                                                                       FILED
                                                                   Jul 26 2018, 8:37 am

                                                                       CLERK
                                                                   Indiana Supreme Court
                                                                      Court of Appeals
                                                                        and Tax Court




ATTORNEYS FOR APPELLANT
Jeffrey S. Dible
Maggie L. Smith
Frost Brown Todd, LLC
Indianapolis, Indiana
Tamatha A. Stevens
Stevens & Associates, P.C.
Indianapolis, Indiana
Jeffrey C. Eggers
Jeffrey C. Eggers, P.C.
Franklin, Indiana
ATTORNEYS FOR AMICUS CURIAE
INDIANA CHAPTER OF THE NATIONAL
ACADEMY OF ELDER LAW ATTORNEYS
Robert W. Fechtman
Fechtman Law Office
Indianapolis, Indiana
Elizabeth A. Homes
Law Office of Elizabeth A. Homes, LLC
Indianapolis, Indiana



                                            IN THE
    COURT OF APPEALS OF INDIANA




Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018                           Page 1 of 13
      In Re the Matter of                                        July 26, 2018
      Guardianship of Timothy A.                                 Court of Appeals Case No.
      Robbins, an Adult                                          18A-GU-242
                                                                 Appeal from the Johnson Superior
                                                                 Court
                                                                 The Honorable Kevin Barton,
                                                                 Judge
                                                                 Trial Court Cause No.
                                                                 41D01-1301-GU-8



      Baker, Judge.


[1]   Timothy Robbins (Timothy) sustained catastrophic, permanent injuries from a

      car accident; he will require full-time care for the rest of his life. His father

      became his guardian, filed a lawsuit on Timothy’s behalf, and reached a

      settlement agreement totaling over $17 million. Timothy’s father asked that the

      trial court authorize the balance of the settlement agreement to be placed in a

      special needs trust. The trial court, expressing its disagreement with the

      legislative policy underlying special needs trusts, placed only $1 million into the

      trust and ordered the remaining funds be paid directly to the guardianship

      estate. Finding that the trial court exceeded the bounds of its authority and

      made errors of law in its ruling, we reverse and remand with instructions that

      the trial court direct the full, available amount of the settlement proceeds be

      placed into Timothy’s special needs trust.




      Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018                       Page 2 of 13
                                                       Facts
[2]   In January 2013, the vehicle being driven by then-42-year-old Timothy was

      side-swiped by a semi truck, resulting in Timothy being ejected from his vehicle.

      As a result of the accident, Timothy sustained a devastating traumatic brain

      injury, multiple skull and facial fractures, and additional serious injuries. He

      remained in a coma for many weeks. Timothy was eventually transferred to a

      nursing home, where he remains today with full-time care. His brain injuries

      and resulting dementia are catastrophic and have resulted in permanent and

      total impairment, including impairments in “intelligence, reasoning, self-care,

      adaptive functioning, orientation, executive functioning, memory, language

      skills, psychomotor functioning, and fine motor functioning.” Appellant’s App.

      Vol. II p. 112. Timothy will never again live independently and will continue

      to require full-time care for the rest of his life. Additionally, his medical team

      believes that his condition will continue to deteriorate with time.


[3]   On February 25, 2013, Timothy was adjudicated to be an incapacitated adult

      person. His father, Shelly Robbins (Guardian), was appointed to be the

      permanent guardian over Timothy and his estate. Guardian filed a lawsuit on

      behalf of Timothy against the tortfeasors responsible for the accident; a jury

      trial took place in July 2017. The jury found in favor of Timothy and awarded

      damages in the amount of $18.5 million. The defendants indicated an intent to

      appeal the verdict. Thereafter, the parties attended post-trial mediation.

      Guardian was willing to settle the case because Timothy had spent “almost five

      years now not getting some of the treatment and therapies that he needs to

      Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018           Page 3 of 13
      benefit him and [Guardian] felt it was in his best interests to get the case

      resolved . . . to provide Tim[othy] the care and treatment he needs sooner rather

      than later.” Tr. Vol. II p. 13. The parties agreed to settle the case for $17.75

      million.


[4]   After reaching the settlement agreement, Guardian retained an elder law

      attorney to help structure Timothy’s finances to ensure that Timothy would be

      provided with the care he needs for the rest of his life. Guardian’s concerns

      stemmed from the fact that following the accident, Timothy was receiving

      Medicaid and Supplemental Security Income (SSI). If the settlement proceeds

      were paid directly to Timothy, it would have caused him to lose eligibility for

      those benefits.


[5]   As will be more fully explained below, both the United States Congress and the

      Indiana General Assembly have enacted statutes allowing for the creation and

      funding of “special needs trusts,” which permit a disabled person to shield

      assets that would otherwise affect Medicaid and SSI eligibility. These statutes

      were adopted, in part, to address the problem present in this case, where a

      disabled adult receives a large, lump sum payment from third-party litigation

      that would eliminate the availability of public benefits. Allowing disabled

      persons to shield these litigation proceeds in special needs trusts is based on the

      public policy determination that it is beneficial to allow a disabled person to

      have both public benefits and an additional source of financial support during

      the person’s lifetime.



      Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018           Page 4 of 13
[6]   Special needs trusts are intended to supplement government benefits and

      provide for treatment, services, equipment, therapy, etc., that are not covered

      by Medicaid. Where a disabled person’s future needs are unknown and

      unquantifiable, a special needs trust protects that person from a situation in

      which the litigation proceeds are insufficient to cover the person’s medical care

      and needs over the course of his life. The flip side to a special needs trust is a

      statutory mandate that, upon the death of the disabled person, any assets

      remaining in the trust will be used to pay back to the State an amount equal to

      the total benefits paid to the disabled person. Only after the State is reimbursed

      in full may the remaining funds in the trust, if any, be distributed to the disabled

      person’s heirs.


[7]   On December 22, 2017, Guardian asked that the trial court approve the

      settlement agreement; Guardian also sought authority to pay attorney fees and

      litigation expenses and to satisfy the lien asserted by Medicaid for medical care

      already provided to Timothy. After making all those payments, the net

      settlement to Timothy was $11.2 million. The structured settlement agreement

      provided that $4.5 million of the net amount would be funded through two

      annuities, providing Timothy guaranteed monthly payments for twenty-five

      years, and that the remaining $6.75 million would be paid in a lump sum. Also

      on December 22, 2017, Guardian sought authority to create and fund the

      Timothy Special Needs Trust with the $6.75 million lump sum.


[8]   The trial court held a hearing on Guardian’s requests on December 28, 2017.

      There were no objections raised with respect to any of Guardian’s requests.

      Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018           Page 5 of 13
      After hearing argument made by Guardian’s attorneys, the trial court stated

      that it was “aware of the rules” regarding special needs trusts but that it

      disagreed with the legislative policy, explaining that “it’s . . . the legal fiction of

      impoverishment which I’m having trouble buying into when we have 12

      million sitting here.” Id. at 27.


[9]   On January 8, 2018, the trial court approved Guardian’s requests to

      compromise and settle Timothy’s personal injury claim in the amount of $17.75

      million, to pay the personal injury action attorney fees and expenses, and to

      satisfy the existing Medicaid lien. The trial court denied Guardian’s request to

      fund the Timothy Special Needs Trust in the manner requested by Guardian.

      Instead, the trial court allowed only $1 million of the $6.75 million to be placed

      in the trust, ordering the remaining $5.75 million to be paid directly to the

      Guardianship Estate. The trial court provided three reasons for this decision:


          • “[T]he Guardian’s request to place all assets received from the personal
            injury settlement into a special needs trust would shift considerable
            expenses . . . to the taxpayer.”

          • “The amount received for the future care of Timothy A. Robbins under
            the Mediated Settlement Agreement is adequate to meet his future needs
            without public assistance.”1




      1
        Although we reverse on other grounds, we note that the record does not support this finding. Instead, the
      record reveals that, as would be expected, there is no way of knowing what the cost or extent of Timothy’s
      needs will be over the course of his lifetime. It is undisputed that his needs are extensive, his condition will
      further deteriorate with time, and there is no way to know how long his lifespan will be. Under these
      circumstances, there is no basis to conclude that the amount received pursuant to the settlement agreement
      will be adequate to meet Timothy’s needs for the remainder of his life.

      Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018                                     Page 6 of 13
           • The Timothy Special Needs Trust “appears to be for the benefit of the
             Guardian and the descendants of Timothy A. Robbins as opposed to
             Timothy A. Robbins.”

       Appellant’s App. Vol. II p. 16. Guardian now brings this uncontested appeal.2


                                      Discussion and Decision
[10]   In guardianship proceedings, we will reverse if a trial court’s decision is against

       the logic and effect of the facts and circumstances before it or if the court has

       misinterpreted the law. E.g., In re Guardianship of N.R., 26 N.E.3d 97, 100 (Ind.

       Ct. App. 2015). As always, we apply a de novo standard of review to questions

       of law. E.g., In re Guardianship of Stant, 50 N.E.3d 149, 150 (Ind. Ct. App.

       2016).


                                       I. Special Needs Trusts
[11]   Special needs trusts are a creation of both federal and state legislation. We turn

       first to the federal program, which must begin with a brief examination of SSI

       and Medicaid. SSI provides a minimum level of income for disabled persons

       (among others). See 20 CFR § 416.1202. Medicaid is a joint federal- and state-

       funded program that provides certain medical services to disabled persons who

       meet requisite criteria. In Indiana, to qualify for Medicaid, an applicant must




       2
         The trial court granted Guardian’s request to modify the timing of the annuity schedule and stay all
       settlement payments during the pendency of this appeal.

       Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018                                  Page 7 of 13
       meet both an income eligibility test and a resources eligibility test. State v.

       Hammans, 870 N.E.2d 1071, 1074 (Ind. Ct. App. 2007).


[12]   In 1993, Congress passed the federal Omnibus Budget Reconciliation Act of

       1993 (OBRA ’93). One of the primary purposes of this legislation was to curb

       abuses that had arisen as a result of the elderly using trusts to shield their assets.

       In re Abraham XX., 900 N.E.2d 136, 139 (N.Y. 2008). As a general rule,

       therefore, OBRA ’93 provides that a Medicaid applicant’s trust assets are now

       considered available resources that count towards determining that applicant’s

       eligibility for government-funded resources such as SSI and Medicaid. 42

       U.S.C. § 1396p(d)(3).


[13]   As part of the OBRA ’93 discussions, however, “[d]isability advocates . . .

       lobbied the federal government for protection[,] . . . striking a balance between

       the tightened eligibility requirements and the heightened needs of severely

       disabled individuals who receive a lump sum of money sizeable enough to end

       their Medicaid eligibility.” Abraham XX., 900 N.E.2d at 139. In response to

       these concerns, Congress drafted OBRA ’93 to include special needs trusts as an

       exception to the general rule. 42 U.S.C. § 1396p(d)(4)(A). As noted above,

       special needs trusts allow disabled individuals to place assets into a trust

       without those assets factoring into the eligibility determination for SSI or

       Medicaid, provided that the State must be paid back from any remaining trust

       balance upon the death of the disabled person.




       Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018            Page 8 of 13
[14]   With respect to the State program, our General Assembly adopted Indiana

       Code chapter 12-15-2 to govern eligibility for the state Medicaid program.

       Indiana Code section 12-15-2-17(f) incorporates the federal special needs trust

       provisions exempting such trusts from the eligibility determination. See also 405

       Ind. Admin. Code 2-3-22. Indiana likewise has a provision requiring that upon

       the death of the disabled person, any amounts remaining in the trust must be

       repaid to the State. I.C. § 12-15-9-1. Thus, both federal and state law permit

       disabled individuals to place what would otherwise be available assets into a

       special needs trust to shield those assets for purposes of determining Medicaid

       or SSI eligibility, so long as the trust provides that, upon the death of the

       disabled person, any remaining assets will be used to pay back to the State an

       amount equal to the total benefits paid for the care of the disabled person.


[15]   Special needs trusts serve public policy considerations that both Congress and

       our General Assembly have deemed important. Specifically, special needs

       trusts provide disabled people with the power to obtain additional healthcare

       services and equipment that are not covered by Medicaid, such as full-time care,

       wheelchairs if needed more often than every five years, dental work and

       dentures, eyeglasses if needed more often than every five years, home

       modifications, accessible vehicles, funerals, or anything to improve the quality

       of life of the disabled person. Amicus Br. p. 4-6.


[16]   Additionally, special needs trusts mean that the disabled person no longer has

       to “spend down” the proceeds of a litigation settlement before SSI and



       Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018           Page 9 of 13
       Medicaid are available. The reason that this is so crucial has been explained as

       follows:


               If the [special needs] trust had not been established, the
               settlement from the tort action would be available to [the
               disabled ward], who would then be ineligible for [M]edicaid
               assistance. [The guardian] would be forced to exhaust the
               settlement to meet [the ward’s] medical needs before reapplying
               for [M]edicaid assistance. Without [M]edicaid providing the
               ward’s basic medical needs, the tort settlement would be depleted
               much more quickly than if it were used merely to supplement
               [M]edicaid assistance. Once he became eligible again for
               [M]edicaid, [he] would receive [M]edicaid assistance but would
               have no assets remaining with which to provide for his
               supplemental needs.


               By contrast, with the creation of the trust, [the ward] will retain
               his [M]edicaid eligibility and [the guardian] can provide for his
               supplemental needs from the trust assets, while [M]edicaid
               provides for his basic medical care.


       Dep’t of Social Servs. v. Saunders, 724 A.2d 1093, 1095-96 (Conn. 1999).


[17]   As the court in In re Abraham XX. explained, special needs trusts reflect “a

       policy decision to balance the needs of the severely disabled and the State’s

       need for funds to sustain the system.” 900 N.E.2d at 140. To further

       Medicaid’s purpose of providing medical assistance to people in need,


               the State agrees to continue paying Medicaid costs—in instances
               where it would otherwise be relieved of this obligation—in
               exchange for the possibility of reimbursement upon the recipient’s
               death. The State in a sense is like an insurer calculating risk. For
               every recipient who depletes the trust before death, the State can

       Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018              Page 10 of 13
               expect some trusts to have sufficient assets upon a recipient’s
               death to offset the additional cost of continuing Medicaid
               payments for these severely disabled individuals who otherwise
               would be ineligible. Moreover, the State’s right to
               reimbursement occurs only upon the death of the beneficiary—at
               a time when the life-enhancing purpose of the trust can no longer
               be effectuated.


       Id. (emphasis original). As aptly put by Guardian,


               [t]he legislative decision at the federal and state level to allow a
               disable[d] person to place substantial assets received from
               litigation proceeds in a special needs trust presents a “win-win”
               in situations where future needs are unknown and cannot be
               quantified at the outset. Ultimately, if those litigation proceeds
               are sufficient to cover a disabled person’s medical care and needs
               throughout his life, then upon his death, the public benefits he
               received will be reimbursed in full. But if it turns out that the
               litigation proceeds were not sufficient to cover medical
               care/needs and end up being exhausted before the disabled
               person dies, then the litigation proceeds will go much further by
               allowing the disabled person to also utilize public benefits.


       Appellant’s Br. p. 26-27 (emphases original).


                                       II. Trial Court’s Order
[18]   In this case, the trial court denied Guardian’s request to put the full amount of

       the settlement reached on behalf of Timothy into a special needs trust. Indeed,

       it agreed to place only $1 million into the trust, ordering that the remaining

       $5.75 million be paid directly to the guardianship estate.




       Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018           Page 11 of 13
[19]   The trial court refused to place the full amount of the settlement agreement into

       the special needs trust because it disagrees with the legislatively-mandated

       “legal fiction of impoverishment,” tr. vol. II p. 27, and disapproves of the shift

       of the expense to taxpayers. The trial court may well have a genuine

       disagreement with the policy decisions of our state and federal legislators, but it

       is still bound to abide by them. See, e.g., Hoagland v. Franklin Twp. Cmty. Sch.

       Corp., 27 N.E.3d 737, 749 (Ind. 2015) (holding that public policy is “exclusively

       for the General Assembly” and “the wisdom or desirability of particular

       legislation is not a matter for the judiciary to determine”); S. Shore Baseball, LLC

       v. DeJesus, 11 N.E.3d 903, 909 (Ind. 2014) (emphasizing the well accepted

       principle that “under our system of limited government, the legislative branch is

       entrusted with decisions of public policy”); Etzler v. Ind. Dep’t of Revenue, 43

       N.E.3d 250, 255-56 (Ind. Ct. App. 2015) (holding that the “formulation of

       public policy is a task entrusted to the legislature, not the court”).


[20]   Here, there are no constitutional concerns preventing the legislature’s policy

       choices from being enforced. Both our federal and state legislators have made

       an express policy decision to allow for a “legal fiction of impoverishment” by

       placing assets in a special needs trust, knowing full well that it has the potential

       to shift expenses to the taxpayer, but trying to ameliorate that cost by requiring

       that any remaining trust proceeds be repaid to the State upon the disabled

       person’s death. While the trial court is free to disagree as to the wisdom of the

       legislature’s policy choices, the trial court exceeded the bounds of its authority

       by refusing to enforce this policy choice based on that disagreement.


       Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018           Page 12 of 13
[21]   The trial court also refused to place the full amount of the settlement proceeds

       into the special needs trust because it concluded that the trust was solely for the

       benefit of the Guardian and Timothy’s descendants. This is a mistake of law.

       As a matter of law, a special needs trust must contain a provision declaring that,

       upon the death of the disabled trust beneficiary, the total amount of Medicaid

       benefits must be paid back first, before any distributions to heirs are made. 42

       U.S.C. § 1396p(d)(4)(A); I.C. § 12-15-2-17(f). Additionally, the special needs

       trust must be administered for the exclusive benefit of the disabled individual

       beneficiary for his or her lifetime. In other words, so long as the disabled

       individual is alive, other persons such as family members—or the guardian—

       cannot receive a direct benefit from the trust assets, and upon the disabled

       person’s death, the State gets repaid before anyone else inherits a dime.

       Consequently, it is a legal impossibility that Timothy’s special needs trust is

       designed to “benefit” either the Guardian or Timothy’s descendants, and the

       trial court’s conclusion in this regard was erroneous.


[22]   The judgment of the trial court is reversed in relevant part and remanded with

       instructions to direct that the full, available amount of settlement proceeds be

       placed in Timothy’s special needs trust.


       Kirsch, J., and Robb, J., concur.




       Court of Appeals of Indiana | Opinion 18A-GU-242 | July 26, 2018           Page 13 of 13
