Changes to Irrevocable Trusts in Minnesota
Minnesota Statute section 501C.1206 states that an irrevocable trust created on or after July 1, 2005, by a Medical Assistance applicant is revocable for the sole purpose of Medical Assistance for Long-Term Care (or Alternative Care) eligibility. This means that if a Medical Assistance applicant in Minnesota created an irrevocable trust on or after July 1, 2005, then the assets in the trust were available assets and counted toward the applicant’s Medical Assistance asset limit. For this reason, and until recently, irrevocable trusts have not been considered a viable long-term care planning tool since 2005.
This Minnesota law contradicts federal law in that under federal law assets and income in an irrevocable trust are only considered available to the extent that the trust allows payment of income or assets to the Medical Assistance applicant. If there are no circumstances under which the income or assets of the trust may be made payable to the Medical Assistance applicant then the trust is unavailable and assets in the trust are not counted toward the applicant’s asset limit.
Geyen v. Commissioner of Minnesota Department of Human Services
Minnesota Statute section 501C.1206 was invalidated in July 2021 in the In re Geyen v. Commissioner of Minnesota Department of Human Services, No. A20-1300 (Minn. Ct. App. July 14, 2021) case where the Minnesota Court of Appeals affirmed the district court’s ruling that federal law preempts Minnesota Statute section 501C.1206.
In this case, Dorothy Geyen created two irrevocable trusts in 2011 in which she named her children as trustees and her children and grandchildren as beneficiaries. Ms. Geyen did not reserve to herself any right to the income or principal of the trust. In fact, the trust stated that the trustees were prohibited from loaning or gifting trust income and assets to Ms. Geyen.
Years later, Ms. Geyen required long-term care services, and in 2019 she applied for the Elderly Waiver program through Medical Assistance. Under the above-referenced Minnesota law, the county found Ms. Geyen in excess of her Medical Assistance asset limit by counting the assets contained in the two irrevocable trusts as available to Ms. Geyen to pay for her care. Ms. Geyen appealed this determination, and a human services judge ruled that the trust assets were available to Ms. Geyen under federal law. Ms. Geyen requested reconsideration and it was denied. Ms. Geyen then appealed the Commissioner’s decision to the Minnesota district court.
The Minnesota district court ruled that under federal law the trust assets were unavailable to Ms. Geyen and that federal law preempts state law. The Commissioner appealed this decision, and the Minnesota appeals court affirmed the district court decision finding that federal law preempts state law. In other words, Minnesota Statute section 501C.1206 is preempted by federal law due to its direct conflict with the purpose of the federal law – to treat irrevocable trusts as unavailable in determining Medicaid eligibility.
The Impact of Long-Term Care Planning in MN
How does this decision impact long-term care planning in Minnesota? Because Minnesota Statute section 501C.1206 is invalidated, policy has changed and county workers have been advised to now only evaluate irrevocable trusts funded by Medical Assistance and Alternative care applicants and enrollees under federal law only.
This means that a Medical Assistance applicant who funded an irrevocable trust in 2005 or later and retained no right to income or principal from the trust will not have trust assets counted toward their asset limit. And irrevocable trust planning could once again become a viable long-term care planning option in Minnesota. For anyone considering creating an irrevocable trust for long-term care planning, or who currently has an irrevocable trust and may need to apply for Medical Assistance benefits, we suggest working with an attorney knowledgeable in Medical Assistance law such as the attorneys at Maser, Amundson & Boggio, P.A.