In Tarrant v. DHS (2018AP1299), the Court of Appeals District II held that testamentary trusts are countable unearned income for determining Medicaid eligibility.
The state Department of Health Services (DHS) denied Christine Tarrant’s application to renew medical assistance because her monthly payments from a testamentary trust combined with other income exceeded Medicaid eligibility limits. Tarrant appealed DHS’s decision, arguing that testamentary trusts are not “unearned income” countable toward determining Medicaid eligibility.
The court agreed with DHS and ruled against Tarrant. Federal law and state guidance in the Medicaid Eligibility Handbook do not specifically include testamentary trusts as countable unearned income, but the lists of countable unearned income sources are not exclusive. The regulations do include trusts as sources of unearned income, and the court rejected Tarrant’s argument that testamentary trusts should not be included because this particular type of trust is not specifically named. Under the court’s decision testamentary trusts are countable unearned income for DHS in determining Medicaid eligibility.