Gonzalez v Department of Health Care Services is the latest opinion published by the California Courts of Appeal about a special needs trust. And, yes, that is how you say it. Let me tell you a little bit about a special needs trust, then we will get into the case.
What is a special needs trust?
A special needs trust is a special trust. It is set up so you can bequeath your assets to a loved one with special needs without jeopardizing their ability to get government benefits like Social Security Income (SSI) and Medicaid. If a person with a disability has access to the money you want to give them, they would not be able to get those benefits. A special needs trust may help your sticky dilemma. What you do is you leave your assets to the trust instead of your loved one. Then, you chose a trusted trustee. This person will have the option to spend the money on the needs of your loved one. Mind you, they cannot give cash directly, but the trustee can take care of many of their basic needs.
Now, you have a basic understanding of a special needs trust we can move onto Gonzalez v Department of Health Care Services.
Brenda Gonzalez was severely injured at birth. She won a $2.4 million law suit. The proceeds were placed in a special needs trust to protect her ability to receive benefits. The trust terminated when she died. It also had a payback clause. A payback clause is a clause that says that after the administration fees are paid, the remainder pays back any state agency that provided Brenda with support.
Brenda passed away at the age of 21 with a little over a million dollars still in the trust. Her mother and father wanted the rest of the trust money instead of the Department of Health Care Services who racked up almost $4 million in Medi-Cal bills and wanted reimbursement.
In Gonzalez v Department of Health Care Services Brenda’s parents argue that based upon an older code that Medi-Cal could not collect because Brenda was under 55. Alternatively, they argued many of the included expenses Brenda incurred prior to the trust set up. The probate court said that Medi-Cal must be reimbursed from the remainder of the trust and Brenda’s parents appealed.
The Court of Appeal reviewed the statutes including Probate Code 3605. They determined that to establish government benefits, the state could not use the assets in the trust. However, when the disabled party passes, the trust becomes part of their estate. It can be used to reimburse Medi-Cal. They also looked at the patent words creating the trust. For these and other reasons, the court allowed reimbursement. Medi-Cal was repaid and Brenda’s parents did not recoup the remainder of the trust.
The court also looked at other instances where their analysis is different. Check out future discussions of pooled special needs trusts. If you are considering a special needs trust, you need to understand these too.