in the 

Medical Assistance Act.17 Eligibility for Medicaid is set out in 

§ 68-915, and it includes persons who qualify for assistance 

under Nebraska’s program for assistance to the aged, blind, 

or disabled.18

DHHS is tasked with administering Nebraska’s Medicaid 

program for the aged, blind, or disabled,19 and has been 

given the authority to promulgate regulations for the program.20 DHHS regulations establish $4,000 as the maximum 

13 Pohlmann v. Nebraska Dept. of Health & Human Servs., 271 Neb. 272, 

710 N.W.2d 639 (2006).

14 In re Estate of Vollmann, 296 Neb. 659, 896 N.W.2d 576 (2017).

15 Id.

16 Id.

17 See Neb. Rev. Stat. §§ 68-901 to 68-991 (Reissue 2009, Cum. Supp. 2016 

& Supp. 2017).

18 See §§ 68-915(2) and 68-1002 through 68-1005.

19 See § 68-1001.

20 See § 68-1001.01.
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DONNA G. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS.

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available resources one may own and still be considered eligible for Medicaid.21 As stated, the balance of Eric’s Trust was 

$512,380.39 in May 2016. Eric’s Medicaid benefits were properly terminated only if Eric’s Trust is considered an “available 

resource” for purposes of determining his Medicaid eligibility. 

DHHS regulations define “available resources” as “cash or 

other liquid assets or any type of real or personal property or 

interest in property that the client owns and may convert into 

cash to be used for support and maintenance.”22 Generally 

speaking, DHHS regulations treat trust assets as “[l]iquid 

resources,” which regulations define as “assets that are in cash 

or financial instruments which are convertible to cash.”23

1. Nature of Eric’s Trust

When determining which trust assets are “available 

resources” for purposes of Medicaid eligibility, DHHS regulations treat trust assets differently depending on the nature 

of the trust. Consequently, the nature of Eric’s Trust must be 

determined as a threshold matter.

As relevant here, DHHS regulations differentiate between 

testamentary trusts,24 revocable trusts,25 and irrevocable trusts 

created after August 11, 1993.26 The parties agree that Eric’s 

Trust is not a revocable trust, so we limit our analysis to 

whether it is properly characterized as either a testamentary 

trust or an irrevocable trust created after August 11, 1993.

(a) Testamentary Trusts

A Nebraska statute defines a testamentary trust as “a trust 

created by devising or bequeathing property in trust in a 

21 See § 001.17.

22 477 Neb. Admin. Code, ch. 21, § 001.03 (2014).

23 477 Neb. Admin. Code, ch. 21, § 001.15A (2014).

24 See § 001.15A12.

25 See 477 Neb. Admin. Code, ch. 21, § 001.15A10 (2014).

26 See § 001.15A13b.
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will as such terms are used in the Nebraska Probate Code.”27

Under DHHS regulations, if a trust is testamentary, it may be 

excluded as a resource “depending on the availability of the 

funds to the individual or his/her spouse as specified in the 

terms of the trust.”28

(b) Irrevocable Trusts

DHHS regulations provide that an irrevocable trust is one 

created by an individual “who establishes a trust, who is a 

beneficiary of a trust, and who is an applicant or recipient of 

Medicaid.”29 Individuals are considered to have established 

such a trust if the individual’s assets “were used to form a part 

or the entire corpus of the trust other than by will.”30 Under this 

regulatory definition, irrevocable trusts can be established by 

the individual, his or her spouse, or by “any court or administrative body, acting at the direction or upon the request of the 

individual or the individual’s spouse.”31

If an irrevocable trust is properly classified as one established on or after August 11, 1993, DHHS regulations provide 

the trust corpus will generally be included in the individual’s 

resources for purposes of determining Medicaid eligibility if 

the “any circumstances” test is met.32 That test provides:

If there are any circumstances under which payment from 

the trust corpus could be made to or for the benefit of the 

client . . . the portion of the corpus from which payment 

to or for the benefit of the client . . . could be made must 

be considered a resource available to the client.33

27 Neb. Rev. Stat. § 76-1514 (Reissue 2009).

28 § 001.15A12.

29 § 001.15A13b.

30 Id. (emphasis supplied).

31 § 001.15A13b4.

32 See § 001.15A13b(1) and (2).

33 § 001.15A13b(1)2.
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For the sake of completeness, we note the “any circumstances” 

test does not apply if an irrevocable trust is also either a special 

needs trust or a pooled trust as defined by DHHS regulations,34

nor does it apply if denial of Medicaid would “cause undue 

hardship.”35 But here, no party contends that Eric’s Trust is 

a special needs or a pooled trust, nor has an undue hardship 

waiver been claimed, so we limit our analysis accordingly.

(c) Eric’s Trust Is Testamentary

It is undisputed that the original Grandchildren’s Trust created by Branting’s will was a testamentary trust. The parties 

dispute whether the subsequent agreement to split the testamentary trust, and the probate court’s approval of that agreement, changed the fundamental nature of the trust for purposes 

of Medicaid eligibility. DHHS argues that Eric’s Trust was created by the probate court’s using the procedures of Neb. Rev. 

Stat. § 30-24,123 (Reissue 2016) and § 30-24,124, and thus 

became either a self-settled or court-settled irrevocable trust. 

Eric’s guardian and conservator argues the testamentary nature 

of the trust was unchanged by the probate proceedings.

[4] Whether a testamentary trust amended by a probate court 

order pursuant to §§ 30-24,123 and 30-24,124 remains a testamentary trust is a question of law.36 When reviewing questions 

of law, an appellate court reaches a conclusion independent of 

the determination reached by the court below.37

It is true Eric’s Trust would not exist as a separate trust 

without the probate order approving the agreement to split 

the trust, but we are unpersuaded by DHHS’ contention that 

Eric’s Trust lost its testamentary character by virtue of the 

probate court proceedings. We find such a contention difficult 

34 See § 001.15A13b(1)(a).

35 § 001.15A13b(3).

36 See In re Trust Created by Hansen, 274 Neb. 199, 208, 739 N.W.2d 170, 

178 (2007) (“the type of trust . . . created is a question of law”).

37 See In re Estate of Psota, 297 Neb. 570, 900 N.W.2d 790 (2017).
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to reconcile with either the facts of this case or the statutes 

on which the Branting grandchildren and the probate court 

relied to split the original testamentary trust.

Prior to the Legislature’s adoption of §§ 30-24,123 and 

30-24,124 in 1974, agreements to modify testamentary trusts 

were generally not allowed, pursuant to the common-law rule 

that although a compromise “‘may provide for disbursement 

of the estate of testator in a manner at variance with his will, 

a valid, unexecuted testamentary trust cannot thus be modified 

or destroyed.’”38 The rationale for this rule was that “[w]hen 

an act or agreement of the parties disappoints the purpose of 

the settlor by divesting the property from the purposes named, 

such act or agreement is void ab initio.”39

The Legislature changed this common-law rule when it 

adopted §§ 30-24,123 and 30-24,124, which expressly allow for 

testamentary trusts to be affected by compromises. Specifically, 

§ 30-24,123 states that “[a]n approved compromise is binding 

even though it may affect a trust or an inalienable interest.”

The intent of the Legislature is expressed by omission as 

well as by inclusion,40 and we see nothing in the statutory 

language indicating that testamentary trusts affected by an 

approved compromise necessarily lose their fundamental character. This conclusion is supported by the plain language of 

§ 30-24,123, which recognizes that a “compromise does not 

impair the rights of creditors or of taxing authorities who are 

not parties to it.”

[5] The question here is whether a testamentary trust which 

is modified by a court-approved compromise agreement retains 

its testamentary character for purposes of determining a beneficiary’s Medicaid eligibility. The answer to that question will 

depend on both the nature of the parties’ agreement and the 

38 Cahill v. Armatys, 185 Neb. 539, 544, 177 N.W.2d 277, 280 (1970), 

quoting In re Estate of Mowinkel, 130 Neb. 10, 263 N.W. 488 (1935).

39 Id.

40 E.D. v. Bellevue Pub. Sch. Dist., 299 Neb. 621, 909 N.W.2d 652 (2018).
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court’s order approving it. But on this record, we conclude that 

neither the agreement to split the trust nor the court’s order 

approving that agreement changed the nature of Eric’s Trust 

from a testamentary trust into a self-settled or court-settled 

irrevocable trust.

The original Grandchildren’s Trust was created by Branting’s 

will, and even after that trust was split, the essential terms of 

the split trusts were derived from Branting’s will—there is 

no separate trust document. The trust terms in Branting’s will 

were recited verbatim in the agreement to split the testamentary trust, and when the probate court approved that agreement, it did not add or eliminate the trust terms. Moreover, the 

entire corpus of Eric’s Trust was funded by Branting’s estate 

pursuant to her will; none of Eric’s assets were used to fund 

the trust.

Because the Grandchildren’s Trust was established by 

Branting’s will, the administration of Eric’s Trust is still controlled by the language of that will, and the trust was funded 

exclusively from Branting’s estate pursuant to the terms of her 

will, we conclude as a matter of law that Eric’s Trust retained 

its character as a testamentary trust for purposes of determining Medicaid eligibility.41

2. Eric’s Trust Is Not

Available Asset

Having determined that Eric’s Trust is properly characterized as a testamentary trust, we next consider the extent to 

which the trust corpus is “available” to him for purposes 

of determining his Medicaid eligibility. Here, DHHS argues 

the entire corpus of Eric’s Trust is available for purposes of 

41 Accord Pohlmann, supra note 13, 271 Neb. at 278, 710 N.W.2d at 644 

(“the plain meaning of the phrase ‘other than by will’ in [42 U.S.C.] 

§ 1396p(d)(2)(A) [(2000)] and the corresponding Nebraska regulation 

make it clear that a Medicaid applicant cannot be considered to have 

established a trust for purposes of the restrictions imposed by § 1396p(d) 

if the trust was established by will”).
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determining his Medicaid eligibility. Under the regulations, an 

asset is “available” if it “may [be] convert[ed] into cash to be 

used for support and maintenance.”42 The central question then 

is whether, given the terms of Eric’s Trust, he can compel the 

trustee to distribute the entire corpus of the trust for his support 

and maintenance.

[6] This court considered whether the corpus of a trust was 

available to a beneficiary for purposes of Medicaid eligibility 

in Pohlmann v. Nebraska Dept. of Health & Human Servs.

43

In that case, we recognized that when analyzing the terms of 

a testamentary trust to determine if the trust corpus is “available” for purposes of Medicaid eligibility, “courts have looked 

to whether the trust is a support trust or a discretionary trust.”44

We recited the basic difference between “support” trusts and 

“discretionary” trusts:

“A support trust essentially provides the trustee ‘shall 

pay or apply only so much of the income and principal 

or either as is necessary for the education or support of 

a beneficiary.’ . . . A support trust allows a beneficiary 

to compel distributions of income, principal, or both, for 

expenses necessary for the beneficiary’s support, and [the 

agency administering Medicaid] may consider the support 

trust as an available asset when evaluating eligibility for 

assistance. . . .

“Conversely, a discretionary trust grants the trustee 

‘uncontrolled discretion over payment to the beneficiary’ 

and may reference the ‘general welfare’ of the beneficiary. . . . Because the beneficiary of a discretionary trust 

does not have the ability to compel distributions from 

the trust, only those distributions of income, principal, or 

both, actually made by the trustee may be considered by 

42 § 001.03.

43 Pohlmann, supra note 13.

44 Id. at 279, 710 N.W.2d at 645.
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[the agency administering Medicaid] as available assets 

when evaluating eligibility for assistance.”45

The trust in Pohlmann provided the trustee was to pay “‘all 

of the accumulative income from the individual funds and such 

portion of the principal as it may, from time to time, deem 

appropriate for [the beneficiary’s] health, education, support 

or maintenance.’”46 Pohlmann found the “key” provision in 

this trust language was the discretion afforded the trustee, and 

concluded that because the trustee could not be compelled to 

distribute the entire corpus, the trust was not an available asset 

for purposes of determining Medicaid eligibility.

We pause here to acknowledge that our analysis in Pohlmann

contemplates a binary choice between “support” and “discretionary” trust provisions for purposes of determining Medicaid 

eligibility. In that regard, the approach adopted in Pohlmann 

is different than our treatment of similar trust terms in cases 

where the question is one of general trust administration or 

interpretation, and not Medicaid eligibility. An example of this 

is Smith v. Smith.

47

In Smith, a former wife sought to compel a trustee to pay 

her former husband’s child support arrearages from the assets 

of a trust which stated its purpose was for the “‘health, support, care and maintenance’” of the husband and his issue.48

The trust further provided that the trustee “‘shall have full, 

absolute and uncontrolled discretionary power and authority 

to exercise or fail to exercise any and all of the powers . . . 

provided . . . .’”49 Smith recognized that because the trust had 

attributes of both a discretionary trust and a support trust, it 

45 Id. at 280, 710 N.W.2d at 645, quoting Eckes v. Richland Cty. Soc. Ser., 

621 N.W.2d 851 (N.D. 2001).

46 Id. at 280, 710 N.W.2d at 645 (emphasis in original).

47 Smith, supra note 8.

48 Id. at 195, 517 N.W.2d at 397.

49 Id.
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should be construed as a hybrid of the two—a “discretionary 

support trust.”50 In Smith and other cases construing discretionary support trusts in a non-Medicaid eligibility context, 

we have rejected the suggestion that either the discretionary 

terms or the support terms must be given operative effect to 

the exclusion of the other, and instead, we attempt to ascertain 

the intention of the testator and interpret the trust in a way 

that gives effect to all its terms.51 Because support terms and 

discretionary terms are often in direct conflict with one another 

in a discretionary support trust, we have reconciled that tension by recognizing that although beneficiaries of such a trust 

cannot always compel the trustee to make payments for their 

benefit, “the trustee of a discretionary support trust can be 

compelled to carry out the purpose of the trust in good faith.”52

In Smith, we applied that “good faith” rule and concluded that 

payment of the child support arrearage would not further the 

purpose of the trust, because the husband’s issue had become 

emancipated. As such, we held the trustee could not be compelled to distribute trust assets from the discretionary support 

trust to satisfy the child support arrearage.

Here, presumably because Eric’s Trust contains both support terms and discretionary terms, DHHS urged application 

of the analysis from Smith governing the administration of 

discretionary support trusts, rather than the rule articulated 

in Pohlmann. If the instant case involved a dispute over the 

proper administration of Eric’s Trust, we would agree it is a 

discretionary support trust, and would proceed to apply the 

50 Id. at 198, 517 N.W.2d at 398.

51 See, e.g., Smith, supra note 8; In re Will of Sullivan, 144 Neb. 36, 

12 N.W.2d 148 (1943). See, also, Restatement (Third) of Trusts § 60, 

Reporter’s Notes, comment a. (2003) (rejecting historical distinction 

between discretionary trusts and support trusts as unnecessary because 

there is continuum of discretionary trusts with variety of support standards).

52 See Smith, supra note 8, 246 Neb. at 198, 517 N.W.2d at 398. Accord 

Doksansky v. Norwest Bank Neb., 260 Neb. 100, 615 N.W.2d 104 (2000).
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general rules of construction applicable to such trusts. But 

the analysis of Smith and Pohlmann is not interchangeable, 

because the legal questions are not the same. In Medicaid 

eligibility cases involving testamentary trusts, the question is 

whether the beneficiary can compel a distribution of the entire 

corpus of the trust, not whether the trustee is carrying out the 

purpose of the trust in good faith.

Here, the district court’s classification of Eric’s Trust as a 

discretionary support trust necessarily took its analysis outside 

the framework of Pohlmann, and consequently the analysis 

did not conform with the applicable law governing Medicaid 

eligibility. Even though Eric’s Trust contained both discretionary and support terms, the proper framework to apply when 

determining Medicaid eligibility is that set out in Pohlmann. 

Applying Pohlmann to the language of Eric’s Trust, we conclude the trust is discretionary and, as such, it is not an available asset.

The relevant trust language provides:

5.2 During the term of this trust, my trustee shall apply 

such part of the net income and principal of this trust as 

shall from time to time be necessary or appropriate to the 

support, care, maintenance, medical expense, educational 

expense and general welfare of my trust beneficiaries in 

such amounts and proportions as my trustee, in the sole 

and uncontrolled discretion of my trustee, shall deem 

advisable, and shall accumulate and add to principal any 

net income not used for such purposes.

[7,8] Pohlmann instructs that when a testamentary support 

trust allows a beneficiary to compel distributions of income, 

principal, or both, for expenses necessary for the beneficiary’s 

support, the trust may be considered as an available asset when 

evaluating Medicaid eligibility. But when a testamentary trust 

grants the trustee uncontrolled discretion over payments to the 

beneficiary, it is considered a discretionary trust for purposes 

of Medicaid eligibility. Because the beneficiary of a discretionary trust does not have the ability to compel distributions from 
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the trust, only those distributions of income, principal, or both 

actually made by the trustee may be considered as available 

assets when evaluating Medicaid eligibility.

Considering the terms of Eric’s Trust under the Pohlmann

framework, we conclude the discretion afforded the trustee 

here is even broader than that considered in Pohlmann. On 

this record, we conclude Eric lacks the ability to compel distribution of the corpus, and it thus is not an available asset 

for purposes of determining his Medicaid eligibility. As such, 

while any distributions actually made by the trustee can be 

considered as available assets when evaluating Eric’s eligibility 

for Medicaid,53 it was error to find the entire trust corpus was 

an available resource.

V. CONCLUSION

Eric’s Trust is properly characterized as a testamentary 

trust, and DHHS regulations provide that testamentary trusts 

may be excluded as resources “depending on the availability 

of the funds to the individual or his/her spouse as specified 

in the terms of the trust.”54 Under Pohlmann, courts determine whether testamentary trusts are “available” for purposes 

of Medicaid eligibility by determining whether the trust is 

properly classified as either a support trust or a discretionary trust. Applying Pohlmann here, we conclude Eric’s Trust 

is a discretionary trust and he does not have the ability to 

compel distribution of the entire corpus. As such, we reverse 

the judgment of the district court and remand the matter to 

the district court for further consideration in accordance with 

this opinion.

Reversed and remanded with directions.

53 See Pohlmann, supra note 13.

54 § 001.15A12.