Cohen v. Commissioner

Facts

In several consolidated cases the grantors of irrevocable trusts, of which the grantors or their spouse were beneficiary and to which the grantor had transferred substantial assets, claimed eligibility for Medicaid assistance because the trust denies the trustee any discretion to make sums available to the grantor if such available would render the grantor ineligible for public assistance. The grantors of these trusts argue that since no funds are available by the terms of the trusts if such would render them ineligible that the grantors’ eligibility is assured. The state argues that this frustrates the stated purpose of Congress in enacting the MQT statute. The MQT statute provides that if there are circumstances under which payment from the trust could be made to or for the benefit of the individual then such payment shall be considered as a resource available to the individual. The trial court held against the beneficiaries of the trusts that under the statute if there was even a small amount of discretion regarding the availability of funds then whatever the beneficiary could most receive in the full exercise of that discretion was the amount to be counted as available for Medicaid eligibility. The beneficiaries now appeal.