Opinion ID: 1954136
Heading Depth: 1
Heading Rank: 1

Heading: The Payback Provision

Text: The AAU agreed with DHHS that 42 U.S.C. § 1396p(d)(4)(A) does not itself create an enforceable repayment obligation, but only mandates that the State not count the corpus of a conforming special needs trust as a resource if the trust contains an obligation to repay. The AAU found that the phrase to the extent required by law in the Lowy trust impermissibly conditions the obligation to repay on the future existence of an independent legal requirement of repayment, which might not occur. Therefore, the AAU concluded the trust does not contain the unconditional repayment obligation required for exclusion under 42 U.S.C. § 1396p(d)(4)(A). Our standard of review on appeal is governed by RSA 541:13 (2007). See Appeal of Leonard, 147 N.H. 590, 594, 809 A.2d 762 (2002). Accordingly, we will reverse the agency only if it made an error of law or if we are satisfied, by a clear preponderance of the evidence, that the agency's order was unjust or unreasonable. Id. We review questions of law de novo. Taylor v. Town of Plaistow, 152 N.H. 142, 144-45, 872 A.2d 769 (2005). While we agree with the AAU that a trust must contain a payback provision to qualify for exclusion, we find the AAU's interpretation of the disputed phrase erroneous, and hold that it does not disqualify the trust under 42 U.S.C. § 1396p(d)(4)(A). Medicaid is a joint federal/state medical assistance program for low-income individuals. 42 U.S.C. §§ 1396 et seq. Medicaid programs require applicants to meet certain financial eligibility criteria with respect to resources and income. Id. In our recent decision, Appeal of Huff, we stated: The United States District Court for the District of New Hampshire has held that New Hampshire is a `§ 209(b) option' state, and therefore the eligibility standards for medical assistance are the same as those in effect in New Hampshire on January 1, 1972, Duquette v. Dupuis, 582 F.Supp. 1365, 1368 (D.N.H. 1984) (citation omitted), under the State's approved plan. See 42 U.S.C. § 1396a(f). Accordingly, if New Hampshire is a section 209(b) state, the petitioner's application must be evaluated against the 1972 eligibility standards for medical assistance in the State's approved plan because those standards define the nature and extent of the State's Medicaid obligations under section 209(b). Huff, 154 N.H. 414, 417-18, 910 A.2d 1287 (2006). Huff considered a challenge to New Hampshire Administrative Rule, He-W 654.04(b)(10) (eff. April 25, 1998), which counts certain distributions from a qualifying special needs trust as income to the beneficiary for Medicaid eligibility purposes. Huff, 154 N.H. at 418-19, 910 A.2d 1287. Because the factual question of the status of New Hampshire's Medicaid plan in 1972 could not be answered based upon the record, we remanded the case for further proceedings without a decision as to the validity of Rule He-W 654.04(b)(10). Id. Because the parties do not question that current law governing Medicaid eligibility is valid or that certain distributions from a special needs trust may be counted as income, we adopt their assumption for purposes of this case, without deciding either issue. The Medicaid statute sets forth rules governing the State's treatment of trusts for eligibility purposes. 42 U.S.C. § 1396p(d). A trust is not counted as a resource if it contains the assets of a disabled individual under age sixty-five and is established for the individual's benefit by a parent, grandparent, legal guardian or a court, if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter. 42 U.S.C. § 1396p(d)(4)(A). As the AAU correctly observed, the statute effectively creates a quid pro quo so that a trust beneficiary receives medical benefits for which his trust resources might render him otherwise ineligible in exchange for repayment of those benefits from the trust upon the beneficiary's death. The Medicaid statute is thus clear that if a trust is not counted, the benefits must be repaid, but is silent with respect to how the reimbursement is guaranteed. Thus, it appears that the trust instrument itself must provide for the reimbursement. The question is whether the language added to the payback provision in this case disqualifies the trust from being excluded from the petitioner's resource calculation. On appeal, the petitioner argues that the qualifier to the extent required by law means that any claim asserted against the trust estate must be addressed in light of all applicable legal principles, including common law principles and state and federal statutory and regulatory law. The petitioner argues that in the context of both the trust settlor's clear intent to create a qualifying special needs trust and the statutory reimbursement provision, the phrase does not disqualify the trust. We agree. When we construe a trust, the intention of a settlor is paramount, and we determine that intent, whenever possible, from the express terms of the trust itself. See Bartlett v. Dumaine, 128 N.H. 497, 504-05, 523 A.2d 1 (1986). Moreover, we reject any construction of trust language that would defeat the clear and expressed intention of a settlor. Lanoue v. Comm'r, Soc. Security Admin., 146 N.H. 504, 508, 774 A.2d 1236 (2001) (declining to find a trust revocable where to do so would defeat settlor's clear intent to establish trust in conformance with 42 U.S.C. § 1396p). Here, the settlors' intention is clear. The trust declaration states, the Settlors desire to create an irrevocable supplemental needs trust for their son David E. Lowy as contemplated by 42 U.S.C. § 1396p(d)(4)(A). . . . The powers and duties of trustees allow certain administrative changes to be made, provided that no amendment may be made that will materially change the purposes of the Trust or will cause the Trust not to be in compliance with 42 U.S.C. § 1396p, as may be amended from time to time. The stipulation of facts that was submitted to the AAU confirms that [i]t was the intent of Appellant's parents to create a conforming 42 U.S.C. § 1396p(d)(4)(a) trust, a so-called Special Needs Trust. The intention is evidenced by the trust itself, which apart from the disputed phrase, the parties stipulated, qualifies as a special needs trust under 42 U.S.C. § 1396p(d)(4)(A) in every respect. The intention to create a trust qualifying under 42 U.S.C. § 1396p(d)(4)(A) signals an intention to enter into the exchange that is at the heart of this statutory provision; namely, exclusion in exchange for reimbursement. This intended exchange is made explicit in the Lowy trust's payback provision, which includes the three elements of the payback requirement included in 42 U.S.C. § 1396p(d)(4)(a), by promising that: (a) the state shall receive; (b) upon the beneficiary's death; (c) any amounts remaining in the trust up to the amount of medical assistance paid on the beneficiary's behalf. To construe the qualifier to the extent required by law as referencing anything other than a general requirement that the promise contained in the payback provision be construed in accordance with the law would require us to ignore the settlors' clear intent. This we decline to do. Accordingly, we hold that the payback provision is adequate, and that the trust therefore qualifies for exclusion under 42 U.S.C. § 1396p(d)(4)(A).