Geyen: Minnesota Law Regarding Irrevocable Trust (Minn. Stat. 501C.1206) Preempted by Federal Statute

Geyen v. Commissioner, Minnesota Dept. of Human Servs., 2021 WL 2908418 (Minn. App. July 12, 2021).

When Dorothy Geyen applied for Medicaid (Medical Assistance or “MA”) benefits in 2019, her application was denied because of two irrevocable trusts that she had created 8 years prior. The Minnesota Department of Human Services argued that the trusts were not irrevocable because the assets could be used to benefit Geyen and because Minn. Stat. § 501C.1206 provides that, if an applicant for MA has created an irrevocable trust with the applicant's assets or income, the trust is treated as revocable for purposes of any MA eligibility determination.

The appellate court found that, because Minn. Stat. § 501C.1206 was more restrictive than the federal Medicaid statute, the provisions of that statute which treat irrevocable trusts as available assets are preempted by the federal exemption for irrevocable trusts. As to whether the trusts met the federal definition of irrevocable, Geyen's estate pointed out that the trusts clearly indicated Geyen's intent for the trust assets to be unavailable to her and to specific provisions in the trusts banning loans or gifts to Geyen. The Department argued that there were no provisions in the trusts specifically banning any payments to Geyen.

The appellate court, reviewing each trust, found that the provisions restricting the use of the funds were sufficient to treat the trust as irrevocable. Because Geyen died while the case was pending, the Department argued that the case was moot and that, because no one had been substituted for Geyen, there was no standing. The appellate court rejected both arguments; Geyen's family members, as beneficiaries the trusts, sustained damages when funds had to be removed from the trust to pay for Geyen's care after Medicaid was denied. The court also noted that the issues in this case were of significant public importance, given the potential implications on estate planning and on MA expenditures.

Read the Geyen decision here.