Applicant Disqualified for Failure to Designate Self as Trust Beneficiary

Martha Ferrugia, a New York resident, established a Wyoming trust, aka irrevocable “trigger” trust in 1986. Trigger trusts are no longer permitted, but New York still recognizes those created before 1992. Martha’s trust was to distribute income and principal to her unless she entered a nursing home. At that point, the trust would terminate, a

Happy smiling senior couple embracing together at home

nd its assets would go to the remainder beneficiaries.

However, another provision of the trust granted Martha the power to change the trust’s beneficiaries. According to the provision, Martha could designate anyone as beneficiary except her spouse, her creditors, her spouse’s creditors, her estate, or her estate’s creditors. So, Martha was not barred from naming herself as beneficiary.

When Martha applied for Medicaid long-term care benefits, the Department of Social Services determined she was not eligible because she had not designated herself as beneficiary of the trust. This was, in effect, a transfer for the sole purpose of qualifying for Medicaid.

The New York Supreme Court, Chatauqua County, agreed and upheld the Department’s denial of Martha’s Medicaid benefits. Since she could have named herself as beneficiary, the trust assets were within her control and constituted available resources.

Washington DC resident Mollie Orshansky was admitted to a hospital by Adult Protection Services (APS) after she was discovered in a “self-neglecting state.” The hospital filed a petition for appointment of a guardian on the basis that Mollie suffered from dementia. Before the guardianship hearing, Jane Pollack, Mollie’s niece from New York, came to the hospital and presented a health care proxy Mollie had executed 18 months earlier naming Jane as her health care agent in case she became incapable of making her own decisions. Jane requested that the hospital release Mollie into her care, but the hospital refused.

Over the next few weeks, Jane lodged numerous complaints with the hospital, claiming her aunt was not receiving adequate care, therapy, or stimulation, and as a result was suffering bruises, sores, and urinary tract infections and was growing weaker and more confused every day she remained in the hospital. The hospital ignored the complaints, so Jane decided to take matters into her own hands as Mollie’s health care agent. Without providing any notification, she entered the hospital, removed her aunt, and took her to New York. Then she notified the hospital, which called the police and APS and filed an amended petition requesting the immediate appointment of a guardian, claiming Mollie had been “improperly” removed while the guardianship hearing was pending.

The probate court held an emergency hearing and appointed a guardian and conservator whom Mollie did not know. Also, the court found that Jane’s removal of her aunt from the hospital had been “improper,” though no evidence was presented that Jane’s actions had violated any law, had threatened Mollie’s health, or had been done against Mollie’s will. The court even declared that “all Powers of Attorney” signed Mollie “for any purpose, including healthcare, are hereby voided,” even though no witnesses presented any evidence that the health care proxy was invalid.

Meanwhile, Jane petitioned the New York Supreme Court to appoint her as Mollie’s guardian and conservator. Pending that hearing, the Court prohibited Mollie from being removed from New York City. In a subsequent hearing in DC, the temporary guardianship was made permanent, and the DC guardian was ordered to go to New York and bring Mollie back. Jane appealed.

The D.C. Court of Appeals reversed, holding that the probate court had abused its discretion and violated statutory requirements for the appointment of a guardian and conservator without taking into account Mollie’s own wishes and prior arrangements.