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Report of the Elder Law Committee

To the Council of Delegates:

The Elder Law Committee recommends to the Council of Delegates a proposal to amend ORC §2101.24 regarding special needs trusts.

As part of the Omnibus Budget Reconciliation Act (OBRA) of 1993, Congress created two types of exempt trusts that would not be counted as resources for purposes of Medicaid eligibility. These trusts are set forth in 42 USC 1396p(d)(4)(A) and (C) [referred to as (d)(4)(A) and (d)(4)(C) trusts]. These trusts may be established with assets of an individual under age 65 who is disabled, by: a parent, grandparent, legal guardian of the individual, or "a court." 42 U.S.C. §1382(b)(e)(5) specifically provides that neither (d)(4)(A) nor (d)(4)(C) trusts are considered as resources for purposes of Supplemental Security Income (SSI).

The Congressional intent was specifically to allow disabled people living at subsistence levels to have funds for special needs (quality of life enhancement items) and not lose Medicaid or SSI benefits. Upon the death of the disabled beneficiary of a (d)(4)(A) trust, OBRA ’93 requires that the state must receive all amounts remaining in the trust up to an amount equal to the total medical assistance paid on behalf of the individual. Any excess can be paid to remainder beneficiaries named in the trust. With respect to a (d)(4)(C) trust, any remaining funds must either remain with the trust or paid to the state.

There are two problems with Ohio law. First, there is no specific jurisdictional authority in Ohio law granting any court the power to create (d)(4)(A) or (d)(4)(C) trusts. While many probate courts in Ohio have issued orders allowing the creation of these types of trusts, other probate courts have been reluctant to do so in the absence of specific statutory authority. Secondly, the Social Security Administration (SSA) only considers irrevocable (d)(4)(A) or (d)(4)(C) trusts to be exempt resources for SSI eligibility purposes. Because Ohio law does not permit probate courts to create wills for wards in guardianship actions, most probate courts in Ohio will not name remainder beneficiaries for (d)(4)(A) or (d)(4)(C) trusts that they create. The case Mumma v. Huntington National Bank of Columbus [9 Ohio App.2d 166, 223 N.E. 2d 621 (1967)] has been interpreted by the SSA as holding that Ohio trusts, even irrevocable trusts, are in fact revocable for SSI purposes if they do not have a named beneficiary. This interpretation is based upon the "Doctrine of Worthier Title." As a result of the combination of probate courts’ inability to name remainder beneficiaries when creating (d)(4)(A) or (d)(4)(C) trusts with the holding in Mumma, disabled Ohio citizens are being denied SSI benefits to which they are specifically entitled under OBRA ’93.

The first problem—the reluctance of some probate courts to authorize the creation of (d)(4)(A) or (d)(4)(C) trusts—can be remedied by the specific legislative granting of that authority. The second, and more serious, problem regarding irrevocability can be remedied by a statutory provision that states that all court created (d)(4)(A) and (d)(4)(C) trusts are irrevocable as a matter of state law. The proposed legislation addresses both issues.

Respectfully submitted,
John F. Murphy, Cleveland
Chair


Exhibit A
§2101.24. Jurisdiction of Probate Court
(A)(1) Except as otherwise provided by law, the probate court has exclusive jurisdiction: (a) To take the proof of wills and to admit to record authenticated copies of wills executed, proved, and allowed in the courts of any other state, territory, or country. If the probate judge is unavoidably absent, any judge of the court of common pleas may take proof of wills and approve bonds to be given, but the record of these acts shall be preserved in the usual records of the probate court.

(b) To grant and revoke letters testamentary and of administration;

(c) To direct and control the conduct and settle the accounts of executors and administrators and order the distribution of estates;

(d) To appoint the attorney general to serve as the administrator of an estate pursuant to section 2113.06 of the Revised Code;

(e) To appoint and remove guardians, conservators, and testamentary trustees, direct and control their conduct, and settle their accounts;

(f) To grant marriage licenses;

(g) To make inquests respecting persons who are so mentally impaired as a result of a mental or physical illness or disability, or mental retardation, or as a result of chronic substance abuse, that they are unable to manage their property and affairs effectively, subject to guardianship;

(h) To qualify assignees, appoint and qualify trustees and commissioners of insolvents, control their conduct, and settle their accounts;

(i) To authorize the sale of lands, equitable estates, or interests in lands or equitable estates, and the assignments of inchoate dower in such cases of sale, on petition by executors, administrators, and guardians;

(j) To authorize the completion of real estate contracts on petition of executors and administrators;

(k) To construe wills;

(l) To render declaratory judgments, including, but not limited to, those rendered pursuant to section 2107.084 of the Revised Code;

(m) To direct and control the conduct of fiduciaries and settle their accounts;

(n) To authorize the sale or lease of any estate created by will if the estate is held in trust, on petition by the trustee;

(o) To terminate a testamentary trust in any case in which a court of equity may do so;

(p) To hear and determine actions to contest the validity of wills;

(q) To make a determination of the presumption of death of missing persons and to adjudicate the property rights and obligations of all parties affected by the presumption;

(r) To hear and determine an action commenced pursuant to section 3107.41 of the Revised Code to obtain the release of information pertaining to the birth name of the adopted person and the identity of the adopted person’s biological parents and biological siblings;

(s) To act for and issue orders regarding wards pursuant to section 2111.50 of the Revised Code;

(t) To hear and determine actions against sureties on the bonds of fiduciaries appointed by the probate court;

(u) To hear and determine actions involving informed consent for medication of persons hospitalized pursuant to section 5122.141 or 5122.15 of the Revised Code;

(v) To hear and determine actions relating to durable powers of attorney for health care as described in division (D) of section 1337.16 of the Revised Code;

(w) To hear and determine actions commenced by objecting individuals, in accordance with section 2133.05 of the Revised Code;

(x) To hear and determine complaints that pertain to the use or continuation, or the withholding or withdrawal, of life-sustaining treatment in connection with certain patients allegedly in a terminal condition or in a permanently unconscious state pursuant to division (E) of section 2133.08 of the Revised Code, in accordance with that division;

(y) To hear and determine applications that pertain to the withholding or withdrawal of nutrition and hydration from certain patients allegedly in a permanently unconscious state pursuant to section 2133.09 of the Revised Code, in accordance with that section;

(z) To hear and determine applications of attending physicians in accordance with division (B) of section 2133.15 of the Revised Code;

(aa) To hear and determine actions relative to the use or continuation of comfort care in connection with certain principals under durable powers of attorney for health care, declarants under declarations, or patients in accordance with division (E) of either section 1337.16 or 2133.12 of the Revised Code;

(bb) To hear and determine applications for an order relieving an estate from administration under section 2113.03 of the Revised Code;

(cc) To hear and determine applications for an order granting a summary release from administration under section 2113.031 of the Revised Code.

(2) In addition to the exclusive jurisdiction conferred upon the probate court by division (A)(1) of this section, the probate court shall have exclusive jurisdiction over a particular subject matter if both of the following apply:

(a) Another section of the Revised Code expressly confers jurisdiction over that subject matter upon the probate court.

(b) No section of the Revised Code expressly confers jurisdiction over that subject matter upon any other court or agency.

(B)(1) The probate court has concurrent jurisdiction with, and the same powers at law and in equity as, the general division of the court of common pleas to issue writs and orders, and to hear and determine actions as follows:

(a) If jurisdiction relative to a particular subject matter is stated to be concurrent in a section of the Revised Code or has been construed by judicial decision to be concurrent, any action that involves that subject matter;

(b) Any action that involves an inter vivos trust; a trust created pursuant to section 1339.51 of the Revised Code; a charitable trust or foundation; subject to divisions (A)(1)(u) and (z) of this section, a power of attorney, including, but not limited to, a durable power of attorney; the medical treatment of a competent adult; or a writ of habeas corpus.

(c) Approval of an OBRA ’93 trust

(i) As used in this section, "OBRA ’93 trust" means a trust established pursuant to 42 U.S.C. § 1396p(d)(4)(A) or an account within a pooled trust pursuant to 42 U.S.C. § 1396p(d)(4)(C).

(ii) Upon the request of an interested party, a court may approve establishment of an OBRA ’93 trust for a person with a disability as defined in section 1614(a)(3) of the federal Social Security Act (42 U.S.C. § 1382c (a)(3)), whether or not the person is an incompetent person as defined in Ohio Rev. Code § 2111.01(D), and may direct that assets of the person with a disability be placed in the OBRA ’93 trust.

(iii) Prior to approving an OBRA ’93 trust for a person with a disability who is a minor or who is incompetent, the court shall consider the factors listed in Ohio Rev. Code § 2111.50(C).

(iv) Nothing in this section shall be construed to preclude an OBRA ’93 trust from being created by any person other than a court, or by any other court, as would be consistent with 42 U.S.C. § 1396p(d)(4).

(v) Notwithstanding any provision or principle of law to the contrary, an OBRA ‘93 trust, the establishment of which is approved by a court pursuant to this section, shall be irrevocable by the grantor or the grantor’s legal representative. This provision shall apply whether or not an OBRA ’93 trust instrument designates the trust as irrevocable, and whether or not the trust designates any remainder beneficiaries.

(2) Any action that involves a concurrent jurisdiction subject matter and that is before the probate court may be transferred by the probate court, on its order, to the general division of the court of common pleas.

(C) The probate court has plenary power at law and in equity to dispose fully of any matter that is properly before the court, unless the power is expressly otherwise limited or denied by a section of the Revised Code.

(D) The jurisdiction acquired by a probate court over a matter or proceeding is exclusive of that of any other probate court, except when otherwise provided by law.

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