COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 68366 CECILIA MILLER, : : Plaintiff-Appellant : : JOURNAL ENTRY vs. : and : OPINION OHIO DEPARTMENT OF HUMAN : SERVICES, : : Defendant-Appellee : DATE OF ANNOUNCEMENT OF DECISION : AUGUST 3, 1995 CHARACTER OF PROCEEDING : Civil appeal from : Common Pleas Court : Case No. 268315 JUDGMENT : AFFIRMED. DATE OF JOURNALIZATION : _______________________ APPEARANCES: For plaintiff-appellant: Sheldon R. Jaffery 1020 Leader Building 526 Superior Avenue, East Cleveland, Ohio 44114 For defendant-appellee: Margaret E. Viancourt Assistant Attorney General Health & Human Services Section 30 East Broad Street, 26th Floor Columbus, Ohio 43215-3428 -2- NAHRA, J.: Appellant, Cecilia Miller, is appealing the order of the trial court affirming the administrative appeal decision of the Ohio Department of Human Services, which held appellant was ineligible for medicaid benefits. For the following reasons, we affirm. On September 30, 1986, appellant established an irrevocable inter vivos trust containing approximately $111,214.29. Pursuant to the trust, appellant would receive all the income from the trust during her lifetime. Upon appellant's death, the remaining assets would pass under her will. The trustee, Sheldon R. Jaffery, had the right to distribute the principal to the appellant as determined in his sole discretion. Appellant reserved a right to withdraw $5,000 per year from principal, upon written notice to the trustee, to be exercised only by the appellant personally. A spendthrift clause stated: The Trustee shall not be liable to any creditor of the Grantor of this Trust with respect to any debt or claim of any kind, nature or description whatsoever and shall not be liable for the payment of any income or principal to any such creditor or claimant or lien upon any income or principal due the Grantor * * * . The trustee has applied trust principal to pay various expenses of appellant, including utilities, meals on wheels, insurance and nursing home day care. In 1990, appellant was diagnosed with Alzheimer's disease. In 1993, she entered the Menorah Park Center for the Aging, a nursing home. As part of the admission agreement with the home, appellant agreed to pay all income from the trust to the home and not to -3- invade trust principal in any way that would diminish the income payable to the home. Appellant further agreed to apply for medicaid. Appellant applied for medicaid on May 27, 1993. Her application was denied because the irrevocable trust assets exceeded the medicaid resource limitation of $1,500. Appellant's sole assignment of error states: THE CUYAHOGA COUNTY COURT OF COMMON PLEAS ERRED IN DISMISSING APPELLANT'S APPEAL WITH PREJUDICE FOR THE REASON THAT THE ADMINISTRATIVE APPEAL DECISION OF THE OHIO DEPARTMENT OF HUMAN SERVICES IS NOT SUPPORTED BY RELIABLE, PROBATIVE AND SUBSTANTIAL EVIDENCE AND IS NOT IN ACCORDANCE WITH LAW. The Ohio Department of Human Services found that appellant's available resources exceeded $1,500, so she was not eligible for medicaid. See Ohio Adm. Code 5101:1-39-05(A)(4), (5), (7). ODHS held that the trust in question was a medicaid qualifying trust, and the entire trust assets were available to appellant. Ohio Adm. Code 5101:1-39-271(G), (H). Appellant argues Ohio Adm. Code 5101:1-39-271 as it existed on the date of creation of the trust did not require medicaid qualifying trusts be deemed available. She also asserts the spendthrift provision of the trust precludes the assets from being available to distribute to the nursing home. Appellant argues her agreement with the nursing home precludes invasion of the principal. She also contends her heirs have a vested interest in the trust assets. -4- The trust in question clearly fits the definition of a medicaid qualifying trust, under both Ohio and federal law. A medicaid qualifying trust is: * * * a trust, or similar legal device, established (other than by will) by an individual (or an individual's spouse) under which the individual may be the beneficiary of all or part of the payments from the trust and the distribution of such payments is determined by one or more trustees who are permitted to exercise any discretion with respect to the distribution to the individual. Section 1396(a)(K)(2), Title 42, U.S. Code, see Ohio Adm. Code 5101:1-39-271(G). The amount which is available from a medicaid qualifying trust is the maximum amount the trustee could disburse to the applicant if the trustee exercised his full discretion. Ohio Adm. Code 5101:1-39-271(H), Section 1396(a)(K)(1), Title 42, U.S. Code. Here, the trustee had the discretion to expend the entire trust fund, so the entire fund was found available. When the trust was created, Ohio Adm. Code 5101:1-39-271 did not state that medicaid qualifying trust assets would be deemed available. See 1985-86 Ohio Monthly Record 542(E). However, the federal statute, Section 1396(a)(K), Title 42, U.S. Code was in effect on April 7, 1986, before the trust was created. Ohio Administrative Code provisions regarding the state medicaid program must comply with any mandatory provisions of Section 1396(a), Title 42, U.S. Code. Ohio Hospital Assoc. v. Ohio Dept. of Human Services (1991), 62 Ohio St.3d 97. Section 1396(a)(K) is mandatory. See Section 1396(a)(A)(17)(B). Additionally, R.C. 5111.012 requires that the state medicaid program conform to the -5- federal Social Security Act. See Ohio Hospital Assoc., supra. Thus, federal law existing at the time of the trust's creation deemed the trust assets available. Additionally, the medicaid eligibility rules on the date of application for benefits applied, not the rules as of the date of creation of the trust. A former statute only applies if rights or obligations have been acquired under the former statute. Coca- Cola Bottling Corp. v. Lindley (1978), 54 Ohio St.2d 1, see R.C. 1.58. Here, appellant did not acquire any rights to medicaid benefits at the time of the creation of the trust. Next, we must address the issue of whether the spendthrift trust provision precludes availability. Appellant argues the trustee cannot distribute the trust principal to the nursing home because of the spendthrift trust clause, so the principal cannot be considered available under Ohio Adm. Code 5101:1-39-271(H), Section 1396(a)(K)(1), Title 42, U.S. Code. While the spendthrift provision states that the trustee is not liable to the grantor's creditors, it does not necessarily preclude an invasion of the principal for nursing home expenditures, in the discretion of the trustee. In fact, the trustee has used principal for such expenditures in the past. The trustee's discretion to expend the principal is not impeded by the spendthrift clause. This case is distinguishable from Society Bank National Assoc. v. Cayuga County Dept. of Social Services (March 10, 1993), Montgomery App. No. 13624, unreported, which held the county was not equitably subrogated to a medicaid recipient's trust interest for medicaid -6- benefits already paid, because the spendthrift provision precluded subrogation. The issue here is not whether creditors are subrogated to appellant's interest in the trust, but whether the trust is available to the appellant. This case is also distinguishable from Society Bank, supra, because that case involved a testamentary spendthrift trust and this case involves a self-settled spendthrift trust. In general, spendthrift trusts are enforceable and prevent creditors from reaching trust assets. Scott v. Bank One Trust Co., N.A. (1991), 62 Ohio St.3d 39. Self-settled spendthrift trusts, where the grantor is also the beneficiary, are void as against public policy. Frangos v. Frangos (1992), 135 B.R. 272. See Restatement of the Law 2d, Trusts (1959) 326, Section 156, Scott on Trusts (4 Ed. Fratcher Ed. 1987), 164, Section 156. The self-settled spendthrift trust provision in this case was void, and did not prevent trust assets from being available. We do not interpret the appellant's agreement with the nursing home as preventing availability of the trust principal. The trustee agreed with the nursing home that principal would not be invaded, "in any way which would diminish the income that is payable to the Home." Payment of the principal to the Home gives the Home the benefit of both the principal and the income from that principal. The trustee would not violate the agreement by paying nursing home bills with the principal. Even if the contract is interpreted as preventing the trustee from distributing the principal to the Home, the trust principal is -7- still available for purposes of medicaid eligibility. The amount available from a medicaid trust is the maximum amount of payments permitted under the terms of the trust. Section 1396(a)(K), Title 42, U.S. Code, Ohio Adm. Code 5101:1-39-271. Contracts outside the trust which limit the trustee's discretion to expend principal are not considered. Id. Additionally, if the contract prevented availability of the principal, the contract would be void as against the public policy expressed in Section 1396(a)(K) and Ohio Adm. Code 5101:1-39-271. See Diversified Property Corp. v. Winters Natl. Bank & Trust Co. (1967), 13 Ohio App.2d 190. Appellant also argues the trustee must act to protect the vested interest of the grantor's heirs, and thus cannot spend all the trust assets on nursing home bills. The heirs have a vested interest subject to complete defeasance. See Papiernik v. Papiernik (1989), 45 Ohio St.3d 337, 342-343. If the trustee, in his discretion, spends all of the trust assets for the support of the grantor, the heirs take nothing. Spending the trust assets on nursing home bills would not be an abuse of discretion by the trustee. See Society Bank, supra. The intent of the grantor was first to provide for her needs during her lifetime. Id., In re Estate of Sells (1968), 15 Ohio App.2d 23. Thus, the interests of the remaindermen did not limit the availability of the trust assets. The ODHS's finding that the trust assets were available for medicaid eligibility purposes was in accordance with law and supported by reliable, probative and substantial evidence. The -8- trial court did not err in affirming the ODHS's denial of benefits to appellant. Accordingly, this assignment of error is overruled. The decision of the trial court is affirmed. -9- It is ordered that appellee recover of appellant its costs herein taxed. The court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. PATTON, C.J., and DYKE, J., CONCUR. JOSEPH J. NAHRA JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof this document will be stamped to indicate journalization, at which time .