Opinion
Case No. 20050895-CA.
Filed July 7, 2006. (Not For Official Publication).
Appeal from the Original Proceeding in this Court.
L. Edward Robbins, Kanab, for Petitioner.
Mark L. Shurtleff, Brent A. Burnett, and Jean P. Hendrickson, Salt Lake City, for Respondent.
Before Judges Greenwood, Billings, and Davis.
MEMORANDUM DECISION
Janet S. Perez appeals the final agency order of the Utah Department of Health, Division of Health Care Financing (the DHCF) denying her Medicaid benefits. We affirm.
The DHCF denied Perez Medicaid benefits, determining that her irrevocable trust (the Trust) was a "[M]edicaid qualifying trust" (MQT) as defined by federal statute, see 42 U.S.C. § 1396a(k)(2) (repealed 1993), and that Perez had access to its funds. Perez does not dispute that the Trust is an MQT, but challenges the DHCF's determination that she had access to the Trust's funds. Medicaid eligibility decisions involving the interpretation of a trust agreement present questions of law, which we review for correctness. See Allen v. Department of Workforce Servs., 2005 UT App 186, ¶ 6, 112 P.3d 1238 (noting that an agency's legal interpretations are reviewed for correctness); Bleazard v. Utah Dep't of Health, 861 P.2d 1048, 1049 (Utah Ct.App. 1993) (noting that agency construction of Medicaid statutes, regulations, and rules are reviewed for correctness).
The Trust was created on September 15, 1992. Although 42 U.S.C. § 1396a(k) was repealed effective August 10, 1993 and replaced with a more stringent version, see 42 U.S.C. § 1396p(d) (2003), its provisions still apply to trusts created before that time, see Ramey v. Reinertson, 268 F.3d 955, 961-62 (10th Cir. 2001) (holding that § 1396a(k) applies to trusts created before 1993 and listing cases reaching the same conclusion).
The statute provides that when an MQT exists, the amount available to the applicant is the maximum amount the trustee has power to pay to the applicant from the trust:
[T]he amounts from the trust deemed available to a grantor . . . is the maximum amount of payments that may be permitted under the terms of the trust to be distributed to the grantor, assuming the full exercise of discretion by the trustee or trustees for the distribution of the maximum amount to the grantor.42 U.S.C. § 1396a(k)(1). The statute also provides that such trust funds are deemed available regardless of whether (1) the MQT "is irrevocable or is established for purposes other than to enable a grantor to qualify for medical assistance" or (2) the trustee actually uses its discretion to pay funds to the grantor.Id. § 1396a(k)(3)(A)-(B).
Although Perez is not listed as a beneficiary of the Trust, the Trust Agreement identifies her as the trustor-trustee of the Trust during her lifetime, and as such, she retains considerable control over the Trust property. As trustor, Perez (1) "shall have power to alter the terms of the use or disposition of the property during her lifetime"; (2) "reserves the right to change the beneficial interest as she may wish," except for the homesites; and (3) reserves the right to amend the trust in writing during her lifetime, "provided that she may not amend to the benefit of any creditor of hers." As trustee, Perez is "entitled to [the] use and enjoyment of the [Trust] property for [her] lifetime." In the event that Perez is declared incapacitated, which is the case here, a successor trustee "shall have power and authority on [Perez's] behalf to exercise or perform any act, power, duty, right[,] or obligation whatsoever that [Perez] may have" regarding the Trust property. The successor trustee's power is "a general durable power of attorney to act as [Perez's] attorney in fact and agent in [her] name and for [her] benefit and shall be in addition to all other powers bestowed upon the [t]rustee."
Perez claims that Utah Code section 75-5-503 prohibits a trustee from modifying the Trust to benefit her. However, that statute is inapplicable to the present case because it applies solely to revocable trusts and is subject to powers expressly granted the trustee in the trust agreement. See Utah Code Ann. § 75-5-503 (Supp. 2005) ("A power of attorney may not be construed to grant authority to an attorney-in-fact or agent to perform any of the following, unless expressly authorized in the power of attorney: . . . create, modify, or revoke an inter vivos revocable trust created by the principal. . . .").
The Trust Agreement also provides that should Perez become physically or mentally disabled, a successor trustee may apply the net income and principal belonging to Perez's "separate estate" for her "proper support, health, and maintenance." Such funds are "to be paid out of all beneficiaries' shares, as the case may be." Perez contends that this provision does not give her access to Trust funds because the term "separate estate" refers only to her separate property not included in the Trust. The DHCF disagrees and argues that the "separate estate" refers to Trust property under Perez's control. "[S]eparate estate" is not defined in the Trust Agreement, and we are left to construe its meaning in the context of the entire Trust Agreement. See Perrenoud v. Harman, 2000 UT App 241, ¶ 13, 8 P.3d 293. Because the amounts used to support Perez are to be taken from the "beneficiaries' shares," it is logical to conclude that the "separate estate" includes property to which the beneficiaries would have shares, namely the Trust property. This reading is also supported by the general structure of the Trust, which defines separate interests held by Perez as trustor-trustee and interests held by the beneficiaries. Finally, the headings used in the Trust Agreement support DHCF's interpretation. The article containing the provision is entitled "Disposition of Trust Estate During Lifetime of Trustor." The first of the two paragraphs under this article is entitled "Distribution of Income and Principal" and clearly relates to the income and principal of the Trust. The second paragraph, containing the provision in question, is entitled "Invasion of Principal by Trustee," which, based on the preceding headings and content, naturally refers to the Trust principal.
Under the terms of the Trust Agreement, Perez deeded fifty acres to the Trust and, as trustor-trustee, retains lifetime control over the Trust property. Perez grants beneficial ownership to the beneficiaries and specifically gifts a half-acre parcel to each beneficiary for a homesite. Each beneficiary that claims a homesite parcel may exercise exclusive control over that parcel once he or she makes "material improvements" to the property.
Perez also contends that she should not be deemed to have access to the Trust funds merely because the successor trustees "might be friendly to [her], do as they please, and allow distribution to [her] just because they wanted to do so, or just because everybody involved decided to allow it to happen." For this proposition she relies on Verdow v. Sutkowy, 209 F.R.D. 309 (N.D.N.Y. 2002) (mem.). Verdow is a memorandum decision and does not provide a detailed description of the irrevocable trusts involved. The issue in the case was whether benefits should be denied because the Medicaid applicants could hypothetically revoke the trust by exercising their power to redesignate beneficiaries who would consent to revoke. See id. at 315. The court noted that the possibility of revocation was "entirely speculative" and would require the court to assume fraudulent collusion without supporting evidence. Id. at 316. Accordingly, the court concluded that there were "no possible circumstances under which payment from the corpus of the irrevocable trusts could b[e] made to or for the benefit of the [applicants]" and that benefits should not be denied. Id. The present case differs from Verdow in that, as noted, Perez specifically retained broad powers to amend the Trust Agreement and use trust property for her benefit without the approval of the beneficiaries. Consequently, Perez's access to funds from the Trust is not "entirely speculative" as was the case in Verdow — to the contrary, the Trust Agreement here anticipates such an arrangement.
Perez also argues that the Trust property is valueless; however, she does not substantively argue this point in her brief. The DHCF found that a 2003 Kane County tax assessment had valued the Trust property at $82,219.00, and although Perez lists in her statement of facts several reasons why the real property deeded to the Trust would not be highly marketable (including claims that the land is sandy, contains sink holes, is gradually eroding into a canyon, and is not suitable for pastureland), she makes no argument in her brief explaining how DHCF erred in determining the property had substantial value. Because Perez fails to adequately argue this issue, we decline to address it here. See Utah R. App. P. 24(a)(9) (requiring appellant's brief to "contain the contentions and reasons . . . with respect to the issues presented").
The DHCF did not err in concluding that amounts from the Trust were available to Perez under 42 U.S.C. § 1396a(k)(2). We affirm.
Pamela T. Greenwood, Associate Presiding Judge Judith M. Billings, Judge, concur.