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