Case Name: Margaret (Peggy) KRYZSKO, Petitioner and Appellant, v. RAMSEY COUNTY SOCIAL SERVICES and North Dakota Department of Human Services, Respondents and Appellees
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 2000-03-21
Citations: 607 N.W.2d 237
Docket Number: No. 990112
Parties: Margaret (Peggy) KRYZSKO, Petitioner and Appellant, v. RAMSEY COUNTY SOCIAL SERVICES and North Dakota Department of Human Services, Respondents and Appellees,
Judges: [¶ 30] DALE V. SANDSTROM, CAROL RONNING KAPSNER, WILLIAM A. NEUMANN, JJ, concur.
Reporter: North Western Reporter 2d
Volume: 607
Pages: 237–248

Head Matter:
2000 ND 43
Margaret (Peggy) KRYZSKO, Petitioner and Appellant, v. RAMSEY COUNTY SOCIAL SERVICES and North Dakota Department of Human Services, Respondents and Appellees,
No. 990112.
Supreme Court of North Dakota.
March 21, 2000.
Duane Houdek, Legal Assistance of North Dakota, Bismarck, ND, for petitioner and appellant.
Jean R. Mullen, Assistant Attorney General, Bismarck, ND, for respondents and appellees.

Opinion:
VANDE WALLE, Chief Justice.
[¶ 1] Margaret Kryzsko appealed from a district court order affirming the North Dakota Department of Human Services ("Department") decision to deny Medicaid benefits to Kryzsko because her available assets exceed the maximum allowed. We affirm.
[¶ 2] Kryzsko is a 52-year-old mentally disabled woman. She is the beneficiary of a trust ("Kryzsko trust") established through a will by her deceased father, Alfred J. Kryzsko. Kryzsko's sister, Sally Stocker, was appointed to administer the trust. It was originally funded with $32,-000 on January 1, 1996, from which Kryz-sko was being paid $450 a month. In January 1997 the trust principal of $32,-539.10 was invested in a Certificate of Deposit from which Kryzsko receives a monthly payment of $500. Under the amortization schedule, Kryzsko will continue to receive payments of $500 a month until July 2003, when the trust principal is exhausted.
[¶ 3] Kryzsko originally applied for Medicaid benefits through Ramsey County Social Services in August 1994. The county denied the benefits because Social Security had denied Kryzsko benefits, as she was not eligible under Social Security's disability or blindness standards. The county informed Kryzsko it may reverse the denial if Social Security reversed its decision and found her disabled. After Social Security reversed its denial, the county reopened Kryzsko's application. On February 12, 1997, the county notified Kryzsko she was retroactively eligible for Medicaid benefits April 1995 through December 1995, but she was ineligible after December 31, 1995, because her countable assets, including the Kryzsko trust, exceeded the maximum $3,000 allowed for her household.
[¶ 4] Kryzsko appealed the decision to the Department. After a hearing, an Administrative Law Judge ("ALJ") found the trust was a support trust and therefore, the assets of the trust are deemed available to Kryzsko and must be considered in determining her eligibility for Medicaid benefits. The Department adopted the ALJ's finding. Kryzsko appealed to the district court, which affirmed the decision.
[¶ 5] When a district court decision reviewing an administrative agency decision is appealed to this Court, we review the decision of the agency and look to the record compiled before it. Stewart v. North Dakota Workers Comp. Bureau, 1999 ND 174, ¶ 7, 599 N.W.2d 280. Our review of an administrative agency decision is governed by N.D.C.C. § 28-32-19 and 28-32-21. Id. We affirm the agency's decision unless its findings of fact are not supported by a preponderance of the evidence, its conclusions of law are not supported by its findings of fact, its decision is not supported by its conclusions of law, its decision is not in accordance with the law or violates the claimant's constitutional rights, or the agency's rules or procedures deprived the claimant of a fair hearing. Id. In determining whether the agency's findings of fact are supported by a preponderance of the evidence, we do not make independent findings of fact or substitute our judgment for that of the agency, but determine only whether a reasoning mind could have reasonably determined that the factual conclusions were supported by the weight of the evidence based on the entire record. Id. It is the agency's responsibility to assess the credibility of witnesses and resolve conflicts in the evidence. Id.
[¶ 6] Medicaid is a cooperative federal-state program designed to furnish financial assistance to needy persons for their medically necessary care. Allen v. Wessman, 542 N.W.2d 748, 752 (N.D.1996). Each state electing to participate in the Medicaid program is required to establish a plan to implement the program in the individual state. 42 U.S.C. § 1396a. North Dakota has elected to participate in the program and has designated the Department to implement the program in the state. N.D.C.C. § 50-24.1-01.1 Thus, the Department has adopted rules to implement the Medicaid program and to determine the conditions of eligibility for Medicaid benefits. See N.D. Admin. Code § 75-02-02.1.
[¶ 7] An applicant for Medicaid benefits must prove eligibility. Allen, 542 N.W.2d at 752. " 'Medicaid is intended to be the payer of last resort, that is, other available resources must be used before Medicaid pays for the care of an individual enrolled in the Medicaid program.' " Id. (quoting New York State Dep't of Social Servs. v. Bowen, 846 F.2d 129, 133 (2nd Cir.1988)). Thus, the Department considers whether the applicant has sufficient assets to meet the costs of necessary medical care and services. N.D.C.C. § 50-24.1-02. An asset must be "available" to the applicant to be considered. N.D. Admin. Code § 75-02-02.1-25(2). No one-person unit with total available assets of more than $3,000.00 is eligible for Medicaid. N.D. Admin. Code § 75-02-02.1-26.
[¶ 8] While certain assets are exempt from consideration, trusts available to the applicant are counted as assets. N.D. Admin. Code § 75-02-02.1-31. "Support trusts" are available to the applicant and considered in an applicant's assets, whereas "discretionary trusts" are only available to the extent amounts are actually distributed to the beneficiary. N.D. Admin. Code § 75-02-02.1-31(3)(4). The regulation regarding support trusts states:
For purposes of this subsection, "support trust" means a trust which has, as a purpose, the provision of support or care to a beneficiary. The purpose of a support trust is indicated by language such as "to provide for the care, support, and maintenance of . "to provide as necessary for the support of . or "as my trustee may deem necessary for the support, maintenance, medical expenses, care, comfort, and general welfare". No particular language is necessary, but words such as "care", "maintenance", "medical needs", or "support" are usually present. The term includes trusts which may also be called "discretionary support trusts" or "discretionary trusts", so long as support is a trust purpose. This subsection applies without regard to:
(1) Whether or not the support trust is irrevocable or is established for purposes other than to enable a beneficiary to qualify for medicaid or any other benefit program where availability of benefits requires the establishment of financial need; or
(2) Whether or not the discretion is actually exercised.
N.D. Admin. Code § 75-02-02.1-31(3) (emphasis added).
[¶ 9] The regulations define discretionary trusts as follows:
For purposes of this subsection, "discretionary trust" means any trust in which one or more trustees is permitted to exercise any discretion with respect to distribution to the beneficiary, but does not include any trust within the definition of a "support trust", as that term is defined in subsection 3.
N.D. Admin. Code § 75-02-02.1-31(4).
[¶ 10] In Hecker v. Stark Cty. Social Serv. Bd., 527 N.W.2d 226, 232 (N.D.1994), a majority of this Court found the sentence underlined above in the Department's regulation regarding support trusts void, as applied.
[¶ 11] Herman Hecker was the sole beneficiary of a trust from his deceased mother. The trust agreement stated as follows:
(a) Introduction. It is the Grantor's primary concern in creating this Trust that it continue in existence as a supplemental fund to public assistance for her handicapped child, Herman Hecker, hereinafter referred to as the 'beneficiary', throughout his life as she would provide if she were personally present. .
(b) Special Needs. The Trustee shall pay to or apply to the benefit of the beneficiary, for his lifetime, such amounts from the principal or income, up to the whole thereof, as the Trustee in the Trustee's sole discretion may from time to time deem necessary or advisable for the satisfaction of the beneficiary's special needs. Any income not distributed shall be added to principal. As used in this instrument, 'special needs' refers to the requisites for maintaining the beneficiary's good health, safety, and welfare when, in the sole discretion of the Trustee, such requisites are not deemed provided by any public agency, office, or department of the State of North Dakota, or of any other state, or of the United States. 'Special needs' include, but are not limited to, medical and dental expenses, clothing and equipment, programs of training, education, treatment, and essential dietary needs to the extent that such needs are not provided by any government entity.
Id. at 228.
[¶ 12] This Court concluded it was the settlor's intent to create a discretionary trust rather than a support trust, reasoning the language in the trust giving the trustee great discretionary power was characteristic of a discretionary trust. The plain language of the trust also demonstrated the settlor's intent was to create a "'supplemental fund to public assistance.' " Id. at 230.
[¶ 13] Since the settlor's intent was clear, this Court went on to determine the effect of the Department's regulation that negated the settlor's intent. See N.D. Admin. Code § 75-02-02.1-31(3)(a) (saying, "The term includes trusts which may also be called 'discretionary support trusts' or 'discretionary trusts', so long as support is a trust purpose"). The Department asserted its regulation allowed it to deem the trust an asset available to Hecker. The majority held the portion of N.D. Admin. Code § 75-02-02.1-31(3) allowing the Department to negate the intention of the settlor void because it overruled judicial precedent and exceeded the rulemaking authority of the Department. Id. at 232.
[¶ 14] With the Hecker precedent in mind, the key issue here is whether the Kryzsko trust is a support trust or a discretionary trust. The Kryzsko trust provides in relevant part:
I devise Margaret Lee Kryzsko . share of my estate to my Trustee to administer said share for the benefit of her by paying to or applying for her benefit so much of the income and/or principal of such share as the Trustee, in her sole discretion, thinks necessary or advisable to provide for the proper care, maintenance, support, and education of Margaret Lee Kryzsko . provided, that the Trustee must make at least an annual distribution of the Trust income, or more frequent distribution as the Trustee, in its sole discretion deems necessary. .
[¶ 15] In finding the above trust to be a support trust, the ALJ distinguished this trust from the trust in Hecker and reasoned as follows:
5. Considering the trust language, the trust contains elements of both a support trust and a discretionary trust. The trustee is authorized to invade the corpus of the trust "to provide for the proper care, maintenance, support, and education" of Ms. Kryzsko, which is an element of a support trust. N.D. Admin. Code § 75-02-02.1-31(3)(a). The trustee is given authority to exercise "sole discretion" as she "thinks necessary or advisable", which is an element of a discretionary trust. N.D. Admin. Code § 75-02-02.1-31(4)(a)....
6. The trust language is ambiguous and therefore requires consideration of extrinsic evidence to determine the trustor's intent. The trustor's intent is crucial to the determination of the nature and extent of the beneficiary's interest in the trust....
7. A typical provision of a discretionary trust is that the trustee has uncontrolled discretion over payment to the beneficiary....
8. Considering the provisions of the trust, the trustee does not have uncontrolled and absolute discretion to determine distributions for the benefit of Ms. Kryzsko. The trustor has imposed a duty on the trustee to determine how much is the "proper" amount of care, maintenance, support and education for Ms. Kryzsko . The trustee has a duty to provide what is proper. Therefore, the trustor has established an enforceable standard against which the reasonableness of the trustee's exercise of discretion may be judged. Ms. Kryzsko, if she believed she were not receiving the proper amount of care, maintenance, support and education, could seek a court order requiring the trustee to exercise discretion consistent with the trustor's intention.
9. The trust language suggests that the trustor's intent was to provide for Ms. Kryzsko's future care. The trust language does not suggest that the trust was intended to be a supplement to other sources of care, such as medical assistance or other public assistance programs. There is no indication the trustor intended the trust should not be used to provide primary support or maintenance for Ms. Kryzsko. This is distinguishable from the. case of Hecker v. Stark County Social Service Board, 527 N.W.2d 226 (N.D.1994).
10. The authority granted to the trustee in the Kryzsko trust is essentially the same as the authority of the trustee in Bohac v. Graham, 424 N.W.2d 144 (N.D.1988), which the Supreme Court determined to be a general support trust.
11. The preponderance of the evidence shows that the trust established for Ms. Kryzsko's benefit is a support trust and therefore, the assets of the trust are deemed available to her and must be considered for the purpose of determining her eligibility for Medicaid benefits .
[¶ 16] The Kryzsko trust contains elements of both a discretionary and a support trust. The trust uses language such as "sole discretion." However, it also instructs the trustee to provide for the "proper care, maintenance, support, and education" of Kryzsko. See N.D. Admin. Code § 75-02-02.1-31(3) (stating "[t]he purpose of a support trust is indicated by language such as 'to provide for the care, support, and maintenance of . ' "). The trust requires annual income distribution. While the trustee may have some discretion as to the timing or number of payments, she must annually distribute the trust income.
[¶ 17] We agree with the ALJ that the trust does not provide the trustee with unfettered discretion. First, even the use of terms like "absolute" or "uncontrolled" do not give the trustee unlimited discretion. See III William F. Fratcher, Scott on Trusts § 187 (1988). Second, of considerable importance in determining the amount of discretion is whether there is any standard by which the trustee's conduct can be judged. Id. Here, there is a standard: the "proper care, maintenance, support, and education" of Kryzsko. Bo-gert's treatise on trusts defines a discretionary trust as one where the:
trustee shall have absolute and uncontrolled discretion whether to pay or apply trust income or principal to or for the benefit of a named beneficiary, without fixing any standard or guide which the trustee is to consider, and that income which the trustee does not elect to use for the beneficiary shall be accumulated or paid to another or to a class of other persons.
George G. Bogert, Trusts and Trustees § 228 (1981). Such a discretionary trust "must be distinguished from trusts where the discretion of the trustee pertains only to the time or manner of the payments, or to the size of the payments needed to achieve a certain purpose, for example, to support the beneficiary." Id. (emphasis added).
[¶ 18] An Ohio case involving a trust similar to the Kryzsko trust illustrates how a trust may not be discretionary where it uses purely discretionary language, but imposes on the trustee the requirement of support. Martin v. Martin, 54 Ohio St.2d 101, 374 N.E.2d 1384, 1389 (1978). The trust gave authority to the trustee to distribute "m its sole and absolute discretion, so much of the income and the principal of her share as it, in its sole and absolute discretion, determines to be necessary for her care, comfort, maintenance and general well-being for and during her lifetime." Id. (emphasis added). The court found the trust to be neither purely support nor purely discretionary. The court stated the trust "confers upon the trustees 'absolute and sole discretion,' but defines the standard by which that discretion is to be employed." While the Kryzsko trust uses less stringent language than the trust in Martin, "sole discretion," rather than "sole and absolute discretion," the support language qualifies the discretionary language. It provides a standard by which the trustee's exercise of discretion may be judged.
[¶ 19] The clause that makes annual income distributions mandatory is also relevant. While it does not by itself demonstrate the corpus is an asset available to the beneficiary, it does provide additional evidence the purpose of the trust was to provide for Kryzsko's support and demonstrates the trust is not truly discretionary because the trustee cannot totally exclude the beneficiary. See Estate of Cavenaugh v. Comm'r, 51 F.3d 597, 601 (5th Cir.1995) (finding trust distributions not absolutely discretionary where the trustee was required to make income distributions "monthly or at the end of such other periods as may be necessary or desirable in the discretion of the Trustee"); Ex Parte Boykin, 656 So.2d 821, 827 (Ala.Civ.App.1994) (finding a trust is a true discretionary trust only where the trustee has complete discretion to pay or totally exclude the beneficiary); Bogert, supra, § 228 n. 5 (concluding it would be a strained construction to treat a trust as a discretionary trust when the only discretion given the trustee is as to the time of payment of income not as to payment or non-payment).
[¶ 20] We agree with the ALJ that this case is distinguishable from Hecker. In Hecker we noted "[t]he trust unequivocally states that it is to be a 'supplemental fund to public assistance.' " 527 N.W.2d at 230. We said the trust "language plainly indicates an intent not to provide primary support or maintenance for the beneficiary." Id.
[¶ 21] Unlike the trust analyzed in Heck-er, the trust language here indicates no intent to be a supplemental rather than a primary source of support for the beneficiary or to look to the state first for care before trust assets are used up. Instead the language instructs the trustee to administer moneys "necessary or advisable to provide for the proper care, maintenance, support, and education of' Kryzsko. After this Court stated in Hecker the trust language indicated an intent not to provide primary support for the beneficiary, the citation which followed instructed, "Compare Bohac, 424 N.W.2d 144." Id. at 230.
[¶ 22] A close analysis of Bohac v. Graham, 424 N.W.2d 144 (N.D.1988), a decision which the majority did not reverse in Hecker, reveals it is more analagous to the present case than Hecker. In Bohac, Anne Bohac, who suffered from multiple sclerosis, was the beneficiary of a testamentary trust devised by her brother. The relevant portion of the trust stated, "The Trustee shall distribute all the net income annually unto my sister, Anne Bo-hac, and is further authorized to give my said sister any portion of the Trust Property as my said Trustee may deem necessary for her support, maintenance, medical expenses, care, comfort and general welfare." Id. at 145. The Grand Forks County Social Service Board denied Anne medical assistance benefits, because it concluded the trust principal was an asset available to her. The Department affirmed the decision but, on appeal, the district court reversed concluding the trust was a discretionary trust and thus' the corpus could not be counted as an available asset. We reversed the district court's decision and concluded evidence demonstrated the trust was a support trust.
[¶ 23] The trust included elements of both a discretionary trust and a support trust. It gave discretion to the trustee to invade the corpus, but not uncontrolled discretion. It authorized invasion of the corpus for Anne's " 'support, maintenance, medical expenses,' and 'care,' " but went further and allowed "invasion of corpus for her 'comfort and general welfare.' " Id. at 146. We found "[i]nclusion of provisions for items such as 'comfort' and 'general welfare' may take the trust language outside that of a general support trust." Id.
[¶ 24] Since the trust language was ambiguous, we considered extrinsic evidence to determine the settlor's intent. We agreed with the Department, which "[a]f-ter considering the language of the trust, the circumstances surrounding its creation, and testimony of the draftsman . found that Frank's primary intent was to provide for Anne's future care." Id. The Department said:
(3) The paramount intent of the appellant's brother in creating the trust was to provide for her future care, including medical care, and he was well aware at the time he created the trust that the appellant's condition would likely not improve, but would probably gradually deteriorate in time so as to require nursing home care.
(4) Neither the trust document, nor the surrounding circumstances at the time it was drafted, suggest that the appellant's brother intended the trust corpus to be preserved for subsidiary beneficiaries at the expense of the general care of the appellant, nor do they suggest that the trust was intended to be supplementary to other sources of care, such as public assistance programs.
Id. (quoting Department's decision) (emphasis added).
[¶ 25] The Kryzsko trust uses language such as "sole discretion" in describing the trustees authority, which, arguably is more discretionary than the Bohac trust's language authorizing invasion of the corpus as the "Trustee may deem necessary" for Bo-hac's "support...." Id. at 145. However, the trust in Bohac allowed for invasion of the corpus for more than the beneficiary's support and also included her "comfort and general welfare," the inclusion of which we said "may take the trust language outside that of a general support trust." 424 N.W.2d at 146.
[¶ 26] Here, no such broad "comfort and general welfare" language was used. The Kryzsko trust uses only support language, directing the trustee to provide for the "care, maintenance, support, and education of' Kryzsko. See N.D. Admin. Code § 75-02-02.1-31(3) (stating "[t]he purpose of a support trust is indicated by language such as 'to provide for the care, support, and maintenance of . ' "). This support language provides a clear standard by which the reasonableness of the trustee's discretion may be judged.
[¶ 27] A determinative issue in Bohac, which distinguishes it from Hecker, was that the trust was not intended to be a supplementary source of income. Similarly, in this case, the ALJ said, "There is no indication the trustor intended the trust should not be used to provide primary support or maintenance for Ms. Kryzsko." The plain language of the trust demonstrates an intent by the trustor to provide for the future support and care of Ms. Kryzsko. The Department's finding on this point is supported by a preponderance of the evidence.
[¶ 28] In looking at each case as a whole, Bohac is not distinguishable from the present case, and, we conclude the Department's reliance on Bohac was well-founded. The Department's findings are supported by a preponderance of the evidence, that is a reasoning mind could have reasonably determined the Kryzsko trust was a support trust and not a discretionary trust.
[¶ 29] We affirm.
[¶ 30] DALE V. SANDSTROM, CAROL RONNING KAPSNER, WILLIAM A. NEUMANN, JJ, concur.
. The dissent's characterization "that the trustee may . use the assets of the trust for support related expenses" suggests the trustee has the option to support or not support the beneficiary. (Emphasis added). We disagree and conclude such an interpretation is contrary to the clear intent of the trust to be used as support for Kryzsko. See III Scott, supra, § 187 (stating if a trustee is "directed to pay as much of the income and principal as is necessary for the support of a beneficiary, he can be compelled to pay at least the minimum amount which in the opinion of a reasonable man would be necessary").
. Provisions in the Administrative Code codified after Bohac include language of 'comfort" and "general welfare," as indicative of a support trust, not a discretionary trust. N.D. Admin. Code § 75-02-02.1-31(3).