Court Opinion

ID: 9843698
Source: CourtListenerOpinion
Date Created: 2023-09-24 02:42:08.297993+00
Date Added: 2024-06-11T09:16:52.752271
License: Public Domain

MARING, Justice,
dissenting.
[¶ 31] I dissent from the majority opinion because I believe Alfred Kryzsko’s intent can be determined from the face of the trust document and that the trust’s language clearly shows he intended to create a discretionary trust, which may not be counted as an available asset in determining Peggy Kryzsko’s eligibility for Medicaid benefits. I would, therefore, reverse.
[¶ 32] The ALJ concluded the trust contained elements of both a discretionary and a support trust, and thus that the trust document was ambiguous. Whether or not a trust is ambiguous is a question of law, fully renewable by this Court on appeal. Hecker, 527 N.W.2d at 230. When a trust instrument is unambiguous, the intent of the settlor is determined from the language of the trust document itself. Id. I conclude no ambiguity exists because the trust document clearly indicates the set-tlor’s intent to create a discretionary trust.
[¶ 33] The trust instrument states:
I devise Margaret Lee Kryzsko, a/k/a Peggy Kryszko’s 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 Kryszko, a/k/a Peggy 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....
(Emphasis added.) The above language shows the settlor expressly contemplated the trustee would exercise “sole discretion” over the assets of the trust. In addition, though the settlor required the trustee to make at least one annual distribution of the trust income, the settlor vested sole discretion with the trustee to determine whether additional distributions of income were “necessary or advisable.” Finally, the settlor endowed the trust with such a small sum, $32,000, that it cannot reasonably be said that he intended the trust funds to be used for his daughter’s primary support. The small size of a trust has been held by other courts to indicate absence of an intent to provide primary support. See, e.g., Zeoli v. Comm’r of Soc. *245Services, 179 Conn. 83, 425 A.2d 553, 556 (1979); Town of Randolph v. Roberts, 346 Mass. 578, 195 N.E.2d 72, 74 (1964).
[¶ 34] The majority believes this trust is like the one we reviewed in Bohac. 424 N.W.2d 144. I disagree. The Bohac trust, unlike the trust before us in this case, did not clearly state that the trustee had “sole discretion” over the assets of the trust; rather it merely stated that the trustee was authorized to distribute the trust property as the trustee “deem[ed] necessary.” This is a distinction with a difference. Alfred Kryzsko, not once, but twice, expressed his intent that the trustee exercise “sole discretion” over the assets of the trust. I believe this language conclusively indicates his intent that the trust be discretionary.
[¶ 35] Once discretion is so clearly vested in the trustee, the settlor’s direction that the trustee may, in her sole discretion, use the assets of the trust for support related expenses does not change the trust’s essential character and, therefore, does not convert the trust into a support trust. The trustee remains the sole judge of the propriety of applications for funds. Chenot v. Bordeleau, 561 A.2d 891, 894 (R.I.1989); Hecker, 527 N.W.2d at 230. Judicial control over the exercise of this discretion only arises if it can be shown the trustee abused his discretion by acting arbitrarily, dishonestly or improperly. Chenot, 561 A.2d at 894. Courts in a number of other states have reviewed trusts which vested discretion over the trust assets in the trustee and yet directed the trustee to use the trust assets for “support.” These courts concluded such trusts were discretionary, and thus that the trust assets were not “available” for determining Medicaid eligibility or to pay medical costs. See, e.g., Myers v. Kansas Dept. of Social and Rehabilitation Services, 254 Kan. 467, 866 P.2d 1052 (1994); Chenot, 561 A.2d 891; Lang v. Commonwealth Dept. of Pub. Welfare, 515 Pa. 428, 528 A.2d 1335 (1987); Tidrow v. Dir., Missouri Div. of Family Services 688 S.W.2d 9 (Mo.Ct.App.1985); Oddo v. Blum, 83 A.D.2d 868, 442 N.Y.S.2d 23 (N.Y.App.Div.1981); First Nat’l Bank of Maryland v. Dept. of Health and Mental Hygiene, 284 Md. 720, 399 A.2d 891 (1979). In addition, that the settlor directed the trustee to make an annual distribution of trust income does not prevent the determination that the settlor intended a discretionary trust. A number of courts have construed trust documents as creating discretionary trusts when these documents directed mandatory distribution of trust income, while reserving discretion over the distribution of the trust corpus with the trustee. See, e.g., NCNB Nat’l Bank of Florida v. Shanaberger, 616 So.2d 96, 97 (Fla.Dist.Ct.App.1993); First Nat’l Bank of Maryland, 399 A.2d at 893; Oddo, 83 A.D.2d at 868, 442 N.Y.S.2d 23; McNeal v. Bonnel, 412 S.W.2d 167 (Mo.1967).
[¶ 36] Our Court has also held that a settlor’s express statement granting sole discretion over trust assets to a trustee creates a discretionary trust, which is then an unavailable asset in the context of determining a beneficiary’s Medicaid eligibility. In Hecker, as in this case, the settlor granted the trustee “sole discretion” to determine whether to distribute trust assets. 527 N.W.2d at 230. We concluded the settlor’s direction that the trust funds be used for the beneficiary’s special needs, which included items associated with support, did not limit the discretion vested in the trustee. Id. Further, we concluded the grant of “sole discretion” deprived the beneficiary of any ability to compel distribution of the trust assets so that the asset was not available to the beneficiary. Id. The discretion granting language in the Hecker trust and in the trust before us in this case is identical, and thus, the analysis we applied to that language in Hecker should apply in this case.
[¶ 37] It is true, as the majority notes, that the settlor in Hecker also expressly stated her intent that the trust be used to supplement any public assistance benefits her son might receive. 527 N.W.2d at 228. *246However, a close reading of this Court’s decision in Heeker reveals this expression of intent was not the determinative factor in that case; rather, a majority of this Court viewed that language as simply an additional expression of intent bolstering the conclusion that the trust was discretionary and not an available asset. Id. at 230-31.
[¶ 38] Other courts reviewing trusts like the one in Heeker have employed the same analysis we used in that case, looking foremost to the discretionary character of the trust and viewing the language indicating the trust was to supplement outside funds as additional evidence of the settlor’s intent. See, e.g., Matter of Leona Carlisle Trust, 498 N.W.2d 260, 264-65 (Minn.Ct.App.1993); Matter of Estate of Benjamin T. Sykes, 131 Mich.App. 49, 345 N.W.2d 642, 644 (1983); Zeoli, 425 A.2d at 556. However, once a trust is determined to be discretionary, that additional language is not necessary to the determination that the trust is supplemental to public assistance. In Lang, the court concluded trustees of a discretionary trust could consider the availability of public assistance funds to the beneficiary when determining whether to distribute funds from the trust. 528 A.2d at 1343. The court based this conclusion on the testator’s decision to create a discretionary, rather than a support trust, and the grant of complete discretion to the trustee. Id. Similarly, in Shanaber-ger, the court concluded trustees given “sole discretion” to determine whether invasion of the trust’s principal was “necessary,” properly looked to outside sources of income to make that determination. 616 So.2d at 97. Neither of the trusts in those two cases contained express language indicating an intent that the trust be supplementary.
[¶ 39] The majority opinion recognizes the settlor in this case granted sole discretion to the trustee. However, it adopts the ALJ’s reasoning that the trustee’s discretion was not “absolute and unfettered” because the settlor indicated an intent that the trustee use the funds for Peggy Kryz-sko’s “proper care, maintenance, support, and education.” According to the ALJ, and now a majority of this Court, inclusion of the word “proper” created an enforceable standard against which to judge the trustee’s exercise of discretion. The majority opinion cites in support of that reasoning only one case, Martin v. Martin, 54 Ohio St.2d 101, 374 N.E.2d 1384 (1978). I believe the majority’s reliance on Martin is misplaced.
[¶ 40] First, though both Martin and this case involve trusts, the factual circumstances and public policies presented in Martin and in this ease are dissimilar. In Martin, a trust beneficiary’s ex-wife sought to compel the trustees of a discretionary trust to satisfy her ex-husband’s alimony obligation with trust funds. Thus, the Martin case was essentially about an ex-wife’s ability to enforce her judgment against a beneficiary’s interest in a trust, which resulted in the conclusion that trust income was not reachable for the payment of alimony. The case now before us is about a disabled woman who depends on public assistance to meet her needs for food, shelter, clothing, and medical care at a subsistence level. The trust which benefits Peggy Kryzsko allows the trustee to provide her with funds for emergency situations should they arise, and also for supplemental needs such as prescription medicines which Kryzsko might not otherwise be able to afford. The dissimilarity between the facts and public policies presented by these two cases militates against adopting the inflexible standard established by Martin.
[¶ 41] Second, North Dakota has never before followed the analysis presented in Martin and this Court’s decision in Heeker suggests it should not do so now. In Heeker, the trust indicated the trust funds should be used “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.” 527 N.W.2d at 228 (emphasis add*247ed). This Court did not conclude the beneficiary could compel the trustee to exercise discretion on the basis that his special needs were not being “satisfied,” despite that this might be construed as a standard against which to judge the trustee’s exercise of discretion as to expenditures for those special needs. Rather, our Court specifically stated:
[although the Hecker trust’s definition of special needs includes medical and dental expenses, clothing, and education, items associated with support of a beneficiary, this language does not limit the trustee’s absolute discretionary power.
Id. at 230 (citing Chenot, 561 A.2d 891) (emphasis added). The dissent in Hecker also did not address this issue, rather it expressly recognized the trust was discretionary and argued an alternative outcome on other grounds. Id. at 237. Thus, our own precedent suggests we should not adopt the reasoning articulated in Martin.
[¶ 42] Finally, numerous courts in other states have examined trusts containing descriptive language identical or similar to that used by the settlor in this trust, yet these courts did not conclude such language altered the discretionary character of those trusts. See, e.g., Tidrow, 688 S.W.2d at 11 (“reasonable comfort”); Estate of Sykes, 345 N.W.2d at 643 (“proper care, support and welfare”); Oddo, 83 A.D.2d at 868, 442 N.Y.S.2d 23 (“necessary and proper for [beneficiary’s] benefit”); Town of Randolph, 195 N.E.2d at 73 (“properly support”); In re Wright’s Will, 12 Wis.2d 375, 107 N.W.2d 146, 149 (1961) (“necessary or proper for the care, maintenance or education”); In re Watson’s Will, 286 A.D. 950, 142 N.Y.S.2d 731, 732 (1955) (“suitable care and support”).
[¶ 43] Having concluded the ALJ erred in deciding the trust was ambiguous and thus was incorrect in her determination the trust is a support trust, I also conclude the ALJ erred in her conclusion that the corpus of Kryzsko’s trust is an available asset for determining her eligibility for Medicaid. The requirement that an asset be “actually available” before it can be counted in determining eligibility for Medicaid is found in N.D.A.C. 75-02-02.1-25(2). Interpretation and application of an administrative regulation is a question of law, fully reviewable by this Court on appeal. Americana Healthcare Ctr. v. North Dakota Dept. of Human Services, 540 N.W.2d 151, 153 (N.D.1995). We accord some deference to an administrative agency’s reasonable interpretation of its own regulations. Id.
[¶ 44] Actually available assets need not be “in hand,” rather an asset is available if an applicant has a legal ability to obtain it. Post v. Cass Cty. Social Services, 556 N.W.2d 661, 664 (N.D.1996). Requiring actual availability of an asset prevents States from “conjuring fictional sources of income and resources by imputing financial support from persons who have no obligation to furnish it or by overvaluing assets in a manner that attributes nonexistent resources to recipients.” Id. (quoting Heckler v. Turner, 470 U.S. 184, 200, 105 S.Ct. 1138, 84 L.Ed.2d 138 (1985)). Our interpretation of the actual availability standard “must be ‘reasonable and humane in accordance with its manifest intent and purpose....’” Id. (quoting Moffett v. Blum, 74 A.D.2d 625, 424 N.Y.S.2d 923, 925 (1980)). In Hecker, a majority of this Court clearly articulated the importance of the policy underlying the requirement that only available assets be attributed to an individual in determining eligibility for Medicaid, stating that public policy militates against attributing tangential sources of income or resources to applicants for public assistance. 527 N.W.2d at 233-35.
[¶ 45] An asset to which an applicant has a legal entitlement is not necessarily unavailable simply because the applicant must sue to collect it. Post, 556 N.W.2d at 665. However, in determining whether an asset is actually available, the central issue is the applicant’s “actual and practical ability to make an asset available as a matter of fact, not legal fiction.” Id. at 664-65. Thus, in Post, this Court upheld an admin*248istrative determination that past-due amounts owed under a divorce decree were actually available to a disabled applicant who was legally entitled to the sums under the agreement and who had successfully sued to enforce the agreement in the past. Id. at 665-66. Thus, the applicant in Post had an “actual and practical ability” to make the sums due under the divorce decree available.
[¶ 46] This case is unlike Post because Kryzsko has no legal entitlement to the principal in the trust. The trust which benefits Peggy Kryzsko is a discretionary trust, such that she cannot compel the trustee to distribute the trust’s principal. Thus, Kryzsko has no actual or practical ability to make the funds available. As was the case in Hecker, the trust principal is not an actually available asset under our regulation and public policy militates against attributing it as a resource upon which she may draw.
[¶ 47] I believe the ALJ committed an error of law in concluding the trust document contained an ambiguity despite language which clearly and expressly states the settlor’s intent to vest “sole discretion” over the management and distribution of the trust assets to the trustee. Based upon that error, the ALJ incorrectly determined Alfred Kryzsko intended to create a support trust for his adult, disabled daughter, whom he had no legal duty to support, and in fact, had not seen in nine years. Deeming the corpus of this discretionary trust an available asset was a misapplication of this State’s administrative regulations and clearly contradicts public policy articulated by this Court. This is not an instance in which an affluent individual is exploiting the social safety net put in place for the poor, elderly, and unfortunate. Allen v. Wessman, 542 N.W.2d 748, 753 (N.D.1996). Rather, this case implicates the public policy we announced in Hecker when we recognized that “our state’s public policy places the burden on the State to support those [disabled] children once they reach adulthood,” and quoted, with approval, the Wisconsin Supreme Court’s statement that:
[w]e know of no public policy to prohibit a person who is not liable for the support of a charity patient in a public institution to give to the patient extra comforts or luxuries or, at need, necessities which the institution does not furnish nor do we find a public policy to seize such gifts before the patient has received them.
527 N.W.2d at 235, 236 (citing Wright’s Will, 12 Wis.2d 375, 107 N.W.2d 146, 149 (1961)). The majority opinion not only overturns Hecker, on the merits, but also disregards the public policy enunciated therein and returns us to the “notion of public assistance as charity” which is “anachronistic.” Hecker, at 236.
[¶ 48] I conclude, given this Court’s precedent and the settlor’s clear intent, Kryz-sko’s trust is a discretionary trust and does not render her ineligible for Medicaid benefits. I would, therefore, reverse.
[¶ 49] Mary Muehlen Maring