Zander v. Adams

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

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(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

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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

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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

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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

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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

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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
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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

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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)

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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)

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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

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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

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"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

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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

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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.

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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

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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

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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.

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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

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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

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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

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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

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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

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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.

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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

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