Shewry v. Arnold

In Shewry v. Arnold (2004) 125 Cal.App.4th 186, the State Department of Health Services sought reimbursement from Brenda Arnold, a disabled adult who had been the conservator of her mother's person and estate. Arnold's mother, Etoria Hatcher, was enrolled in Medi-Cal after the proceeds of a settlement were placed in a special needs trust with Arnold as trustee. When Hatcher died, Arnold withdrew all but $2.31 from the trust and did not notify the department. Eventually the department learned of Hatcher's death and claimed more than $90,000 from Arnold as recipient of the remaining trust assets. Arnold refused on the ground that she was Hatcher's only surviving child and was disabled. The department sued Arnold and obtained summary judgment, but the Second District, Division Five, reversed. The court held that the Medicaid reimbursement provisions of section 1396p(b)(2)(A) and the Medi-Cal provisions under section 14009.5, subdivision (b)(2)(C), barred recovery from the trust beneficiary's estate under the exception for a beneficiary with a disabled child. The estate, reasoned the court, included the trust assets. In the court's view, no different treatment after a Medi-Cal recipient's death was warranted for special needs trusts. Subdivision (d) of section 1396p was considered inapplicable because it related only to eligibility for benefits, not reimbursement. (Shewry, supra, 125 Cal.App.4th at pp. 196-197.) Consequently, the court determined that Arnold, an adult disabled child of the trust beneficiary, was entitled to the remaining trust assets free of the department's reimbursement claim. That conclusion was supported by "sound public policy," the court added, because enforcement of the department's reimbursement claims "would likely result in hardship" to the adult disabled child of a deceased beneficiary. (Id. at p. 198.)