Zander v. Adams ( 2010 )

FIRST DIVISION
March 15, 2010
No. 1-09-0979
BETTE I. ZANDER, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Cook County.
)
v. ) No. 08 CH 23123
)
CAROL L. ADAMS, Secretary, The )
Department of Human Services )
CARMELA A. GARDNER, Chief Bureau )
of Assistance Hearings, The )
Department of Human Services, and )
BARRY MARAM, Director, The )
Department of Healthcare and )
Family Services, ) The Honorable
) Leroy K. Martin, Jr.,
Defendants-Appellees. ) Judge Presiding.
JUSTICE GARCIA delivered the opinion of the court.
Plaintiff Bette I. Zander appeals from an administrative
decision of the Illinois Department of Human Services
(Department) imposing a penalty period during which the plaintiff
is ineligible for Medicaid assistance. The circuit court
confirmed the Department's decision. Mrs. Zander, an elderly
resident of a long-term care facility, assigned her beneficial
interest in an Illinois land trust to her three daughters more
than 36 months prior to applying for benefits. She argues that
period was sufficiently long to shield her from a penalty for
transferring her assets under Department regulations. The
Department ruled that Mrs. Zander was required to wait 60 months
before applying for assistance.
1-09-0979
We find the Department properly imposed a penalty on Mrs.
Zander because the transfer of beneficial interest constituted a
noncash or property disbursement from a revocable trust under
Department regulations. Accordingly, we affirm.
BACKGROUND
On June 10, 2003, at the age of 79, Mrs. Zander began living
in a group care facility in Illinois. On December 4, 2003, Mrs.
Zander created the Zander Land Trust to which she transferred
three parcels of real estate she owned in the County of
McDonough, McComb, Illinois. One of Mrs. Zander's daughters,
Karen Kae Skiles, served as trustee of the Zander Land Trust.
The trust entitled Mrs. Zander to 100% of "the earnings, avails
and proceeds of said real estate." However, under the terms of
the trust, the beneficiary had no "right, title or interest in or
to any portion of real estate as such, either equitable or
legal." Less than two weeks later, on December 16, 2003, Mrs.
Zander executed an assignment of beneficial interest in the
Zander Land Trust transferring all of her beneficial interest to
her three daughters.
On January 23, 2007, approximately 37 months after the
beneficial interest in the Zander Land Trust was transferred to
Mrs. Zander's three daughters, the Department received Mrs.
Zander's application for Medicaid assistance. The Department
found Mrs. Zander eligible for Medicaid, but imposed a penalty
period of ineligibility from October 1, 2006, to June 30, 2014
2
1-09-0979
(later adjusted to February 28, 2011), based on the transfer of
beneficial interest in the trust, which the Department found was
a nonallowable transfer of assets subject to review within 60
months of the application.
Administrative Hearing
On October 19, 2007, a formal hearing was held on the
Department's denial of Medicaid assistance to cover the cost of
Mrs. Zander's nursing home care. According to Mrs. Zander's main
brief, "At the time she applied for medical assistance in
January, 2007, Mrs. Zander believed that her gift to her
daughters by assignment of beneficial interest would not affect
her eligibility as it had occurred more than 36 months prior to
her application." Before a hearing officer, Ms. Skiles, the
trustee of the Zander Land Trust, testified she had neither
collected any income nor distributed any real estate from the
trust.
In its decision, the Department set forth provisions of the
Illinois Administrative Code (Code) (89 Ill. Adm. Code §120.347,
amended at 22 Ill. Reg. 16291, 16299-301, eff. August 28, 1998;
89 Ill. Adm. Code §120.387 amended at 23 Ill. Dec. 11301, 11309-
12, eff. August 27, 1999), Title XIX of the Social Security Act
(42 U.S.C. §1396p (2006)), and section 3259 of the State Medicaid
Manual (State Medicaid Manual, Health Care Financing
Administration Publication No. 45-3, Transmittal 64, §3259
(November 1994) (Transmittal 64)). It found the trust was a
3
1-09-0979
revocable trust; Mrs. Zander's assignment constituted a transfer
of assets from the trust inuring to the assignees' benefit, which
constituted a "payment" under the State Medicaid Manual
triggering the 60-month look-back period. Because Mrs. Zander
applied for Medicaid assistance after only 37 months, a penalty
period of ineligibility was triggered based on the nonallowable
transfer of revocable trust assets.
Mrs. Zander sought timely review of the Department's
decision in the Circuit Court of Cook County. Treating the issue
as one of statutory construction subject to de novo review, the
circuit court agreed with the Department that Mrs. Zander's
transfer of her beneficial interest in the Zander Land Trust was
a payment from a revocable trust under the State and federal
Medicaid statutes, triggering the penalty period of
ineligibility, and confirmed the Department's decision. This
timely appeal followed.
ANALYSIS
An administrative agency's decision is subject to judicial
review under Illinois Administrative Review Law (735 ILCS 5/3-101
et seq. (West 2006)). "When reviewing a decision of an
administrative agency, the appellate court reviews the decision
of the agency, not the decision of the circuit court." Vincent
ex rel. Reed v. Department of Human Services, 392 Ill. App. 3d
88, 93, 910 N.E.2d 723 (2009).
Standard of Review
4
1-09-0979
The Department asserts the issue is whether, "for purposes
of Medicaid eligibility, an assignment of a beneficial interest
in an Illinois land trust is a non-allowable transfer of assets
subject to a 60-month look-back." As framed by Mrs. Zander, the
issue is whether her assignment "is a transfer of her personal
property or a payment from a revocable trust under 89 Ill. Admin.
Code §120.387(e) affecting her eligibility for Medicaid coverage
of her long term care." In either regard, the parties submit the
issue presents a question of law, subject to de novo review. See
Vincent, 392 Ill. App. 3d at 93 (whether trust assets were
available to Medicaid applicant to determine eligibility
presented a pure question of law). The Department, though
charged with determining eligibility for Medicaid assistance,
does not assert that its interpretation of the term "payment," to
capture the transfer of beneficial interest in an Illinois land
trust under its regulations, is entitled to any deference by this
court. Cf. County of Du Page v. Illinois Labor Relations Board,
231 Ill. 2d 593, 608-09, 900 N.E.2d 1095 (2008) (deference is
owed to the construction of a statute by the agency charged with
its interpretation). Accordingly, we construe the meaning of the
term "payment" in the Department regulations without regard to
the Department's interpretation.
Medicaid Legislation
In 1965, Congress enacted Title XIX of the Social Security
Act (42 U.S.C. §1396 et seq. (2006)), commonly known as the
5
1-09-0979
Medicaid Act. Gillmore v. Illinois Department of Human Services,
218 Ill. 2d 302, 304, 843 N.E.2d 336 (2006). We quote at length
the supreme court's description of the Medicaid program.
"This statute created a cooperative program
in which the federal government reimburses
state governments for a portion of the costs
to provide medical assistance to two low
income groups: the categorically needy and
the medically needy. The categorically needy
are persons who are automatically eligible to
receive cash grants under one of the general
welfare programs [citations]. The medically
needy are persons who are ineligible to
receive cash grants *** because their
resources exceed the eligibility threshold
***, but who still lack the ability to pay
for medical assistance. See 305 ILCS 5/5-2(2)
(West 2002); [citation] People who fall into
the second category are called MANG (Medical
Assistance-No Grant) recipients. See 89 Ill.
Adm. Code §120.10(a) (Conway-Greene CD-ROM
March 2002). To qualify for Medicaid as a
MANG recipient, a person must have low income
and low assets, and the person must 'spend
down' any resources over the statutory and
6
1-09-0979
regulatory limits. See 89 Ill. Adm. Code
§120.10(d) (Conway-Greene CD-ROM March
2002)." Gillmore, 218 Ill. 2d at 304-05.
To ensure that a MANG applicant's true financial resources
are considered in determining Medicaid eligibility, Congress
added look-back provisions to the Medicaid Act to examine assets
held in trusts.
"In 1993, Congress sought to combat the
rapidly increasing costs of Medicaid by
enacting statutory provisions to ensure that
persons who could pay for their own care did
not receive assistance. Congress mandated
that, in determining Medicaid eligibility, a
state must 'look-back' into a three- or
five-year period, depending on the asset,
before a person applied for assistance to
determine if the person made any transfers
solely to become eligible for Medicaid. See
42 U.S.C. §1396p(c)(1)(B) (2000). If the
person disposed of assets for less than fair
market value during the look-back period, the
person is ineligible for medical assistance
for a statutory penalty period based on the
value of the assets transferred. See 42
U.S.C. §1396p(c)(1)(A) (2000). Congress also
7
1-09-0979
mandated that a state plan for medical
assistance must comply with, inter alia, the
provisions of section 1396p with respect to
'transfers of assets[] and treatment of
certain trusts.' 42 U.S.C. §1396a(a)(18)
(2000). That is, any assets disposed of
during the look-back period are 'countable'
toward the Medicaid limits and subject to the
spend-down requirement, if the person's
resources are over those limits." Gillmore,
218 Ill. 2d at 306-07.
As the supreme court explained in Gillmore, an applicant
seeking Medicaid under MANG may qualify either by a "spend down"
of resources or, under the circumstances present in this case
where a transfer of trust assets occurred, by delaying an
application for the corresponding look-back period. Gillmore,
218 Ill. 2d at 305. "Thus, the Medicaid Act expresses an intent
by Congress that '[i]ndividuals are expected to deplete their own
resources [or engage in transfer of assets sufficiently in
advance] before obtaining assistance from the government.' "
Vincent, 392 Ill. App. 3d at 94, quoting Lebow v. Commissioner of
the Division of Medical Assistance, 433 Mass. 171, 172, 740
N.E.2d 978, 980 (2001). If an application is submitted within
the corresponding look-back period following a transfer of assets
from a trust, the transfer may trigger a statutory penalty period
8
1-09-0979
of ineligibility.
When Illinois elected to participate in the Medicaid
program, the Department implemented a program consistent with the
federal guidelines. Gillmore v. Department of Human Services,
354 Ill. App. 3d 497, 500-01, 822 N.E.2d 882 (2004), aff’d, 218
Ill. 2d 302, 843 N.E.2d 336 (2006). Illinois now essentially
administers its own Medicaid program. See West Virginia
University Hospitals, Inc. v. Casey, 885 F.2d 11, 15 (3d Cir.
1989) (Medicaid " 'is basically administered by each state within
certain broad requirements and guidelines' "), quoting Data On
the Medicaid Program: Eligibility, Services, Expenditures Fiscal
Years 1967-77 Before the H. Subcomm. On Health and the
Environment, H.R. Rep. No. 10, 95th Cong., 1st Sess. 1 (1999).
Transfer of Assets
Mrs. Zander sought Medicaid assistance under MANG. She does
not contend her transfer of beneficial interest in the Zander
Land Trust to her daughter was not a transfer of assets under the
Department regulations. To the contrary, she contends the 36-
month period applies to the transfer given the nature of the
interest transferred. She asserts the assignment of beneficial
interest in the Zander Land Trust was a "transfer of her personal
property, *** not a payment from a revocable trust, *** [and,
therefore,] subject to the general 36 month look-back period
imposed on transfers of personal property." (Emphasis added.)
The Department found the transfer was subject to a look-back
9
1-09-0979
period of 60 months.
The parties agree that the State Medicaid Manual
(Transmittal 64) is an essential authority on transfer of assets
as our supreme court recognized in Gillmore. Gillmore, 218 Ill.
2d at 306-07, quoting 42 U.S.C. §1396a(a)(18)(2000) (Transmittal
64 is a policy document promulgated to comply with "the
provisions of section 1396p with respect to 'transfer of assets[]
and treatment of certain trusts' "). Mrs. Zander does not
contend that the Zander Land Trust is exempt from the provisions
of Transmittal 64 addressing revocable trusts.
Transmittal 64 provides:
"Payment - For purposes of this section
a payment from a trust is any disbursal from
the corpus of the trust or from income
generated by the trust which benefits the
party receiving it. A payment may include
actual cash, as well as noncash or property
disbursements, such as the right to use and
occupy real property." State Medicaid
Manual, Health Care Financing Administration
Publication No. 45-3, Transmittal 64,
§3259.1(A)(8) (November 1994).
The Department promulgated section 120.387 of Title 89 of
the Code to comply with the requirement for look-back provisions
of the 1993 amendment to the Medicaid Act. Section 120.387(d)
10
1-09-0979
provides:
"A transfer of assets occurs when an
institutionalized person *** gives away real
or personal property ***. Changing ownership
of property to a life estate interest is an
asset transfer ***. For assets held in joint
tenancy, tenancy in common or similar
arrangement, a transfer occurs when an action
by any person reduces or eliminates the
person's ownership or control of the asset.
A transfer occurs when an action or actions
are taken which would cause an asset or
assets not be received ***." 89 Ill. Adm.
Code §120.387(d), amended at F23 Ill. Reg.
11301, 11310, eff. August 27, 1999.
Section 120.387(e) determines the circumstances when the 60
month look-back period applies:
"(A) the 60 month period applies to
payments from a revocable trust that are not
treated as income (as described in Section
120.347) ***." 89 Ill. Adm. Code
§120.387(e)(1)(A), amended at 23 Ill. Reg.
11310, eff. August 27, 1999.
As a matter of convenience to assist in our review of the
imposition of the statutory penalty, we read section 120.387(e)
11
1-09-0979
to require three elements before the 60-month period is
triggered: (1) a transfer from a revocable trust; (2) the
transfer from the trust is not an income payment under section
120.347(f)(2); and (3) the transfer is a payment, other than an
income payment.
Mrs. Zander concedes that the Zander Land Trust is a
revocable trust, satisfying the first element.
There is also no dispute that the second element is
satisfied--the Department could not treat the transfer of
beneficial interest from Mrs. Zander to her daughters as an
income payment under section 120.347(f)(2). A transfer is
treated as an income payment only if it is "made to or for the
benefit of" the Medicaid applicant, Mrs. Zander. 89 Ill. Adm.
Code §120.347(f)(2), amended at 22 Ill. Reg. 16300, eff. August
28, 1998.
The disagreement between the parties centers on whether Mrs.
Zander's transfer of her beneficial interest in the Zander Land
Trust to her daughters constituted a payment (other than an
income payment), the third element of section 120.387(e)(1)(A).
Under Transmittal 64, only if the transfer qualifies as a
"payment" from the revocable trust would the 60-month look-back
period apply; by contrast, the 36-month period would apply if the
transfer were merely a gift of personal property, as Mrs. Zander
contends. At the formal hearing, the Department acknowledged
that had the transfer been of a "savings account, stock
12
1-09-0979
certificates or savings bonds," the look-back would be 36 months.
Mrs. Zander puts forth several interrelated arguments
against the Department's decision that the assignment was a
nonallowable transfer of trust assets within 60 months of her
Medicaid application to trigger the statutory penalty period.
Common to each of her arguments is the contention that Mrs.
Zander's assignment of beneficial interest is irreconcilable with
the term "payment" in the Department regulations.
Penal Regulation
In challenging the Department's decision, Mrs. Zander makes
note that the Department imposed a penalty of ineligibility for
Medicaid assistance because the Department found a nonallowable
transfer of assets from the Zander Land Trust under section
120.387. Based on the "penal" nature of section 120.387 as to
Medicaid eligibility, Mrs. Zander argues that the section "must
be strictly construed and the definition of 'payment' may not be
extended to include an assignment of beneficial interest." She
cites various cases strictly construing penal statutes as
authority. In her reply brief, Mrs. Zander notes, "The
Department did not refute Mrs. Zander's assertion that the
applicable regulation is punitive and therefore subject to strict
construction."
At oral argument, the Department asserted that the
characterization of section 120.387 as punitive did not warrant a
written response because characterizing the regulation as
13
1-09-0979
"punitive" does not aid in interpreting the controlling
regulations of the Department. According to the Department, the
underlying question before us is whether the assignment of
beneficial interest in the Zander Land Trust qualifies as a
"payment" under the plain and clear language in Transmittal 64
and the Department regulations. From the Department's
perspective, there is little in the definition of "payment" that
lends itself to be strictly construed.
Because we agree that characterizing the regulation as
"punitive" does not aid in the interpretation of the Department
regulations, we do not address whether the term "payment" is
subject to strict construction. See Sylvester v. Industrial
Comm'n, 197 Ill. 2d 225, 232, 756 N.E.2d 822 (2001) (the primary
goal in construing the meaning of a statute, "to which all other
rules are subordinate, is to ascertain and give effect to the
intention of the legislature"). While section 120.387 explicitly
labels the period of ineligibility a "penalty" for nonallowable
transfers of assets of revocable trusts during the controlling
look-back period (89 Ill. Adm. Code §120.387(f), amended at 23
Ill. Reg. 11312, eff. August 27, 1999), we must affirm the
Department's decision if the assignment of beneficial interest
constitutes a "payment" under the plain and clear language of
Transmittal 64 and the Department regulations, a question we
examine de novo. See Gillmore, 354 Ill. App. 3d at 500 (we look
to the clear and plain meaning of the regulation to determine
14
1-09-0979
whether the Department's interpretation is correct).
Beneficial Interest as Personal Property
Fundamental to Mrs. Zander's arguments is her contention
that it is "well settled Illinois law that the beneficiary of an
Illinois land trust holds a personal property interest in the
land trust." See 765 ILCS 405/1 (West 2006); Klein v. La Salle
National Bank, 155 Ill. 2d 201, 207, 613 N.E.2d 737 (1993)
(beneficiaries' interest in Illinois land trust "is personal
property"). Mrs. Zander contends that because the interest she
assigned to her daughters is considered "personal property" under
Illinois law, this characterization controls the nature of the
asset transferred from the Zander Land Trust notwithstanding that
the Zander Land Trust was established with the conveyance of real
property. Premised on the transfer of beneficial interest as a
transfer of personal property, Mrs. Zander argues that the
transfer here cannot constitute a "payment from the trust."
(Emphasis added.) She contends the "personal property interest
was never a part of the corpus of the Land Trust and, therefore,
could not be paid from the Zander Land Trust."
We do not agree that the legal characterization of
beneficial interest as "personal property" under Illinois land
trust law controls the Department's review of Mrs. Zander's
transfer of beneficial interest from the Zander Land Trust to her
daughters. As our supreme court noted, Congress made clear in
its 1993 amendment to the Medicaid Act with the addition of
15
1-09-0979
section 1396p that persons able to pay for their own care could
not avoid doing so by the " 'transfer of assests[] and treatment
of certain trusts.' " Gillmore, 218 Ill. 2d at 307, quoting 42
U.S.C. §1396a(a)(18) (2000). We are unpersuaded that the legal
characterization of beneficial interest in an Illinois land trust
as personal property should necessarily exclude from the term
"payment" a transfer of assets from a revocable trust under the
Department regulations mandated by section 1396p of the Medicaid
Act. Cf. Vincent, 392 Ill. App. 3d at 95 (Medicaid Act
established that specially designed trusts "were 'no longer a
permissible means to shelter assets for purposes of Medicaid
eligibility' "), quoting Ramey v. Reinertson, 268 F.3d 955, 959
(10th Cir. 2001).
Further supporting our conclusion is Mrs. Zander's
observation in her main brief that "[t]he Illinois land trust is
'*** a legal fiction whereby an individual converts his ownership
interest in real property to ownership in personal property.'
[Quoting] Smith v. First National Bank of Danville, 254 Ill. App.
3d 251, 264, 624 N.E.2d 899 (1993)." Mrs. Zander offers no
compelling reason that this "legal fiction" should be carried
over to Medicaid eligibility when Congress, in an effort to
address the "increasing costs of Medicaid," mandated that state
plans consider the true resources of Medicaid applicants by
looking back into transfers of trust assets. Gillmore, 218 Ill.
2d at 307.
16
1-09-0979
In any event, under section 120.387(d), a transfer of
assets, subject to a look-back period, "occurs when an
institutionalized person *** gives away real or personal property
***." 89 Ill. Adm. Code §120.387(d), amended at 23 Ill. Reg.
11310 eff. August 27, 1999. As the title to section 120.387
makes clear, consistent with the mandate from Congress, the focus
is on "Property Transfers Occurring On or After August 11, 1993."
(Emphasis added.) 89 Ill. Adm. Code §120.387, amended at 23 Ill.
Reg. 11309, eff. August 27, 1999. We find unpersuasive Mrs.
Zander's position that a transfer of beneficial interest from the
Zander Land Trust is, by its very nature, irreconcilable with the
term "payment" to trigger the 60-month look-back period for
transfers from a revocable trust. We reject Mrs. Zander's
position that the term "payment" cannot apply to the transfer of
beneficial interest in an Illinois land trust simply because,
under Illinois law, the focus is on the beneficial interest
rather than the real property, which forms the principal of the
land trust.
Corpus of Trust
Mrs. Zander next contends that because the assignment of
beneficial interest in the Zander Land Trust only changed the
persons that are entitled to benefit from the "the earnings,
avails and proceeds of said real estate," the corpus of the land
trust remained unaffected. The argument is that because the
corpus of the land trust remained intact, her "assignment of the
17
1-09-0979
beneficial interest was simply a transfer of personal property by
Bette Zander to her daughters and not a payment from the trust."
(Emphasis added.) Once again, we reject Mrs. Zander's position
that a payment from a trust cannot capture the transfer of
beneficial interest of a land trust simply because the personal
property interest she conveyed in the assignment was not a part
of the corpus of the land trust. We reject Ms. Zander's solitary
focus on the "personal property" nature of the interest
transferred from the Zander Land Trust to drive our analysis.
We emphatically reject Mrs. Zander's claim that "Mrs.
Zander's beneficial interest was not an asset of the Zander Land
Trust" by virtue of Illinois land trust law that treats the
beneficial interest in the land trust as personal property. We
reject Mrs. Zander's implicit claim that the principal of the
land trust and the beneficial interest in the trust are wholly
unrelated. That this claim borders on fiction is readily
discernable given that the holder of beneficial interest in an
Illinois land trust also has the power to dissolve the trust and
sell the real estate, as Mrs. Zander conceded at oral argument.
See IMM Acceptance Corp. v. First National Bank & Trust Co., 148
Ill. App. 3d 949, 954, 499 N.E.2d 1012 (1986) ("While referred to
as personal property, every attribute of real property ownership,
except title, is retained by the beneficiary under [an Illinois
land] trust agreement").
In accordance with the congressional mandate that the
18
1-09-0979
Illinois Medicaid program take into account the full resources of
Medicaid applicants, the Department regulations focus on
transfers of assets from a trust. We note that had no transfer
of beneficial interest occurred prior to Mrs. Zander's
application for Medicaid assistance, the Department was required
to treat the real property in the Zander Land Trust "as an
available asset" under section 120.347(f)(1) regardless of the
restrictions in the land trust documents. See Vincent, 392 Ill.
App. 3d at 93-96 (court upheld Department's determination that
"trust assets were available for [Medicaid applicant] under
federal medicaid law, notwithstanding the trust language to the
contrary"). There is no suggestion by Mrs. Zander that this is
not so.
If the parcels of real property conveyed to the Zander Land
Trust constituted an available asset of Mrs. Zander prior to the
assignment of beneficial interest, we find no basis for the
available asset in the trust to effectively disappear by the
conveyance of beneficial interest of the Zander Land Trust to her
daughters. We are unpersuaded that the assignment could not fall
within "other payments from the trust as transfers of assets by
[the Medicaid applicant] (subject to the provisions of Section
120.387)" (89 Ill. Adm. Code §120.347(f)(3), amended at 22 Ill.
Reg. 16300, eff. August 28 1999), simply because the use of the
term "payment" is contrary to Mrs. Zander's notion of conveyance
of personal property.
19
1-09-0979
Final Administrative Decision
In her main brief, Mrs. Zander complains that the "Final
Administrative Decision contained no analysis as to why Mrs.
Zander's assignment of beneficial interest in the Zander Land
Trust was treated as a 'payment' from a revocable trust." We
offer the following analysis for the Department's decision
specific to Mrs. Zander's circumstances.
On December 4, 2003, after Mrs. Zander became a resident of
a care facility, Mrs. Zander established the Zander Land Trust,
to which assets of Mrs. Zander were conveyed in the form of
several parcels of real estate. Mrs. Zander concedes the Zander
Land Trust was a revocable trust. The Zander Land Trust fell
subject to section 120.347 (Treatment of Trusts) because "assets
of [Mrs. Zander] were used to form *** the principal of the
trust." 89 Ill. Adm. Code §120.347(c), amended at 22 Ill. Reg.
16299, eff. August 28, 1998.
On December 16, 2003, Mrs. Zander assigned her beneficial
interest in the Zander Land Trust to her three daughters. When
Mrs. Zander applied for Medicaid assistance, the Department had
"to determine if [Mrs. Zander] made any transfers solely to
become eligible for Medicaid." Gillmore, 218 Ill. 2d at 306. In
accordance with the congressional mandate on examining assets
held in trust, the Department had to treat the principal of the
Zander Land Trust as an available asset of Mrs. Zander. The
Department then had to determine whether the assignment of
20
1-09-0979
beneficial interest fell within the provision requiring that "any
other payments from the trust [be treated] as transfers of assets
by [Mrs. Zander] (subject to provisions of Section 120.387)." 89
Ill. Adm. Code §120.347(f)(3), amended at 22 Ill. Reg. 16300,
eff. August 28, 1998.
If the assignment constituted a "payment" from a revocable
trust as contemplated by section 120.387(e)(1)(A), then the 60-
month look-back period applied to Mrs. Zander's transfer of
assets to her daughters by way of assignment of beneficial
interest in the Zander Land Trust. 89 Ill. Adm. Code
§120.347(f)(3), amended at 22 Ill. Reg. 16300, eff. August 28,
1998; 89 Ill. Adm. Code §120.387(e)(1)(A), amended at 23 Ill.
Reg. 11310, eff. August 27, 1999.
Section 120.347(f)(2) requires that the Department "treat as
income[,] payments from the trust that are made to or for the
benefit of [Mrs. Zander]"; however, no such income payments were
ever made. 89 Ill. Adm. Code §120.347(f)(2), amended at 22 Ill.
Reg. 16300, eff. August 27, 1998. Section 120.347(f)(3) requires
that the Department "treat any other payments from the trust as
transfers of assets by [Mrs. Zander]." (Emphasis added.) 89
Ill. Adm. Code §120.347(f)(3), amended at 22 Ill. Reg. 16300,
eff. August 28, 1998.
There is no distinction in the use of "payments" in sections
120.347(f)(2) and (f)(3). "Payment" is also used in section
120.387(e)(1)(A) ("the 60 month period applies to payments from a
21
1-09-0979
revocable trust") (emphasis added), 89 Ill. Adm. Code
§120.387(e)(1)(A), amended at 23 Ill. Reg. 11310, eff. August 27,
1999. We perceive no difference in the meaning of "payment" used
in the Treatment of Trusts section (section 120.347) and the
meaning of "payment" used in the section titled Property
Transfers Occurring On or After August 11, 1993 (section
120.387). The term "payments" in section 120.387(e)(1)(A)
conveys precisely the same action conveyed in sections
120.347(f)(2) and (f)(3), that is, a transfer of assets from a
trust, either as "income payments" or, more broadly, as "any
other payments." See McMahan v. Industrial Comm'n, 183 Ill. 2d
499, 513, 702 N.E.2d 545 (1998) ("Under basic rules of statutory
construction, where the same words appear in different parts of
the same statute, they should be given the same meaning unless
something in the context indicates that the legislature intended
otherwise").
That the term "payment" is repeatedly used in the Department
regulations is simply a matter of convenience expressing a
transfer of trust assets either to or by a Medicaid applicant.
It is the transfer of assets, which constitutes a "payment," that
bears scrutiny under the Department regulations: "A transfer of
assets occurs when an institutionalized person *** buys, sells or
gives away real or personal property ***." 89 Ill. Adm. Code,
§120.387(d), amended at 23 Ill. Reg. 11301, eff. August 27, 1999.
Mrs. Zander gave away her beneficial interest in the Zander Land
22
1-09-0979
Trust to her daughters. We find no basis to exclude this
transfer of assets from scrutiny under the Department regulations
regarding property transfers from trusts for Medicaid eligibility
simply because the conveyance is considered under Illinois law to
be that of personal property, a conveyance which Mrs. Zander
contends is at odds with the common understanding of the term
"payment." "Payment" as used in the Department regulations
simply captures the transfer of assets from a revocable trust,
which occurred when Mrs. Zander assigned the beneficial interest
in the Zander Land Trust to her daughters.
Against this reading of "payment" in the Department
regulations to capture the transfer of assets from a revocable
trust, Mrs. Zander contends that "payment" under the definition
in Transmittal 64 is restricted to a "disbursal from the corpus
of the trust or from income generated by the trust." Transmittal
64, §3259.1(a)(8). We are not persuaded that the quoted language
controls the meaning of "payment."
Transmittal 64 further provides that "payment" "may include
*** noncash or property disbursements, such as the right to use
and occupy real property." Transmittal 64, §3259.1(a)(8). That
broader definition of "payment" in Transmittal 64 fits precisely
the situation present in this case. Mrs. Zander's assignment of
beneficial interest in the Zander Land trust was either a noncash
disbursement (if Mrs. Zander persists in her claim that
assignment was of "personal property") or a property
23
1-09-0979
disbursement, giving her daughters the right to use and occupy
the real property constituting the principal of the trust. The
right to use and occupy is much like the right granted by the
Zander Land Trust Agreement to the beneficiaries, which includes
the "power of direction to deal with the title to said property
and to manage and control said property *** and *** to receive
the proceeds from rentals and from mortgages, sales or other
disposition of said premises." With the assignment of beneficial
interest, Mrs. Zander's three daughters were given the right to
use and occupy the principal of the trust, no less so than Mrs.
Zander had the right to use and occupy the parcels of real estate
prior to establishing the Zander Land Trust. See IMM Acceptance
Corp., 148 Ill. App. 3d at 954.
By their clear and plain language, Transmittal 64 and
section 120.347 and section 120.387 provide a consistent meaning
of "payment," which captures an assignment of beneficial interest
because it involves a transfer of assets from the revocable
Zander Land Trust. Transmittal 64, §3259.1(a)(8); 89 Ill. Adm.
Code §120.347, amended at 22 Ill. Reg. 16299, eff. August 28,
1998; 89 Ill. Adm. Code §120.387, amended at 23 Ill. Reg. 11309,
eff. August 27, 1999.
As matter of law, Mrs. Zander's assignment of her beneficial
interest in the Zander Land Trust was subject to the 60-month
look-back period to determine Medicaid eligibility. Because Mrs.
Zander applied for Medicaid after only 37 months following her
24
1-09-0979
transfer of the assets of the Zander Land Trust to her daughters,
she was subject to a statutory period of ineligibility.
CONCLUSION
Mrs. Zander's transfer of her beneficial interest in the
Zander Land Trust constituted a "payment" from a revocable trust
because it was a noncash disbursement or a disbursement of
property rights regarding the parcels of real property
constituting the principal of the Zander Land Trust. The 60-
month look-back period therefore applied to Mrs. Zander's
Medicaid application. Because she transferred her beneficial
interest in the Zander Land Trust within 60 months of the
application, the Department properly imposed the statutory
penalty period for Medicaid assistance.
Affirmed.
PATTI and LAMPKIN, JJ., concur.
25
1-09-0979
REPORTER OF DECISIONS - ILLINOIS APPELLATE COURT
____________________________________________________________________
BETTE I. ZANDER,
Plaintiff-Appellant,
v.
CAROL L. ADAMS, Secretary, The Department of Human Services,
CARMELA A. GARDNER, Chief Bureau of Assistance Hearings, The
Department of Human Services, and BARRY MARAM, Director, The
Department of Healthcare and Family Services,
Defendants-Appellees.
________________________________________________________________
No. 1-09-0979
Appellate Court of Illinois
First District, First Division
Filed: March 15, 2010
_________________________________________________________________
JUSTICE GARCIA delivered the opinion of the court.
PATTI and LAMPKIN, JJ., concur.
_________________________________________________________________
Appeal from the Circuit Court of Cook County
Honorable Leroy K. Martin, Jr., Judge Presiding
_________________________________________________________________
For PLAINTIFF- Janna Dutton
APPELLANT Janna Dutton & Associates, PC
One N. LaSalle Suite 1700
Chicago, IL 60602
For DEFENDANT- Lisa Madigan, Attorney General, State of Illinois
APPELLEE Michael A. Scodro, Solicitor General
Carl J. Elitz
Assistant Attorney General
100 W. Randolph Street, 12th Floor
Chicago, IL 60601
26