Trust established by children bars mother’s claim for state
Appeals court clarifies proper interpretation of Wis. Stat. section 49.454 relating to
irrevocable trusts and medical assistance eligibility.
By org jforward wisbar Joe Forward, Legal Writer,
State Bar of Wisconsin
Oct. 13, 2011
– A state appeals court recently ruled that an
irrevocable trust, established by three children to benefit their
parents in limited circumstances, now bars the mother's claim for
For purposes of determining an individual's eligibility for or
amount of medical assistance benefits under Wis. Stat. section 49.454,
payments that could be made to an individual from an irrevocable trust
are considered a resource available to the individual in certain
The trust will be considered an income resource if the
individual’s (or spouse’s) assets were used to form all or
part of the trust corpus, and the individual, the
individual’s spouse, or someone with legal authority established
the trust. Trust amounts established at the individual’s request
are also included.
The Wisconsin Department of Health Services denied Lucille Hedlund’s request for medical assistance
after she entered a nursing home in 2008, 17 years after an irrevocable
trust was created. Hedlund argued that
she did not own the assets that were transferred to the trust, her
In June 1991, Hedlund and her husband (now deceased)
transferred all their real property and financial assets to their three
children. On the same day, and in the same document transferring the
property and assets to the children, the children created a family trust
and transferred all the assets to the trust.
The purpose of the trust was to provide for the support and welfare of
Lucille Hedlund and her husband, but only when no other
funds were available and to supplement social security and medical
assistance benefits. The children are to receive remaining assets in the
trust upon their mother’s death.
In Hedlund v. Wisconsin Department of Health
Services, 2010AP3070 (Oct.
13, 2011), the District III Wisconsin Court of Appeals agreed that trust
assets were “available” under the meaning of section 49.454,
despite Hedlund’s argument that she did not own
the assets transferred to the trust.
“[The statute] does not require that the individual have legal
ownership of the assets used to form the trust at the time the trust
is formed,” wrote Judge Margaret Vergeront.
This is so, the appeals court explained, because trust amounts
established at the individual’s request are also included (for
financial eligibility purposes), even if the trust was established by
someone who did not have legal authority to act on behalf of the
“[A] person without the legal authority to act on behalf of the
individual could not establish a trust using the individual’s
assets as a corpus if the individual retained legal ownership of the
trust assets,” the judge wrote. In other words, the children could
not establish the trust with a transfer of assets first.
The administrative law judge ruled that Hedlund requested the
trust be established, because it was solely for her benefit and the
benefit of her husband while alive.
“The ALJ’s inference that Hedlund transferred her assets to her children
for the purpose of establishing the trust for her and her
husband’s benefit is certainly a reasonable inference from the
evidence, if not the only reasonable inference,” the appeals court
Finally, Hedlund argued that the court should determine
whether the trust is available for medical assistance eligibility based
on the statute in effect when the trust was formed, Wis. Stat. section 49.45(23) (1991-92). But the
court refused to rule on that issue because it was not raised before the
administrative law judge. It was first raised in a reply brief before
the circuit court.