Ark. Code Ann. § 28-69-102 (2020)
Definitions
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As used in this section:
- “Trust” means a trust, or similar legal device, established other than by will by an individual or an individual's spouse under which the individual may be a beneficiary of all or part of the payments from the trust, and the distribution of such payments is determined by one (1) or more trustees or other fiduciaries who are permitted to exercise any discretion with respect to the distribution to the individual, and shall include trusts, conservatorships, and estates created pursuant to the administration of a guardianship;
- “Grantor” means the individual, institution, or entity that established, created, or funded the trust and shall also include fiduciaries as defined by § 28-69-201 and third parties as contemplated by § 20-77-301 et seq.
- A provision in a trust, other than a testamentary trust, which limits the availability of, or provides directly or indirectly for the suspension, termination, or diversion of the principal, income, or beneficial interest of either the grantor or the grantor's spouse in the event that the grantor or grantor's spouse should apply for medical assistance or require medical, hospital, or nursing care or long-term custodial, nursing, or medical care shall be void as against the public policy of the State of Arkansas without regard to the irrevocability of the trust or the purpose for which the trust was created and without regard to whether the trust was created pursuant to court order.
- Subsection (b) of this section is remedial in nature and is enacted to prevent individuals otherwise ineligible for medical assistance benefits from making themselves eligible by creating trusts in order to preserve their assets.
History. Acts 1993, No. 1228, § 1.
Case Notes
In General.
Without question, this section serves the general welfare of the public. Ark. Dep't of Human Servs. v. Walters, 315 Ark. 204, 866 S.W.2d 823 (1993).
Discretion of Trustee.
Where provisions of a trust relating to the safeguarding of government benefits ran afoul of the public policy as expressed in this section, and for that reason, they were void and unenforceable under this section, the discretion in the trustee to apply trust resources for beneficiary's benefit was comprehensive. Thomas v. Arkansas Dep't of Human Servs., 319 Ark. 782, 894 S.W.2d 584 (1995).
Grantor.
Alleged status as grantor did not take the matter out from under this section where settlement proceeds to meet beneficiary's medical and custodial needs ultimately belonged to him or to the guardian of his estate; the third party's role as the grantor of this trust was something of a guise. Thomas v. Arkansas Dep't of Human Servs., 319 Ark. 782, 894 S.W.2d 584 (1995).
Medical Benefits.
Where grantor's trust prevented the trustee from distributing the principal of the trust until grantor's death, but no provision in the trust limited the availability of, or provided directly or indirectly for the suspension, termination, or diversion of the principal, income, or beneficial interest of the grantor, she was not disqualified from receiving Medicaid benefits. Arkansas Dep't of Human Servs. v. Wilson, 323 Ark. 151, 913 S.W.2d 783 (1996).
Public Policy.
Provisions in trusts that limit the availability of funds should the grantor apply for medical assistance or require medical or long-term care are void as against public policy. Arkansas Dep't of Human Servs. v. Wilson, 323 Ark. 151, 913 S.W.2d 783 (1996).
A retroactive application of this section would not disturb a contractual right, or create a new obligation. Ark. Dep't of Human Servs. v. Walters, 315 Ark. 204, 866 S.W.2d 823 (1993).
The department's regulations in effect before this section was enacted did not expressly prohibit a person from artificially impoverishing himself or herself in order to become eligible for Medicaid; the General Assembly, without question, intended to put an end to such contrivances. Ark. Dep't of Human Servs. v. Walters, 315 Ark. 204, 866 S.W.2d 823 (1993).
The event that determines whether the application of this section is prospective or retroactive is the determination of eligibility of the individual for welfare; that determination could be made periodically with the outcome being dependent on the amount of resources and income the individual had at that time. Ark. Dep't of Human Servs. v. Walters, 315 Ark. 204, 866 S.W.2d 823 (1993).
Trial court considered case law from other jurisdictions that permitted the modification the trustee requested in this case, in order to qualify a beneficiary for public benefits, but the trial court did not find that the modification was permissible under public policy and Arkansas law; the court was not left with a firm conviction that a mistake was committed. In re Ruby G. Owen Trust, 2012 Ark. App. 381, 418 S.W.3d 421 (2012).
Trustee intended to modify the trust in order to qualify a beneficiary for public benefits; because impoverishing the beneficiary in order to qualify her would make the trust provisions void, the modified provisions would have been void on grounds of public policy, and the trial court's denial of the modification motion was that the purpose for modifying the trust would be defeated. In re Ruby G. Owen Trust, 2012 Ark. App. 381, 418 S.W.3d 421 (2012).
Retroactive Application.
The legislative intent was to give this section retroactive effect; the legislative intent may be given effect, and this section may be applied retroactively. Ark. Dep't of Human Servs. v. Walters, 315 Ark. 204, 866 S.W.2d 823 (1993).
Subchapter 2 — Banks and Trust Companies
Publisher's Notes. For Comments regarding the Uniform Common Trust Fund Act, see Commentaries Volume B.
Cross References. Foreign banks and trust companies as fiduciaries, § 4-27-201 et seq.
Limited relaxation of the prudent person rule for fiduciaries and financial institutions, § 28-71-107.
Effective Dates. Acts 1947, No. 394, § 10: effective July 1, 1947, and applicable to fiduciary relationships then in existence or thereafter established.
Acts 1985, No. 947, § 4: Apr. 15, 1985. Emergency clause provided: “It is ascertained and determined by the General Assembly of the State of Arkansas that it is in the public interest to permit trust departments of banks which are members of an affiliated group to use a single common trust fund, which will be for the benefit of fiduciaries and beneficiaries. Therefore, an emergency is hereby declared to exist and this enactment being necessary for the immediate preservation of the public peace, health and safety shall be in full force and effect from and after its passage and approval.”
Acts 1989, No. 351, § 4: Mar. 6, 1989. Emergency clause provided: “It is hereby found and determined by the General Assembly that banks located in this State should be authorized to utilize their affiliates to perform services for a trust administered by the banks; that such authorization will be more efficient and economical for all parties; that this Act grants such authority and therefore should be given effect immediately. Therefore, an emergency is hereby declared to exist and this Act being immediately necessary for the preservation of the public peace, health and safety shall be in full force and effect from and after its passage and approval.”