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Schell v. Department of Public Welfare

Commonwealth Court of Pennsylvania

December 4, 2013

Dorothy Schell, Petitioner
v.
Department of Public Welfare, Respondent

Submitted: September 6, 2013

BEFORE: HONORABLE DAN PELLEGRINI, President Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge

OPINION

PATRICIA A. McCULLOUGH, Judge

This case presents an issue of first impression as to whether a beneficiary's renunciation of her right to the remaining principal in a terminated residual trust, originally created by will, constitutes a transfer of assets for less than fair consideration thereby affecting her eligibility for Medical Assistance - Long Term Care (MA-LTC) benefits. Specifically, Dorothy Schell (Petitioner) petitions for review of the January 17, 2013 final administrative action order of the Department of Public Welfare (DPW), Bureau of Hearings and Appeals (BHA), affirming the January 11, 2013 adjudication and order of an administrative law judge (ALJ) recommending the denial of Petitioner's appeal from the determination of the Northumberland County Assistance Office (CAO) that she was ineligible for MA-LTC benefits for the period from January 28, 2011, through August 16, 2012. We affirm.

Facts and Procedural History

Petitioner's husband, Weston F. Schell (Decedent), died on August 28, 2001. Pursuant to the terms of Decedent's will, a trust was established on September 13, 2001, for the benefit of Petitioner.[1] Decedent named PNC Bank as the trustee. The terms of this trust, referred to as the Residuary Trust, were set forth in Item Three (b)(1) of Decedent's will, and directed the trustee as follows:

The trustee shall set apart all property not subject to the provisions of subparagraph (a) above as a separate trust, subject to the following terms and conditions:
(1) until the death of my common law wife, DOROTHY M. SCHELL, the trustee shall pay or apply the net income of this trust (herein referred to as the residuary trust) to or for the benefit of my said wife not less often than quarter-annually and the trustee shall also pay or apply so much of the principal of this trust to or for the benefit of my said wife and any or all of the children born to or adopted by my said wife and myself (hereinafter referred to as my children) or their issue as the trustee in its sole and absolute discretion shall deem necessary and proper for his, her or their support, maintenance, health and education (including college and professional education), and taking into consideration a beneficiary's other resources including the availability of present or future government benefits (it should be noted that my said wife is the primary beneficiary of this trust, and her needs should be adequately provided for before any distributions are made to my children, namely CYNTHIA and WILLIAM).

(R.R. at 54a-55a) (emphasis added).

Additionally, Item Four of Decedent's will provided that "[i]f the trustee, in its sole discretion, determines that it is impractical to administer any fund under any trust created hereby, the trustee without further responsibility, may pay the fund to the person then eligible to receive income therefrom (or, in the case of any trust where there is more than one such person, to such of them and in such amounts and proportions as the trustee may think appropriate)." (R.R. at 56a) (emphasis added).

The trustee subsequently determined that it was impractical to continue to administer the trust because the primary asset of the trust was "improved real estate held by the decedent at the time of his death" and "[t]he beneficiaries have requested that the Trustee not sell the property." (R.R. at 67a.) Pursuant to these terms, the trustee exercised its discretion and decided to terminate the trust. The trust was dissolved on December 19, 2009. The total sum of the dissolved trust was $302, 463.52. Pursuant to Item Four of Decedent's will, the sole person "eligible to receive income" from the trust, i.e., Petitioner, was entitled to any remaining funds in the trust. In conjunction with the termination of the trust by the trustee, Petitioner renounced her rights to any income or principal from the trust pursuant to a form entitled "Renunciation, Release, Waiver of Accounting and Indemnification Agreement." (R.R. at 66a-71a.) The trustee thereafter transferred the remaining principal and funds in equal shares to Petitioner's son and daughter. (ALJ's Adjudication, Findings of Fact Nos. 3-9.)

Petitioner was later admitted to Mountain View Nursing Center (Provider) on January 28, 2011. On May 10, 2011, Provider applied for MA-LTC benefits on behalf of Petitioner effective January 28, 2011. Upon review, the CAO determined that Petitioner was eligible for benefits effective January 28, 2011, but that she had transferred a total of $302, 463.52 in assets for less than fair consideration. DPW's regulations provide, in relevant part, that for all applications filed on or after March 3, 2007, if assets are disposed of for less than fair market value on or after the look-back date (for trusts, a period of 60 months from the date an applicant is both institutionalized and has applied for MA benefits), the individual will be ineligible for a period of time calculated based on the amount of assets transferred and the cost of private payment for nursing facility care. 55 Pa. Code §§178.104, 178.104a.

Hence, on March 30, 2012, the CAO issued Petitioner a notice of ineligibility for the period from January 28, 2011, through March 6, 2014. Petitioner appealed and also requested an undue hardship waiver. The waiver was granted because Petitioner's daughter was disabled since 2002 under criteria established by the Social Security Administration. The CAO later determined that only $151, 231.76 in assets was transferred without fair consideration, thereby reducing Petitioner's ineligibility to the period from January 28, 2011, through August 16, 2012. By notice dated November 29, 2012, the CAO advised Petitioner that she was eligible for MA-LTC benefits effective August 17, 2012. (ALJ's Adjudication, Findings of Fact Nos. 1, 10-22.)

That same day, the ALJ assigned to hear Petitioner's appeal conducted a hearing. Petitioner presented several exhibits, including copies of Decedent's will and Petitioner's renunciation of the trust funds. Petitioner did not present any witnesses. Deborah Weaver (Weaver), an income maintenance caseworker, testified on behalf of DPW. Weaver testified regarding the application submitted by Provider on behalf of Petitioner, CAO's determination, and the subsequent partial grant of an undue hardship waiver. (R.R. at 174a-77a.) Weaver explained that the assets totaling $302, 463.52 represented the value of the home previously owned by Decedent, $265, 000.00, plus the remaining funds in the trust, $37, 463.52. (R.R. at 179a-80a.) Weaver noted that ownership of the home was transferred to Decedent's children in December 2009 and the remaining trust funds were distributed to Decedent's children in April and May 2010. (R.R. at 179a, ...


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