Vincent ex rel. Reed v. Dept. Human Serv.

• Decision Date: 18 June 2009
• Docket Number: No. 3-08-0096.,3-08-0096.
• Parties: Mabel VINCENT, a Disabled Person, by Janice REED, her Daughter and Next Friend, Plaintiff-Appellee, v. THE DEPARTMENT OF HUMAN SERVICES, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

910 N.E.2d 723

392 Ill. App. 3d 88

Mabel VINCENT, a Disabled Person, by Janice REED, her Daughter and Next Friend, Plaintiff-Appellee, v. THE DEPARTMENT OF HUMAN SERVICES, Defendant-Appellant.

No. 3-08-0096.

Appellate Court of Illinois, Third District.

June 18, 2009.

Lisa Madigan, Attorney Gen., Rachel Murphy (argued), Asst. Atty. Gen., Michael A. Scodro, Solicitor Gen., Chicago, IL, for Appellant.

Virgil A. Thurman (argued), Geneseo, IL, for Appellee.

Justice HOLDRIDGE delivered the opinion of the court:

This action was brought by the plaintiff, Janice Reed, as next friend of Mabel Vincent, her mother, against the Illinois Department of Human Services (IDHS or Department). The Department determined that Mabel Vincent had "available assets" of $138,119, as defined by the Social Security Act, also popularly known as the Medicaid Act (the Medicaid Act) (42 U.S.C. § 1396 et seq. (2006)). These funds were held in the Fred and Mabel Vincent Trust established by Mabel and her late husband in 1991. The Department determined that Mabel was required to "spend down" this amount before Medicaid would cover the medical expenses associated with her long-term nursing home care. The plaintiff appealed the Department's decision to the circuit court of Henry County, which reversed the Department's decision. The Department then sought review in this court. For the following reasons, we reverse the judgment of the circuit court and affirm the decision of the Department.

FACTS

Mabel Vincent was born February 9, 1910. On August 29, 1991, she and her husband, Fred Vincent, placed assets worth $333,391 in an irrevocable trust, naming themselves as beneficiaries and their daughter, Janice, as trustee. The stated purpose of the trust was "to provide extra funds necessary for [Fred and Mabel's] happiness over and above the essential, primary support services such as * * * medical care and support which [they] expect will be provided to [them] through federal, state and local governmental sources." To that end, the trust provided that for purposes of determining Fred's or Mabel's eligibility for public aid, "no part of the principal or income of this Trust shall be considered owned by [him or her]." Rather, "Trust assets are to be used only when governmental aid is not available."

The trust was "intended to be a discretionary trust," and granted the trustee the "absolute discretion to determine if and when the [beneficiaries] need extra funds to supplement existing public or private funds and services" and to "pay out or withhold payment of Trust income or principal as she evaluates [their] needs." However, the trust provided that the trustee "must never use any income or principal * * * to provide any goods or services for [Mabel and Fred] if [either] qualifies to receive that benefit or service through any other public assistance programs." The trust provided that if the trustee, in her exclusive discretion, determined that continued distributions would result in reduced public assistance, she had the power to terminate such distributions. Upon termination of the trust, the remaining trust assets are to be distributed to Janice and her brother.

Over the years, Janice distributed approximately $2,500 per month from the trust for Mabel's and Fred's care. Upon Fred's death in 1992, Mabel became the sole beneficiary of the trust. Janice testified at hearing that she provided care to Mabel in Mabel's home from 2000 to 2005. However, there was no evidence presented that Janice and Mabel entered into any agreement providing for Janice to be paid for her care of Mabel. On May 4, 2005, Mabel suffered a stroke and entered Hillcrest Nursing Home in Henry County, Illinois.

On June 16, 2005, Mabel, acting through Janice, applied for public aid (Medicaid) with the Department. At that time, the trust had a value of $138,119. The Department included the value of the trust in assessing Mabel's available assets and calculated that she had to "spend down" $136,119 before she would need public assistance. The Department notified Mabel of the decision that she was eligible for public aid only after she had spent $136,119 on her own care and that she had 60 days to request a formal hearing.

Mabel, through Janice acting as her power of attorney, requested a hearing. Prior to hearing, Mabel received a written statement of facts from the Department supporting its decision. Attached to the statement were copies of relevant Department regulations, including section 120.346 (89 Ill. Adm.Code § 120.346, amended at 19 Ill. Reg. 2905, eff. February 27, 1995), which applied to trusts established prior to August 11, 1993. That section provided that when an applicant's assets are held in a self-settled, discretionary trust ("Medicaid Qualifying Trust") "[t]he maximum amount of payment permitted under the terms of [the] Medicaid qualifying trust * * * shall be considered in determining eligibility for medical assistance, whether or not the maximum amount was distributed to the individual." 89 Ill. Adm.Code § 120.346(b), amended at 19 Ill. Reg.2095, eff. February 27, 1995.

The day before the hearing, Mabel's counsel faxed to the local Department office an invoice that he had prepared on Janice's behalf billing Mabel $141,960 for care received from Janice from 2000 to 2005. Counsel suggested that the invoice should be factored into the determination of Mabel's available assets.

The Department conducted the hearing on November 8, 2005. Mabel appeared through Janice and her counsel. The Department's local representative testified as to the value of trust and the Department's decision that the assets in the trust were available to Mabel, as previously outlined in the Department's statement of facts. The Department representative also addressed the invoice for Janice's services stating that any payment to Janice would not affect Mabel's eligibility because there was no preexisting written agreement between Mabel and Janice for such payment. Absent such evidence that Mabel intended to pay Janice at the time the services were rendered, the Department would consider the services as having been rendered without expectation of payment.

Mabel's counsel argued that the trust should not be deemed available to Mabel because the trust language prohibited their consideration for purposes of determining her eligibility for public aid and forbade the trustee from making distributions that would render Mabel ineligible for public aid. As an alternative, counsel argued again that the trust should be depleted by the $141,960 that Janice was now billing her mother for the care she provided to her from 2000 to 2005.

On April 7, 2006, the Department issued a final administrative decision affirming the local office's decision to approve Mabel's application for public aid contingent on spending down the trust assets for her care. The Department upheld the local office's determination that the trust assets were available for Mabel's care, regardless of the language of the trust. It further found Janice's claim for five years of retroactive payment for her caring for her mother to be "without merit."

On May 9, 2006, Mabel, through Janice as her next friend, filed a complaint for administrative review in the circuit court seeking reversal of the Department's decision regarding both the availability of the trust assets for Mabel's care and Janice's claim for payments for past provided services. Mabel died on July 22, 2006. No motion for substitution of proper party was made.

On August 8, 2007, the circuit court issued an order affirming the Department's decision that the trust was an available asset for Mabel's care but reversing its decision with respect to payment for Janice's services. The court reasoned that, although Mabel never agreed to pay Janice, Janice deserved payment under an equitable theory of quantum meruit. The court ordered the Department to "conform its ruling" to reflect payment from the trust to Janice. Both parties filed motions for reconsideration, and the court heard arguments on December 18, 2007.

On January 9, 2008, the court issued a final order reversing the Department's decision that the trust was an available asset. The court determined that the trust was a "Medicaid Qualifying Trust" under section 120.346 of the Department's regulations and acknowledged that the Department could consider "[t]he maximum amount of payment permitted under the terms [of the trust] * * * in determining eligibility for medical assistance, whether or not the maximum amount was distributed to the individual." However, the court reasoned that, "pursuant to the specific language of the trust at issue, no amount is payable to the beneficiary if doing so would affect her eligibility for public assistance" and therefore, "the principal and interest of the trust is exempt and should not be considered in the determination of eligibility." The court also reaffirmed its prior ruling with respect to Janice's entitlement to payment for her services.

On February 11, 2008, the Department filed its notice of appeal to this court.

On January 21, 2009, Janet filed a motion with the circuit court to substitute herself in her capacity as trustee of the Vincent Trust in the place of Mabel Vincent as plaintiff. The circuit court granted the motion that same day. The record contains no indication that the motion or the order were served upon the Department nor does the record contain any notification to the Department.

The Department was first made aware of Mabel's death at oral argument before this court on January 26, 2009.¹

ANALYSIS

On appeal, the Department argues that the trial court erred, both in finding that trust assets were not available to Mabel for purposes of determining her eligibility for Medicaid and in reversing the Department's factual determination that the plaintiff had failed to establish the existence of a contract for Mabel to pay Janet for care.

When reviewing...