When Lyman Corcoran wrote his will in 1987, he may not have known that his daughter Pamela would be dependent on public benefits after his death. He clearly knew she had problems, however; he left her share of his estate in a trust, and gave the trustee complete discretion over whether to make any distributions to her, or to pay for anything on her behalf.

Mr. Corcoran died in 1989, and his estate was settled and the trust for Pamela Corcoran funded in 1992. For nearly a decade the trust worked as we can imagine Mr. Corcoran intended; while only modest expenditures were made from the trust (except for significant tax payments), Pamela Corcoran continued to receive both Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) payments. Although her SSI checks were only $19 per month, that meant she qualified for Medicaid benefits in her home state of Connecticut.

Then, in 2001, the Connecticut Medicaid agency looked at Mr. Corcoran’s trust. The agency noticed that the trustee was directed to use the money for Pamela Corcoran’s "health, support in reasonable comfort, best interests and welfare." To the agency, that meant the trust should be treated as a resource available to Ms. Corcoran.

Because the trust was set up for her "support," reasoned the Medicaid agency, Ms. Corcoran would be able to compel the trustees to pay for her room and board, clothing and personal needs. Even if she did not exercise that authority the mere fact that she might would make the trust assets "available" for Medicaid calculations, and end her eligibility—even though she continued to receive a small SSI check each month.

In order to forestall the Medicaid agency’s determination Ms. Corcoran’s trustees asked the state probate court to categorize the trust as a "special needs" trust. The probate court obliged after determining that Ms. Corcoran’s creditors could not reach trust assets.

That did not satisfy the Medicaid agency, which continued to insist that the trust was a "support" trust and an available resource. The Connecticut Supreme Court ultimately agreed with the agency, and authorized Ms. Corcoran’s oss of Medicaid benefits based on the existence of her father’s trust. Corcoran v. Department of Social Services, November 9, 2004.

Of course, Mr. Corcoran and his lawyers may not have even been able to anticipate the current circumstances when they originally prepared the trust in 1987. More careful drafting then might have preserved Ms. Corcoran’s benefits, however. Complicated, and changing, eligibility rules make it imperative that parents of children with disabilities get expert advice when planning their estates.

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