Lang v. Com., Dept. of Public Welfare
| Decision Date | 13 July 1987 |
| Citation | 528 A.2d 1335,515 Pa. 428 |
| Parties | , Medicare & Medicaid Guide P 36,694 Elizabeth Ellen LANG, Appellant, v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF PUBLIC WELFARE, Appellee. 73 W.D. 1986 |
| Court | Pennsylvania Supreme Court |
Foster S. Goldman, Jr., Vernadean S. Passodelis, Berkman Ruslander Pohl, Lieber & Engel, Pittsburgh, for appellant.
Lawrence A. Frolik, University of Pittsburgh, School of Law, Pittsburgh, amicus curiae for Pa. Protection & Advocacy, Inc.
Jon Pushinsky, Pushinsky & Rosenfield, Pittsburgh, for Assoc. for Retarded Citizens, etc.
Jean E. Graybill, Asst. Counsel, Dept. of Welfare, Harrisburg, for appellee.
Before ROBERT, C.J., and NIX, LARSEN, FLAHERTY, McDERMOTT, HUTCHINSON, ZAPPALA and PAPADAKOS, JJ.
Appellant is trustee of a discretionary testamentary trust her father created for the benefit of all his children. She appeals by allowance Commonwealth Court's order upholding DPW's determination that the trust's income and assets are an "available resource" of her mentally disabled brother which must be applied against his own statutory liability for care before public funds can be provided, 96 Pa.Commonwealth Ct. 118, 506 A.2d 530.
In reaching this result both DPW and Commonwealth Court necessarily assumed, but did not analyze, the propriety of withholding public moneys from the beneficiary of a discretionary support trust. Accordingly, the trustee was directed to pay the state's charges for her brother's care until the trust corpus and income were, for all practical purposes, exhausted. If we accept the assumption that testator's primary intent of providing necessary support for his mentally disabled son could not be carried out without imposing a duty on the trustee to utilize trust corpus and income to discharge the institutionalized beneficiary's statutory liability to the state for his own care, Commonwealth Court would be correct.
That assumption is incorrect. Neither the federal Medicaid statute, Title XIX of the Social Security Act, 42 U.S.C. § 1396 (1982), nor the regulations adopted under it, infra note 3, require the states to withhold public funds from mentally disabled persons because a trustee is subject to an enforceable legal duty to provide support when needed. Absent such a federal requirement, availability of public funds for the care of mentally disabled persons is governed by the state's public policy with respect to apportioning the cost of caring for the mentally disabled, as that policy is expressed in its own laws. See Cannuni v. Schweiker, 740 F.2d 260, 264 (3d Cir.1984). We hold the public policy of this Commonwealth, as expressed in the Mental Health and Mental Retardation Act of 1966 (Mental Health Act), Act of October 20, 1966, Spec.Sess. No. 3, P.L. 96, as amended, 50 P.S. § 4502, (Supp.1987) and otherwise, is in conflict with DPW's conclusion that the assets and income of discretionary support trusts are "available resources" of adult mentally disabled beneficiaries who require institutional care. Accordingly, we reverse.
Although Commonwealth Court's explicit holding is that William is not eligible for Medical Assistance, a closer examination of its opinion and DPW's Adjudication reveals that there are two questions before this Court: whether William is liable for the costs of his care at a state mental retardation center and whether he is eligible for Medical Assistance. 1 The first question requires us to determine whether William has income or assets restricted to his use. 2 The second requires us to determine whether he has any resources he could use for his support and maintenance. 3
Because William has no income or assets other than what might be available to him under the trust, the underlying question presented by this appeal is whether testator created a duty in trustee, independent of any statutory duty, to provide for William's basic support. If so, William arguably could compel distributions from the trust for his basic support and it thus would be considered available for his use. See Walter's Case, 278 Pa. 421, 123 A. 408 (1924) (). See also 2 A. Scott, The Law of Trusts, § 128.4 at 1020-22 and § 157.2 at 1216-20 (3d ed. 1967) (when a support standard is expressed in a trust instrument, the extent of the interest of the beneficiary depends upon the settlor's intent, and the court will not interfere with the trustee's discretion as long as his judgment is reasonable). If, however, testator gave trustee discretion to consider funding otherwise available from the Commonwealth in determining whether to distribute trust income and principal (or either) for William's support, the trust (or its income or principal) would not be available for William's use and could not be considered his asset or resource. See 2 A. Scott, supra, § 128.3 at 1016-18 (). See also Abravanel, Discretionary Support Trusts, 68 Iowa L.Rev. 273, 289 (1983) ().
William LeViseur has lived in state institutions since he was diagnosed in 1946 at the age of thirteen as having "Idiopathic Epilepsy" and "Mental Deficiency." For the next thirty years, William's father, Edward J. LeViseur, Sr., paid the full per diem costs of his support at these institutions. In January, 1967, Mr. LeViseur and the Commonwealth executed a Maintenance Agreement for Part Pay Patients under which he paid $200.00 per month for William's care at the Cresson State School and Hospital (Cresson). 4
Mr. LeViseur executed his will on May 21, 1968, and died on October 7, 1968. Article FOURTH of the will placed all of his stock in publicly held companies in a trust. Their total value was $118,360.63. This was forty-nine percent of the gross value of Mr. LeViseur's estate, and just short of sixty-seven percent of its net value after death taxes and expenses.
The Orphans' Court of Allegheny County adjudicated William an incompetent in December, 1968, and appointed The Union National Bank of Pittsburgh (UNB) guardian of his estate. Until 1970, the trustee distributed income of the trust to UNB to meet William's expenses in excess of his Social Security and Veteran's benefits. By agreement with the Department of Revenue, the trustee paid all of the net income of the trust directly to Cresson from late 1970 through September, 1974.
In October, 1974, the General Assembly amended Section 502 of the Mental Health Act to provide that the liability of any person who had a legal duty to support a patient or resident receiving services under the act would cease when he attained the age of eighteen, or, if he were already eighteen, upon the effective date of the Act, October 12, 1974. Mental Health Act, supra, § 502, 50 P.S. § 4502. In December, 1974, the trustee asked Cresson's Revenue Agent whether this amendment relieved the trust of any further legal duty to support William, who was then over the age of eighteen and receiving services at Cresson under the Mental Health Act. DPW's General Counsel responded that there was no statutory duty to support William and the trust could not be billed for his maintenance.
DPW did not bill the trust for the next nine years. During this time, the trustee in her discretion provided clothing, gifts and pocket money for William from the trust income.
In January, 1984, DPW informed the Western Center, where William then resided, that he was not eligible for Medical Assistance because both income and principal from the trust were resources available to William. 5 It instructed Western Center to bill the trustee for the per diem costs of William's care until the income of the trust was exhausted and the principal was reduced to $1,500. 6
Despite the assurance received earlier from the Department's top legal officer, the trustee received a Notice of Assessment in March 1984 purporting to place liability for the cost of William's care on the trust. The trustee appealed to DPW's Office of Hearings and Appeals. It upheld the assessment. Commonwealth Court affirmed DPW's decision, holding the testator intended the trust to pay for such support. We granted the trustee leave to appeal in order to consider the important issues raised by the Commonwealth's decision to treat the income and assets in this trust as resources available to one of its beneficiaries.
The terms of the trust pertinent to the question before us are set forth in Article FOURTH of testator's will:
A. The Trustee shall hold, manage, invest and reinvest said Trust estate and shall distribute the net income (hereinafter called 'Income') and principal from time to time as follows:
(1) During the lifetime of my son, WILLIAM GEORGE LeVISEUR, if he survives me, the Trustee shall pay the Income periodically to or for the support, maintenance, welfare and benefit of my said son or may, in the Trustee's discretion, add part or all of the Income to principal, to be invested as such.
(2) The Trustee may distribute such part of the Income not necessary for the support of my son, in equal shares to my three children, MARGARET MARY SMITH, EDWARD JOHN LeVISEUR, JR. and ELIZABETH ELLEN LANG, or to the survivor or survivors of them, provided however, should any of my said children predecease me, or surviving me die prior to the termination of the Trust Estate leaving issue, such deceased child's then living issue shall take the deceased parent's share, per stirpes.
(3) The Trustee shall use so much of the principal as may...
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