Special-Needs Trust - Payment of Trustee Fee After Medicaid Beneficiary's Death

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Alabama Medicaid Agency v. Britton, [Ms. 2180926, Mar. 27, 2020] __ So. 3d __ (Ala. Civ. App. 2020). The court (Edwards, J.; Donaldson and Hanson, JJ., concur; Moore, J., concurs in the result; Thompson, P.J., recuses) affirms the Talladega Circuit Court’s order approving the final settlement of a Special Needs Trust following the death of the beneficiary who was a Medicaid recipient.

The Alabama Medicaid agency objected to a $1,500 trustee fee paid from the trust corpus after the beneficiary’s death. Ms. *2. The fee was for services rendered by the trustee prior to the beneficiary’s death. Ms. *4. The Agency argued that

... [B]ecause the December 2018 compensation was for services provided during Cinnamon’s life, 42 U.S.C. § 1396p(d)(4)(A), as interpreted by the Social Security Administration's Program Operations Manual System (“POMS”),[] prohibited any payment of that compensation until after the Agency received full payment for its claim.

Ms. *5.

The court noted that while “POMS is not a statute, nor is POMS a regulation; nevertheless, it has been held that POMS may receive deference under Skidmore v. Swift & Co., 323 U.S. 134 (1944).” Ms. *15. Nonetheless, the court rejected the Agency’s argument that the trustee fee was a prohibited expense because

Comparison of the categories of “[a]llowable administrative expenses” in POMS SI 001120.203E.1. and the “[p]rohibited expenses and payments” in POMS SI 001120.203E.2. supports the trial court’s conclusion, and the Agency’s argument to the contrary is not a reasonable reading of the language ....

Ms. *16-17.

The court also rejected the Agency’s argument that its sovereign immunity precluded payment to the trustee for the fee earned in 2018. The court held that a trustee is not a third-party creditor of a trust and “that a trustee, who is a party to a trust, has a lien for payment of his or her services to a trust….” Ms. *18 n. 8. Because “[t]he Agency’s right to payment from the trust ... arose only upon [the beneficiary’s] death, any lien of the Agency could not have attached before her death….” Ms. *19-20.

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