## Facts

- Dawn Simonsen, a 57-year-old quadriplegic, resided in a long-term care facility requiring 24-hour ventilator care beginning in October 2013.
- She received Connecticut Medicaid benefits to cover her facility care starting March 2014; benefits were terminated in June 2015 and later reinstated pending an adverse fair-hearing decision.
- Simonsen was the beneficiary of two third-party discretionary trusts created under her mother’s estate plan; the trustee could distribute income and principal for her health, comfort, education, and best interests.
- In 2014, the trustee obtained a Florida probate court order authorizing “decanting” the two trusts into two new third-party special-needs trusts intended to provide supplemental benefits without creating an enforceable right to distributions.
- In November 2014, more than $1,000,000 in trust assets were transferred from the original trusts to the successor special-needs trusts.
- The Connecticut Department of Social Services (DSS) treated the decanting as a transfer for less than fair market value and imposed a Medicaid long-term-care penalty period from September 2014 through September 2021.
- Simonsen’s facility care cost about $1,000 per day; loss of Medicaid threatened interruption of medically necessary care.

## Issues

1. Whether DSS could treat assets in third-party discretionary/supplemental-needs trusts as “available resources” for determining Medicaid eligibility.
2. Whether trustee-initiated decanting of third-party trust assets into third-party special-needs trusts constituted a disqualifying transfer triggering a Medicaid penalty period.
3. Whether the plaintiff satisfied the federal standard for preliminary injunctive relief (irreparable harm, merits showing, balance of hardships, and public interest).

## Decision

- The court granted a preliminary injunction and denied the temporary restraining order request as moot.
- The court enjoined the Commissioner from treating the successor third-party special-needs trust assets as available resources for Medicaid eligibility.
- The court enjoined the Commissioner from treating the decanting as a disqualifying transfer for purposes of imposing a penalty period.
- The court found irreparable harm due to the risk of losing life-sustaining, facility-based ventilator care.
- The court found at least serious questions going to the merits (and a strong merits showing), with the balance of hardships tipping decidedly toward the plaintiff and the public interest favoring continuity of care.

## Legal Principles

- A Medicaid applicant seeking preliminary injunctive relief must show irreparable harm and either (a) likelihood of success on the merits or (b) serious questions on the merits plus a balance of hardships strongly favoring the applicant.
- For Medicaid eligibility, assets in a third-party trust are generally not “available” to the beneficiary when the beneficiary lacks an enforceable right to compel distributions and the trustee retains discretion.
- Medicaid transfer-penalty provisions primarily target disposals of assets by the applicant (or spouse) for less than fair market value; serious questions arise when the challenged transaction is a trustee’s decanting of third-party trust property not owned or controlled by the applicant.
- Decanting that does not diminish the beneficiary’s enforceable rights, and that maintains the beneficiary’s status as a discretionary beneficiary of third-party trust property, is unlikely to constitute a disqualifying transfer under federal Medicaid law at the preliminary-injunction stage.

## Conclusion

The court preliminarily restrained Connecticut Medicaid officials from counting third-party special-needs trust assets as available resources or penalizing the trustee’s decanting as a disqualifying transfer, based on irreparable medical harm and a strong merits showing under federal Medicaid trust and transfer rules.


Simonsen v. Bremby, No. 3:15-cv-01399 (VAB), 2015 WL 9451031 (D. Conn. Dec. 23, 2015)