Christine Tarrant v. DHS

2019 WI App 45

COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION

Case No.: 2018AP1299

Complete Title of Case:

CHRISTINE TARRANT,

PETITIONER-RESPONDENT,

V.

WISCONSIN DEPARTMENT OF HEALTH SERVICES,

RESPONDENT-APPELLANT.

Opinion Filed: July 31, 2019
Submitted on Briefs: March 14, 2019

JUDGES: Neubauer, C.J., Gundrum and Hagedorn, JJ.
Concurred:
Dissented:

Appellant
ATTORNEYS: On behalf of the respondent-appellant, the cause was submitted on the
briefs of Maura FJ Whelan, assistant attorney general, and Brad D.
Schimel, attorney general.

Respondent
ATTORNEYS: On behalf of the petitioner-respondent, the cause was submitted on the
briefs of Polly Shoemaker of ABC for Health, Inc., Madison.
2019 WI App 45

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
July 31, 2019
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2018AP1299 Cir. Ct. No. 2017CV1973

STATE OF WISCONSIN IN COURT OF APPEALS

CHRISTINE TARRANT,

PETITIONER-RESPONDENT,

V.

WISCONSIN DEPARTMENT OF HEALTH SERVICES,

RESPONDENT-APPELLANT.

APPEAL from an order of the circuit court for Dane County:
RICHARD G. NIESS, Judge. Reversed.

Before Neubauer, C.J., Gundrum and Hagedorn, JJ.

¶1 GUNDRUM, J. The Wisconsin Department of Health Services
(Department) appeals from the circuit court’s order concluding that the monthly
payments Christine Tarrant received from a testamentary trust account did not
No. 2018AP1299

constitute countable unearned income when determining her eligibility for medical
assistance. Because we conclude the circuit court erred, we reverse.

Background

¶2 As a result of her father’s death, and during the time period relevant
to this case, Tarrant received $4500 a month from a testamentary trust created by
her father’s will. In January 2017, she applied to renew government-provided
medical assistance.1 The Department treated the monthly payments as unearned
income, which when combined with her other income, made her ineligible for
medical assistance. As a result, her applications were denied.

¶3 Tarrant appealed the Department’s decision. An administrative law
judge agreed with the Department that the monthly payments constituted unearned
income for purposes of determining medical assistance eligibility and that these
payments made her ineligible for medical assistance. Tarrant petitioned for review
by the circuit court, and the court reversed the Department’s decision. The
Department appeals; we now reverse the decision of the circuit court.

Discussion

¶4 “When a party appeals a circuit court order reviewing a decision
made by an administrative agency, we review the agency’s decision, rather than
that of the circuit court.” Newcap, Inc. v. DHS, 2018 WI App 40, ¶13, 383
Wis. 2d 515, 916 N.W.2d 173. Because there is no factual dispute in this case, we

1
Tarrant applied for Medicaid, Medicare Premium Assistance, and BadgerCare Plus.

2
No. 2018AP1299

review de novo the application of legal authority to the facts. See Estate of
Gonwa v. DHFS, 2003 WI App 152, ¶25, 265 Wis. 2d 913, 668 N.W.2d 122.

¶5 Medical assistance is “aimed at ensuring medical care for those who
cannot pay for their own care.” Id., ¶19. Eligibility for such assistance “is not a
default position that the Department must rebut but rather a privilege for which the
applicant must prove eligibility.” Id., ¶17. Thus, in this case, Tarrant bore the
burden of demonstrating to the Department that she was eligible for the assistance
for which she applied. We agree with the Department and the ALJ that she failed
to meet that burden.

¶6 Eligibility for medical assistance is determined based upon an
individual’s “income and resources.” WIS. STAT. § 49.47(4)(a) (2017-18)2; State
of Georgia, Dep’t of Med. Assistance v. Shalala, 8 F.3d 1565, 1566 (11th Cir.
1993) (“Applicants are needy, and therefore eligible for assistance, depending on
what income and resources are available to them.” (citing Schweiker v. Gray
Panthers, 453 U.S. 34, 36 (1981))). “‘[I]ncome’ includes earned or unearned
income that would be included in determining eligibility … for the aged … under
42 U.S.C. [§§] 1381 to 1385 [2016].” Sec. 49.47(4)(c). “[E]arned income means
only” wages, net self-employment earnings, “remuneration received for services
performed in a sheltered workshop or work activities center,” and royalties.
Sec. 1382a(a)(1). “[U]nearned income means all other income, including”
“support and maintenance” (with certain exceptions not relevant here); “any
payments received as an annuity, pension, retirement, or disability benefit”;

2
All references to the Wisconsin Statutes are to the 2017-18 version unless otherwise
noted.

3
No. 2018AP1299

“prizes and awards”; “payments to the individual occasioned by the death of
another person” if the payments exceed last illness and burial costs; “support and
alimony payments, and ... gifts … and inheritances”; “rents, dividends, interest,
and royalties”; “any earnings of, and additions to, the corpus of a trust established
by an individual ... of which the individual is a beneficiary”; and certain
“payments to or on behalf of a member of a uniformed service for housing.” Sec.
1382a(a)(2). We agree with the Department’s position that the types of income
identified in § 1382a(a)(2) as unearned income are not intended to be a limited list
as unearned income means “all other income, including” the types specifically
identified. (Emphasis added.) See also 20 C.F.R. § 416.1120 (1994) (“Unearned
income is all income that is not earned income.” (emphasis added)); 20 C.F.R.
§ 416.1121 (1994) (delineating “some types of unearned income” (emphasis
added)); Rosenshein v. Florida Dep’t of Children & Families, 971 So. 2d 837,
839 (Fla. Dist. Ct. App. 2007) (concluding that “the federal statute is not a
complete itemization of every possible type of unearned income” and that
although monthly long-term care insurance payments are not specifically
identified, they are nonetheless “‘countable’ unearned income”).

¶7 Tarrant points out that 42 U.S.C. § 1382a(a)(2)(G) “expressly
identifies Medicaid Qualifying Trust distributions as countable unearned income”
(“any earnings of, and additions to, the corpus of a trust established by an
individual … of which the individual is a beneficiary”), and she briefly asserts that
the lack of similar enumeration for testamentary trust payments suggests such
payments do not constitute unearned income. We disagree. Section
1382a(a)(2)(G), like WIS. STAT. § 49.454, upon which Tarrant also heavily relies,
see infra ¶12, appears to address a very specific type of trust—self-settled trusts—
and provides us with no indication that adoption of this provision was intended as

4
No. 2018AP1299

an implication that payments from other types of trusts are not to be considered
unearned income. The mildest of implications subd. (G) may have in this regard is
overcome by the instruction that unearned income means “all other income” that is
not earned income, see § 1382a(a)(2) and 20 C.F.R. § 416.1120, and the similar
nature of the payments Tarrant received to other types of “payments” and funds
considered as unearned income. For example, although not specifically discussed
by the parties, if the testamentary trust payments Tarrant received do not directly
satisfy the language of the enumerated “payments … occasioned by the death of
another person” or “inheritances” provisions of § 1382a(a)(2)(D) and (E)
respectively, the payments at least bear much similarity to those types of
payments. We see no reason why Tarrant’s testamentary trust payments,
occasioned by her father’s passing, should not similarly be treated as unearned
income.

¶8 “Income,” earned or unearned, “is anything you receive in cash or in
kind that you can use to meet your needs for food and shelter.” 20 C.F.R.
§ 416.1102 (1994). In addition to other authorizations, the trust in this case
authorized the trustees to pay Tarrant “reasonable sums” for her “comfort and
well-being” and stated that “[t]his provision shall be construed liberally.” Thus,
Tarrant’s trust payments appear to be funds available for her unrestricted use for
her comfort and well-being, and we see no error with the Department treating
these payments as unearned income for purposes of determining her eligibility for
medical assistance. See State ex rel. DHS v. Trust Co. of Okla., 890 P.2d 1342,
1347 & n.15, 1349 (Okla. 1995) (noting “[f]ederal regulations defining income for
SSI provide that income is anything received in cash or in kind that can be used to
meet needs for food, clothing and shelter” and concluding that disbursements from

5
No. 2018AP1299

a trust “may be income for medical [assistance] eligibility purposes … if they are
utilized to meet” such needs (citing 20 C.F.R. §§ 416.1102, 416.1103 (1994))).

¶9 WISCONSIN STAT. § 49.45(34) and Wisconsin case law lead us to
look to the state Medicaid Eligibility Handbook for additional guidance in
determining whether the Department appropriately included Tarrant’s monthly
trust payments in determining her eligibility for medical assistance.3 Section
49.45(34) directs that the Department prepare the handbook and that it be used for
administration of the medical assistance program. Further, our supreme court has
recognized that the handbook “is consistent with the federal and state legislation
regarding medical assistance,” Tannler v. DHSS, 211 Wis. 2d 179, 187-88 &
n.10, 564 N.W.2d 735 (1997), and has expressed that “because the … Handbook is
designed to assist state and local agencies to implement the federal-state [medical
assistance] program,” we may consider its provisions persuasive in resolving
disputes, id. at 184.

¶10 Section 15.4.1 of the handbook, “Income from Trusts,” provides that
“[a]ll payments (including interest and dividends) from a trust to the beneficiary
are unearned income to the beneficiary.” Medicaid Eligibility Handbook, § 15.4.1

3
Both the Department and Tarrant acknowledge the significance of the Medical
Eligibility Handbook in resolving the issue before us on appeal.

6
No. 2018AP1299

(June 2016) (emphasis added).4 Tarrant asserts that the trusts referred to in the
handbook do not include testamentary trusts like that from which she received
payments. She claims that “[u]nder the handbook policy, payments from a trust
may be counted as income to the beneficiary, but only if the trust was established
by one of the specifically enumerated grantor types.” (Emphasis added.) She
specifically references § 15.4.1 of the handbook, “Income from Trusts,” which
explains that

A trust is any arrangement in which a person (the
“grantor”) transfers property to another person with the
intention that the person (the “trustee”) hold, manage, or
administer the property for the benefit of the grantor or of
someone designated by the grantor (the “beneficiary”).

The term “trust” includes any legal instrument or device
or arrangement which, even though not called a trust under
state law, has the same attributes as a trust. That is, the
grantor transfers property to the trustee, and the grantor’s
intention is that the trustee hold, manage, or administer the
property for the benefit of the grantor or of the beneficiary.

The grantor can be:

 A Medicaid member.

 The spouse of a Medicaid member.

4
Tarrant’s application for BadgerCare Plus was also denied by the Department. The
BadgerCare Plus Eligibility Handbook explains that “[o]ther income is any payment that the
member receives from sources other than employment. Unless it is disregarded income [(not the
case here)], count the gross payment in the person’s income total.” BadgerCare Plus Eligibility
Handbook, § 16.5 (Aug. 2016). It also provides that “[a]ll regular payments … made under the
terms of the trust, from the trust to the beneficiary are unearned income to the beneficiary.” Id.
Because the parties focus their arguments on the Medicaid Eligibility Handbook, we will as well;
however, Tarrant makes no argument, and we see no reason, for treating the eligibility
determination for Tarrant any differently based upon the BadgerCare Plus Eligibility Handbook
than based upon the Medicaid Eligibility Handbook.

7
No. 2018AP1299

 A person … with legal authority to act in place of or
on behalf of the member or the member’s spouse.
This includes a power of attorney or guardian.

 A person … acting at the direction or upon the
request of the member or the member’s spouse.
This includes relatives, friends, volunteers, or
authorized representatives.

Medicaid Eligibility Handbook, § 15.4.1.

¶11 We do not read the handbook as being as restrictive as Tarrant
would like. The handbook identifies four types of persons that “can be” a grantor.
Tarrant argues as if a grantor “can only be” one of these types of persons. The
handbook does not state this. Importantly, there is no dispute in this case that
Tarrant is the beneficiary of and received monthly payments from a “trust,” and
the handbook unambiguously states that “[a]ll payments … from a trust to the
beneficiary are unearned income to the beneficiary” and that such unearned
income should be “count[ed] ... in a person’s income total.” Medicaid Eligibility
Handbook, §§ 15.4, 15.4.1 (emphasis added). Furthermore, the handbook
explains: “The term ‘trust’ includes any legal instrument or device or arrangement
which, even though not called a trust under state law, has the same attributes as a
trust.” We conclude that the testamentary trust in this case qualifies as a “trust”
under the handbook, and thus pursuant to the handbook, the Department properly
considered the trust payments to Tarrant as unearned income to be counted for
purposes of determining medical assistance eligibility.

¶12 In arguing that the Department erred in including her trust payments,
Tarrant directs us to WIS. STAT. § 49.454. This statute addresses when the corpus
and payments of certain self-settled trusts may be considered in determining a
person’s medical assistance eligibility. Section 49.454(1)(a) provides in relevant
part that

8
No. 2018AP1299

this section applies to an individual with respect to a trust if
assets of the individual or the individual’s spouse were
used to form all or part of the corpus of the trust and if any
of the following persons established the trust other than by
will:

1. The individual.

2. The individual’s spouse.

3. A person … with legal authority to act in place of or
on behalf of the individual or the individual’s spouse.

4. A person ... acting at the direction or upon the
request of the individual or the individual’s spouse.

The statute goes on to explain how the corpus and payments from a trust falling
within the description of para. (1)(a) are to be treated for purposes of determining
medical assistance eligibility. Sec. 49.454(1)(b).

¶13 Tarrant would have us read more into this statute. She asks us to
read this statute as if it provides a legislative indication that no trust payments may
be considered for purposes of determining medical assistance eligibility unless the
payments are made from the types of trusts identified in WIS. STAT. § 49.454. The
Department, on the other hand, argues that § 49.454 simply does not apply to
testamentary trusts, like the one from which Tarrant received payments. The
Department contends § 49.454 merely provides the circumstances under which
corpus and payments from the types of self-settled trusts addressed therein may
and may not be considered as income for medical assistance purposes and was not
intended as an implication by the legislature that trust fund payments from other
types of trusts not addressed by that statute, such as the testamentary trust at issue
in this case, cannot be considered for medical assistance eligibility purposes. The
Department asserts that the treatment of trust payments in the handbook should be
followed, specifically that “[a]ll payments … from a trust are unearned income to
the beneficiary” and are to be “count[ed] … in a person’s income total.”

9
No. 2018AP1299

¶14 The ALJ concluded, similar to the Department’s position, that

[a]lthough WIS. STAT. § 49.454(1)(a) explicitly states that
section 49.454 does not apply to trusts created by will [i.e.,
it applies only to trusts created from assets of an individual
or his or her spouse and established by a limited list of
persons “other than by will”], that is not to say that
distributions from a trust created by will are not to be
treated as unearned income under [medical assistance]
eligibility rules.

We agree. As we pointed out in Gonwa, § 49.454 was enacted in 1993 as part of
“an effort to further tighten loopholes” specifically exploited by individuals who
were utilizing Medicaid-qualifying trusts to shield assets from consideration for
medical assistance eligibility purposes and were thereby qualifying for this
program, which was designed to aid truly “low-income elderly and disabled
individuals, and poor women and children.” See Gonwa, 265 Wis. 2d 913, ¶36
(citation omitted). Thus, the fact that § 49.454 does not address testamentary
trusts is not surprising, and we do not interpret this as an indication the legislature
gave consideration to whether payments from testamentary trusts should be
included as unearned income for medical assistance eligibility purposes and
concluded to the contrary. Section 49.454 provides us with no clear insight as to
any legislative intent with regard to whether or not testamentary trust fund
payments such as those Tarrant received are to be considered for medical
assistance eligibility purposes. This statute is simply inapplicable to this case.

¶15 For the foregoing reasons, we conclude the Department
appropriately treated Tarrant’s monthly trust payments as unearned income to be

10
No. 2018AP1299

considered for purposes of determining her eligibility for medical assistance.
Therefore, we reverse the decision of the circuit court.5

5
On September 25, 2018, the Department filed its brief-in-chief in this appeal requesting
that we issue a published decision reversing the circuit court. The Department sought publication
“to clarify how payments from a trust not subject to Wis. Stat. § 49.454 affect eligibility for
medical assistance.” On October 25, 2018, Tarrant filed her response brief, also indicating that
“[p]ublication is appropriate because the opinion will clarify rules affecting the impact on
Medicaid eligibility of distributions from trusts not governed by [§] 49.454 and the issue appears
not to have been addressed in any prior decisions.” Responding to our later request for
supplemental briefing, both parties filed briefs on May 22, 2019, adhering to and advocating for
their respective positions in this case.

On July 15, 2019, Tarrant filed a motion to dismiss the Department’s appeal on the
ground of mootness. She asserts it is moot because the corpus of the testamentary trust is
depleted and thus “[a] decision on the merits will not affect Ms. Tarrant’s Medicaid eligibility.”
She also asserts it is moot because “[a] decision on the merits will not entitle the Department to
recover Medicaid benefits already paid” on her behalf because under WIS. STAT. § 49.497 such
recovery could be made only if Tarrant had “misrepresented or failed to report information about
trust distributions in her application for benefits”; however, in this case benefits were erroneously
paid only due to the ruling of the circuit court. The State filed a two-sentence response agreeing
the case is moot and stating it does not oppose dismissal.

We deny Tarrant’s motion to dismiss. Due to “the interest of judicial economy,” moot
cases are “generally dismissed without discussion on the merits.” State v. Leitner, 2002 WI 77,
¶13, 253 Wis. 2d 449, 646 N.W.2d 341. We may, however, decide moot issues under certain
circumstances. Outagamie County v. Melanie L., 2013 WI 67, ¶80, 349 Wis. 2d 148, 833
N.W.2d 607. One of those circumstances is where an issue “is likely to arise again and a decision
of the court would alleviate uncertainty.” Id. (citation omitted). That is the case here. While no
party has put forth an estimate as to how often testamentary trust payments preclude an individual
from qualifying for medical assistance, it is not hard to envision the situation happening on future
occasions. Moreover, Tarrant herself makes the case for us deciding this appeal even if it may
not directly affect her at this point. The circuit court ruled that the Department is prohibited from
considering the testamentary trust fund payments to Tarrant in determining her eligibility for
medical assistance. If that decision is not reversed, it is likely the Department and/or a future
administrative law judge will follow the circuit court’s directive from this case when reviewing
other medical assistance applications. This no doubt would result in significant taxpayer dollars
being spent based upon an erroneous legal interpretation. And, if Tarrant’s reading of WIS. STAT.
§ 49.497 is correct, then the Department, and ultimately the taxpayers, will never be able to
recover those funds even if a future appellate court rules as we do today. The only way to protect
taxpayers in a circumstance such as this is with a published decision that provides the clarity both
parties originally sought for situations like Tarrant’s.

(continued)

11
No. 2018AP1299

By the Court.—Order reversed.

As noted, judicial economy is the primary reason for dismissing a moot case. In this
instance, our decision was already completed and poised for release when Tarrant filed the
motion to dismiss. As a result, a dismissal at this point will not promote judicial economy. The
release of this decision, which is based upon a real case and controversy and provides greater
certainty and clarity for testamentary trust payment situations, better serves judicial economy.

12