## Facts

- Herman Pohlmann’s will created a marital trust and the “Herman and Ruth C. Pohlmann Family Trust” (Family Trust), intended to be funded up to the federal unified credit amount.
- Ruth Pohlmann was entitled to all trust income and to such principal as the trustee might deem appropriate for her health, education, support, or maintenance; if she remarried, her rights to principal ended and she would receive income only.
- The remainder beneficiaries of the Family Trust were the couple’s children and grandchildren.
- After probate, the co-personal representatives conveyed four parcels of real property to the trustee to fund the Family Trust.
- Ruth later applied for Medicaid long-term care benefits.
- The Nebraska Department of Health and Human Services (DHHS) denied benefits, treating the Family Trust corpus as an available resource that put Ruth over Medicaid’s asset limit, even though her other income and resources were below the limits.
- Ruth pursued administrative review without success, then sought judicial review; the district court affirmed DHHS’s denial.
- Ruth appealed to the Nebraska Supreme Court.

## Issues

1. Whether the corpus of a testamentary trust is an “available resource” for Medicaid eligibility when the trustee may distribute principal for the beneficiary’s health, education, support, or maintenance, but the beneficiary cannot compel distributions.

## Decision

- The Nebraska Supreme Court reversed the district court’s judgment affirming DHHS.
- The court held that DHHS erred by treating the Family Trust corpus as a disqualifying, available resource.
- The matter was remanded for further proceedings consistent with excluding the trust corpus from the resource calculation.

## Legal Principles

- For Medicaid eligibility, trust principal is an available resource only if the applicant has a legal right, authority, or power to obtain the principal or compel its distribution.
- Trust language providing that the trustee “may” distribute principal “as [the trustee] may… deem appropriate” indicates discretionary authority rather than a mandatory duty to invade principal.
- A discretionary trust that uses a support-oriented standard (health, education, support, maintenance) does not, without more, give the beneficiary an enforceable right to principal distributions.
- Courts construe testamentary trust terms in light of the settlor’s plan, including the preservation of remainder interests, and will not treat discretionary trust corpus as the beneficiary’s asset absent a right to compel distribution.

## Conclusion

Because the trustee had discretion to distribute principal and Ruth lacked any unilateral power to demand trust corpus, the Family Trust corpus was not an available Medicaid resource, and DHHS could not deny benefits on the ground that the corpus made Ruth ineligible.


Pohlmann v. Nebraska Dep’t of Health & Hum. Servs., 710 N.W.2d 639 (Neb. 2006)