Margaret E. Masterson, Appellant, v. Department of Social Services, Division of Family Services, Respondent.

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Opinion Missouri Court of Appeals Eastern District Case Style: Margaret E. Masterson, Appellant, v. Department of Social Services, Division of Family Services, Respondent. Case Number: 72204 Handdown Date: 10/07/1997 Appeal From: Circuit Court of the City of St. Louis, Hon. Joan M. Burger Counsel for Appellant: Clifford Christy Barton Counsel for Respondent: Jeff Childress Opinion Summary: Margaret E. Masterson ("claimant") appeals the judgment of the Circuit Court of the City of St. Louis affirming the determination by the Missouri Division of Family Services ("DFS") that she was not entitled to medical assistance and supplemental nursing care under RSMo Chapter 208 because she had resources available in excess of $1,000. Claimant alleges the above determination was based on the erroneous finding that the Margaret E. Masterson Revocable Trust ("Masterson Trust"), of which she is a beneficiary, was a resource available to claimant and worth approximately $140,000. AFFIRMED. Division One holds: The trial court did not err in affirming DFS's determination that the Masterson Trust was a resource available to claimant and therefore that claimant was not entitled to Medicaid benefits under RSMo Chapter 208. Citation: Opinion Author: Gary M. Gaertner, Judge Opinion Vote: AFFIRMED. Grimm, P.J., and Pudlowski, J., concur. Opinion: Margaret E. Masterson ("claimant") appeals the judgment of the Circuit Court of the City of St. Louis affirming the

determination by the Missouri Division of Family Services ("DFS") that she was not entitled to medical assistance and supplemental nursing care under RSMo Chapter 208.(FN1) We affirm. The Margaret E. Masterson Revocable Trust ("Masterson Trust") agreement was made on October 10, 1991, "by and between Henry R. Stillman . . . , as Grantor, and Henry R. Stillman, as Trustee[.]"(FN2) The trust document further stated "Grantor desires to create a trust for the primary benefit of his sister, [claimant]." On October 16, 1991, claimant executed an "assignment" pursuant to which she transferred a single premium annuity, her household furniture, furnishings, and other household personal property, and investment contracts and securities held in her accounts with Stifel, Nicolaus & Company and Paine Webber, Inc. to Henry Stillman, as trustee of the Masterson Trust. The Masterson Trust was thereafter funded with these assets and was worth approximately $140,000. Also on October 16, 1991, claimant executed a durable power of attorney appointing Henry Stillman as her attorney-in-fact. For purposes of this appeal, the significant portions of the Masterson Trust agreement are as follows. Article Six provided the trust could be "revoked, amended, modified or restated at any time by the Trustee without notice to or the consent of any beneficiary hereunder." Article Ten, Paragraph A granted the trustee the following authority: With respect to the income of the trust, the Trustee may, in his sole and absolute discretion, either (1) accumulate all or any part of the net income of the trust each year . . . or (2) distribute, annually or more frequently, all or any part of the net income of the trust to claimant, during her lifetime . . . provided trustee first obtain written consent to such distribution(s) from Henry R. Stillman and Florence E. Stillman. Article Ten, Paragraph A further provided that: Neither the principal nor income of this trust shall be regarded as available resources of Margaret E. Masterson which could disqualify her from eligibility for benefits available under Medicaid or any other governmental program. It is the grantor's intent that the principal and income of this trust should be available, in the Trustee's sole and absolute discretion, for the limited purpose of supplementing benefits provided by available governmental programs. Article Ten, Paragraph B stated that upon claimant's death, "the trustee shall pay over and distribute the rest of the trust estate, or any part thereof, to or among one or more persons, . . . or any other entities that Margaret Masterson shall appoint. . . ." If claimant did not exercise her special power of appointment, the trustee was to pay over and distribute the rest of the estate to Henry Stillman and Florence Stillman, or their survivors. At some point prior to November 1994, claimant became a resident of the Carrie Geitner Home, a residential care facility. On November 7, 1994, Henry Stillman, on behalf of claimant, applied to DFS for medical assistance and supplemental nursing care. The eligibility statement, submitted with the application, showed claimant's assets included a Paine Webber checking account, no value indicated; a savings account at Boatmen's Bank with a balance more than $500; and, annuities, investment contracts, and securities valued at approximately $50,000 which had been transferred to

Henry Stillman, as trustee of the Masterson Trust, on October 16, 1991. As of the date of the application, the Masterson Trust was worth approximately $142,476.56. DFS submitted a request for interpretation of the Masterson Trust to its Program and Policy Unit and inquired whether the assets in the trust constituted an available resource to claimant. The Unit concluded, based upon the following language in the trust, the trust assets were an available resource. Article Ten, Paragraph A authorized the trustee to distribute to claimant sums he deemed appropriate in his "sole and absolute discretion." The Unit noted the requirement that trustee first obtain written consent from the grantor and his spouse before making distributions, but concluded this provision had no effect as it was contrary to the provision which granted trustee sole and absolute discretion. The Unit opined it was not within the power of the trustee to declare the trust principal and income not be regarded as available for Medicaid purposes, if such requirement were contradictory to federal or state law. Based upon the above, DFS determined the Masterson Trust was an available resource to claimant and was worth approximately $140,000. Pursuant to RSMo section 208.010.2(4), because claimant had income and resources in excess of $1,000, she was not eligible for public assistance. DFS thereafter denied claimant's application.(FN3) Claimant requested an administrative hearing which was held on April 4, 1995. At the hearing, DFS caseworker Karen Cole testified she processed claimant's application, then sent her notice her application had been denied. Henry Stillman testified he was the trustee of the Masterson Trust, a revocable trust which was still in effect and had not been modified since its creation. He estimated the Masterson Trust to be worth $130,000 to $150,000. Following the hearing, the parties were permitted to submit memorandums in support of their respective positions. (FN4) DFS counsel submitted a memorandum of law arguing that the following trust provisions were determinative on the issue of the availability of the trust assets. Article Six provided that the trustee had the power to revoke the trust, at which time the trust estate would be distributed to claimant. Pursuant to Article Ten, claimant retained a power of appointment by which she could appoint alternative beneficiaries. DFS counsel further argued claimant was the "effective grantor" of the Masterson Trust as the entire corpus of the trust consisted of assets originally in claimant's possession.(FN5) DFS counsel argued that while the Masterson Trust was created with Tidrow v. Dir., Mo. State Div. of Fam. Serv., 688 S.W.2d 9 (Mo.App.E.D. 1985), and Missouri Div.of Family Serv.v.Wilson, 849 S.W.2d 104 (Mo.App.W.D. 1993), in mind, it was distinguishable from those trusts by the fact the settlor and beneficiary were the same individuals. DFS counsel concluded that because claimant "is effectively the settlor of the trust, she cannot intend for the trust payments to supplement and not supplant the benefits to which she may be entitled." On August 4, 1995, the Director of the Division of Family Services, Carmen Schultz ("Director"), issued a written

decision affirming the denial of claimant's application finding that for the following reasons, the Masterson Trust was an available resource to claimant. Claimant did not divest herself of the assets of the trust. Claimant merely transferred her assets to Henry Stillman, trustee of the revocable Masterson Trust of which she was the only lifetime beneficiary. As a result, Director opined claimant was "effectively the settlor of the trust." Director concluded the Masterson Trust was "very much like" the trust in Estate of Wallace v. Director, 628 S.W.2d 388 (Mo.App.E.D. 1982), where the trust allowed the entire corpus to be used for claimant who was the only lifetime beneficiary. Director further concluded the Masterson Trust was unlike the trust in Wilson, 849 S.W.2d 104, where the settlor was a different individual than the intended beneficiary of the trust. Director found the Masterson Trust fit the definition of a "Medicaid Qualifying Trust" so constituted an available resource for claimant.(FN6) Claimant appealed Director's decision to the Circuit Court of the City of St. Louis, pursuant to RSMo section 208.110. The circuit court entered an order and judgment on January 15, 1997, affirming Director. The trial court found claimant was effectively the settlor and that the trustee must fulfill his duties as trustee by making the trust assets available to claimant. In its order, the trial court stated: The Court does not believe this type of trust can be likened to the trusts in Wilson and Tidrow, nor should it be approved for the purpose of making a person eligible for supplemental nursing care benefits. There is no public purpose in allowing [claimant] to place her own assets in a trust with the intent to qualify for public assistance benefits. This appeal follows. Claimant's sole point on appeal is her claim the denial of her application was based upon the erroneous determination that the Masterson Trust was an available resource to her. We are not persuaded. The determination whether the Masterson Trust was an available resource to claimant is a question of law. "Our review of a question of law is not in any way restricted or controlled by the agency's decision." Wilson, 849 S.W.2d at 106; Wallace, 628 S.W.2d at 389. Therefore, we exercise de novo review of DFS's determination denying claimant's application for benefits. Resolution of this issue necessitates a brief review of the Medicaid program and its application in Missouri. The purpose of the Medicaid program is to provide medical assistance to needy persons whose income and resources are insufficient to meet the expenses of health care. Couch v. Director, State DFS, 795 S.W.2d 91, 93 (Mo.App.W.D. 1990). The legislature did not intend for Medicaid to replace other forms of assistance available for needy persons. Wilson, 849 S.W.2d at 106. Instead, Medicaid was intended to provide assistance to those individuals whose "available resources" were insufficient to provide for their medical care. 42 U.S.C. section 1396a(a)(17)(B).

Missouri participates in the Medicaid program. The Medicaid Act requires Missouri base its assessment of an applicant's financial need only on resources available to the applicant. 42 U.S.C. section 1396a(a)(17)(B). Accordingly, RSMo section 208.010.1 provides that in determining an applicant's eligibility for public assistance, DFS must take into account the applicant's income and resources from whatever source received.(FN7) Resources are available when they are both actually available and when the applicant has a legal interest in the sum and the legal ability to make such sums available for support and maintenance. Wilson, 849 S.W.2d at 107. Consistent with the intent of the Medicaid Act, Missouri provides that benefits available under these sections shall not replace those provided under federal and state law, or other contractual or legal entitlements, and all persons shall be required to apply for and utilize all benefits available to them. RSMo section 208.153.1. The relationship created by the execution of the Masterson Trust reveals the trust was an available resource to claimant. Henry Stillman was the trustee and claimant the sole lifetime beneficiary. The relationship of trustee and beneficiary is a fiduciary relationship of the highest order. Ramsey v. Boatmen's First Nat. Bank, 914 S.W.2d 384, 387 (Mo.App.W.D. 1996). A trustee has many duties emanating from the fiduciary relationship, the most fundamental being the duty of loyalty. Id. "As part of this duty the trustee is to administer the trust solely in the interest of the beneficiary." Id. An action lies for an exercise of power by the trustee where there has been a breach of trust. See McDaniel v. Frisco Employees' Hospital Association, 510 S.W.2d 752, 757 (Mo.App.E.D. 1974). As stated above, claimant was the sole lifetime beneficiary of the Masterson Trust. The stated purpose of the Masterson Trust was "for the primary benefit" of claimant. The trustee had the "sole and absolute discretion" regarding distributions from the trust to claimant. Based upon the above, the trustee had a legal obligation to make distributions from the trust to pay for claimant's health care needs. To deny claimant funds for her health care needs, with the intent that claimant qualify for Medicaid benefits, would be a breach of trustee's fiduciary duties. Should the trustee breach his fiduciary obligations, claimant would have an action available against him. As the trustee had the legal obligation to make the Masterson Trust available to claimant, the trust constituted an available resource to claimant. See Wilson, 849 S.W.2d at 107. Our decision in Wallace is also instructive here, as the trust analyzed therein is similar to the Masterson Trust. In Wallace, we concluded that a revocable trust, executed by the applicant, funded by the applicant's assets consisting of cash, bonds, certificates, and household goods and worth about $37,000 was a resource available to the applicant. 628 S.W.2d at 390. In reaching this decision, we noted the trust specified the trustee could "in his sole discretion use any part of the principal or income of the trust for support of claimant." Id. The Wallace court concluded, "Such language has

been held to require the trustee to pay the minimum amount which in the opinion of a reasonable man would be necessary for claimant's support. . . ." Id. The Masterson Trust contains language virtually identical to that cited above in Wallace. Moreover, the Masterson Trust is contrary to the stated purpose of the Medicaid Act as well as Missouri public policy. Article Ten, Paragraph A provided that "neither the principal nor income of this trust shall be regarded as available resources of Margaret Masterson which could disqualify her from eligibility for benefits available under Medicaid . . ." This language is contrary to the legislatures intent that Medicaid not replace other benefits provided under other contractual or legal entitlements. See Wilson, 849 S.W.2d at 106. The above cited language is also contrary to public policy in Missouri, as articulated by RSMo section 208.010-2(1), which provides that one may not voluntarily divest himself or herself of assets in order to qualify for public assistance. Claimant's argument that the above intention of the settlor must be effectuated, and her reliance upon Tidrow is misplaced. While in Tidrow we stated "the intention of the settlor is the key to the construction of a trust [,]" we further announced "that the intention will be effectuated unless contrary to law or public policy. . . ." 688 S.W.2d at 12. Based upon the foregoing, we affirm the judgment of the trial court affirming the decision by DFS denying claimant's application for benefits under RSMo Chapter 208. Footnotes: FN1.All statutory references are to RSMo 1994 unless otherwise noted. FN2.Florence E. Stillman, Henry Stillman's wife, was named successor trustee. FN3.Claimant applied for two types of benefits, medical assistance and supplemental nursing benefits. DFS Caseworker Karen Cole testified DFS denied claimant's request for medical assistance because she was not in a Medicaid vendor bed. DFS denied claimant's application for supplemental nursing care benefits because her resources, which included the Masterson Trust, exceeded the maximum allowed. FN4.The record fails to show claimant submitted a memorandum following the hearing. FN5.While the Masterson Trust identified Henry Stillman as the "grantor", the record reflects all assets in the trust were originally owned by and in claimant's possession. By definition, the "grantor" or "settlor" of the trust is "the one who furnishes the consideration (res) for the creation of the trust." Black's Law Dictionary, 956 (6th ed. 1991). FN6.The term "Medicaid Qualifying Trust" is a misnomer; it refers to a trust whose assets are an available resource for a Medicaid applicant. Klipfel v. Dept. of Social Services, 804 S.W.2d 768, 769 (Mo.App.E.D. 1990). FN7.RSMo section 208.010.2(4) specifies that a single person who possesses resources in the sum of $1,000 or more, and a married person who possesses resources in the sum of $2,000 or more, is not eligible for Medicaid benefits. Separate Opinion: None This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.