The South Dakota Supreme Court decision attached actually pre-dates the U.S. Circuit Court of Appeals decision yesterday by a couple of weeks, but comes to the same conclusion, and further adds language that no state may avoid application of the federal rule:

“[¶ 44.] In a CMS memorandum from Gale P. Arden, Director of Disabled and Elderly Health Programs Group at the Center for Medicaid and State Operations in Baltimore, the transfer penalty and pooled trust statutes at issue in this case were clarified. See Memorandum from Gale P. Arden to Jay Gavens, Acting Assoc. Regional Adm’r, Div. of Medicaid and Children’s Health (Apr. 14, 2008). In part, the memorandum stated:

Although a pooled trust may be established for beneficiaries of any age, funds placed in a pooled trust established for an individual age 65 or older may be subject to penalty as a transfer of assets for less than fair market value. When a person places funds in a trust, the person gives up ownership of the funds. Since the individual generally does not receive anything of comparable value in return, placing funds in a trust is usually a transfer for less than fair market value. The statute does provide an exception to imposing a transfer penalty for funds that are placed in a trust established for a disabled individual. However, only trusts established for a disabled individual 64 or younger are exempt from application of the transfer of assets penalty provisions ․

“Id. (emphasis added). CMS issued this memorandum because “it was brought to [its] attention that in many States individuals age 65 or older are establishing pooled trusts, but the States may not be applying the transfer of assets penalty provisions as required by statute.” Id. The memorandum explain[ed] that “[i]f States are allowing individuals age 65 or older to establish pooled trusts without applying the transfer of assets provisions, they are not in compliance with the statute. [F]ederal statute requires the application of the transfer rules in this situation; it [is] not a decision for each State to make.”8 Id.”

The United State Circuit Court of Appeals for the Eight Circuit ruled today in Center v. Olson  that persons age 65 and over cannot place funds in a pooled trust without serving a penalty first.  This decision aligns Medicaid eligibility to the position that the Social Security Administration has taken with regard to maintaining SSI eligibility from the very first rules that come out in 1999.

To read the decision click HERE

Although the decision will impact elders seeking to transfer costs of nursing homes to state Medicaid agencies, it does not prevent disabled persons under age 65 from retaining SSI Disability and SSI-related Medicaid.  SSI payments switch automatically from "disabled" to "elderly" when the disabled individual has his or her 65th birthday.  Assets deposited into an individual or pooled Special Needs Trust prior to age 65 continue to be exempt and will not prevent SSI and SSI-related Medicaid eligibility.

We remain available to attorneys and individuals seeking assistance in attaining SSI and Medicaid eligibility and understanding how this decision may or may not affect them.  David@LillesandLaw.com (727) 330-7895.