Medicaid Recipient\'s Income Diverted to Child\'s SNT Is Not Countable

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Medicaid Recipient's Income

Medicaid Recipient's Income Diverted to Child's SNT Is Not Countable

A New York court finds that income transferred to a special needs trust solely for the benefit of a Medicaid recipient's disabled adult child is not countable when calculating the money available to pay for the recipient's cost of medical care. In The Matter of Virginia Kaiser (N.Y. Sup. Ct. Nassau, No. 4668/06, July 28, 2006).

After determining Virginia Kaiser to be an incapacitated person, a New York court appointed a guardian to administer her personal needs and property. The court further ruled that Ms. Kaiser's income was to be diverted to a special needs trust (SNT) for the benefit of her adult disabled daughter, Stephanie. However, when Ms. Kaiser's guardian applied for Medicaid services with the Nassau County Department of Social Services, the Department responded that all of Ms. Kaiser's income would be considered to be Net Available Monthly Income (NAMI) to pay for Ms. Kaiser's extended medical care. After a fair hearing, the New York State Department of Health (DOH) upheld the decision, ruling that only income deposited into an SNT for a recipient's benefit is not countable, and that the exemption did not include diversions to an SNT for the benefit of Ms. Kaiser's daughter.

The New York Supreme Court, Nassau County, sets aside the DOH ruling. The court finds that income diverted to an SNT solely for the benefit of Ms. Kaiser's daughter is consistent with the language of both the federal Medicaid statute and state law. The court further rejects the DOH's contention that state law allows income to be exempted only for the purposes of Medicaid eligibility and not for the actual funding of the trust. The court finds such a reading would "choke off" the income that would form the trust's corpus, requiring that it go to the beneficiary's cost of care and thus rendering the SNT a "meaningless shell."

To download the full text of this decision in PDF format, click here. (If you do not have the free PDF reader installed on your computer, download it here.)