## Facts

- In December 1994, Nicholas W. Hammans suffered a serious automobile accident that caused a traumatic brain injury, leaving him totally disabled and in need of 24-hour care.
- After discharge from the hospital in March 1995, Nicholas lived with his parents, Roland and Sue Hammans (the Hammanses), who were trained to provide extensive medical and therapeutic care at home, including physical therapy, IV or injection medication delivery, tube feeding, tracheotomy tube changes, suctioning, and respiratory therapy.
- The Hammanses pursued a personal-injury lawsuit on Nicholas’s behalf. The settlement proceeds were placed in a court-supervised guardianship estate.
- The trial court later created the Nicholas W. Hammans Disability Trust and appointed the Hammanses as co-trustees, funding the trust with $200,000 transferred from the guardianship estate.
- The trust was designed to preserve Nicholas’s Medicaid eligibility. Under Indiana Medicaid rules, an applicant had to satisfy both income and resource limits; exceeding either could disqualify the applicant.
- Trust provisions included:
  - Paragraph 4(c), directing the trustees to arrange services intended to improve Nicholas’s quality of life as much as possible.
  - Paragraph 4(c)(7), expressly allowing payments to family members who provided “special care or supervision,” limited to the reasonable value of those services.
  - Paragraph 4(d)(6), granting trustee powers under Indiana Code § 30-4-3-3, including authority to take actions appropriate to accomplish the trust’s purposes.
- Nicholas remained on Medicaid. The State paid $355,632.15 for his medical care.
- Nicholas died on December 7, 2005. At his death, the trust held $143,860.
- The Hammanses filed a verified petition seeking (1) fees for trust administration and (2) compensation for the care and supervision they had provided.
- The trial court authorized a $140,000 payment to the Hammanses, leaving about $1,360 for Medicaid reimbursement (plus attorney’s fees).
- The State appealed, arguing the award improperly depleted the trust and defeated the Medicaid payback requirement applicable to 42 U.S.C. § 1396p(d)(4)(A) trusts.

## Issues

1. Whether the trial court erred by authorizing $140,000 in payments from a § 1396p(d)(4)(A) disability trust to the parents/co-trustees for trustee services and family-provided care, where the State sought Medicaid reimbursement from remaining trust assets at the beneficiary’s death.
2. Whether, under the trust’s terms and Indiana trust law, the parents were entitled to compensation—and if so, whether the amount awarded was reasonable and supported by the record.

## Decision

- The Court of Appeals held that the trust language and Indiana law permitted compensation to the Hammanses for trustee work and for qualifying family-provided “special care or supervision.”
- The court rejected the State’s position that the Medicaid payback requirement categorically barred such payments; the payback applies to the amount remaining at death, and authorized expenditures consistent with the trust’s purposes may reduce that remainder.
- The court concluded, however, that the $140,000 award was not adequately supported as reasonable on the record presented.
- The court therefore affirmed in part and reversed in part, remanding for the trial court to reconsider and recalculate compensation consistent with the trust terms, evidentiary support, and the State’s payback interest in amounts remaining.

## Legal Principles

- A trust meeting 42 U.S.C. § 1396p(d)(4)(A) must provide that, at the beneficiary’s death, the State receives amounts remaining in the trust up to the total Medicaid assistance paid; the statute does not, by itself, forbid legitimate trust spending authorized during the beneficiary’s life.
- When a trust expressly authorizes payments to family members for “special care or supervision,” trustees may compensate family caregivers for qualifying services, but only to the reasonable value of services actually provided.
- Trustees may receive reasonable compensation for trust administration when authorized by the instrument and applicable state law, including Indiana Code § 30-4-3-3.
- Courts supervising trust administration must evaluate whether claimed trustee fees and caregiver compensation are reasonable and supported by evidence; large, post-death lump-sum awards that substantially eliminate the remainder require careful justification.
- The State’s payback right attaches to the trust remainder at death; courts must prevent awards that function as an unsupported diversion of that remainder rather than payment for proven services.

## Conclusion

State v. Hammans held that a (d)(4)(A) disability trust can pay reasonable trustee fees and reasonable compensation to family members for documented “special care or supervision” when the trust permits it, but the appellate court required closer support for the amount awarded and sent the case back to recalculate compensation so the State’s Medicaid reimbursement claim would apply to whatever funds properly remained at the beneficiary’s death.


State v. Hammans, 870 N.E.2d 1071 (2007)