IN THE COURT OF APPEALS OF IOWA
No. 22-0048
Filed December 7, 2022
IN THE MATTER OF THE TRUST UNDER THE WILL OF WALTER RIESSEN,
RONALD RIESSEN,
Trustee-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Ida County, James N. Daane, Judge.
A trustee appeals an order requiring it to pay a claim for Medicaid debt of
the trust beneficiary. AFFIRMED.
Justin F. Reininger and Peter A. Goldsmith of Boerner & Goldsmith Law
Firm, P.C., Ida Grove, for appellant.
Thomas J. Miller, Attorney General, and Laura F. Kron, Assistant Attorney
General, for appellee.
Heard by Vaitheswaran, P.J., Ahlers, J., and Danilson, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206
(2022).
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AHLERS, Judge.
Walter Riessen died in 1972. His will gave his property to his four children
in equal shares, but the share given to his daughter Joan Riessen was to be held
in trust with his son Ronald Riessen serving as trustee. Specifically, the part of the
will relevant to this dispute provided:
I hereby give, devise and bequeath unto my children: Lois
Jensen, Alberta Reitz, Ronald Riessen and Joan Riessen in equal
shares all personal property owned by me at the time of my death,
share and share alike, provided that the share of Joan Riessen is to
be placed in the Trust hereinbelow provided.
. . . . [After providing for the surveying and division of Walter’s
farm into four equal parcels,] I give, devise and bequeath said four
equal tracts as follows:
....
2. Tract No. 2 to the Trustee hereinafter named, subject to the
terms and conditions of said Trust.
....
I hereby appoint Ronald Riessen as Trustee for the benefit of
my daughter, Joan Riessen, and said Trustee shall take possession
of all properties herein provided as being placed in trust.
The Trustee shall manage all of said property from the same
as a reasonable prudent man under the circumstances would. It is
my specific wish and order and direction that the Trustee shall have
the full right to rent the land held in trust personally under the same
leasing arrangements as is prevalent in and around the community
of Battle Creek, Iowa. It being my full intent that he shall have every
right to farm the land as a tenant.
The said Trustee shall pay out the net income from the trust
property in such amounts and at such times as he deems advisable
for the benefit of my daughter, Joan Riessen.
The said Trustee shall deliver to my daughter, Joan Riessen,
all trust property and accumulated income held in his hands at such
time as he in his sole and absolute discretion determines that she
should receive said property. This discretion shall be his alone and
shall not be possessed by any subsequent trustee.
Said Trustee shall have the right to invade any trust corpus
held by him when in his own sole and absolute discretion he deems
it necessary for the benefit of my daughter, Joan Riessen. This again
is a personal right belonging to the Trustee herein named, and shall
not be the right of any subsequent Trustee.
In the event of the death of my daughter, Joan Riessen, any
property in the hands of the said Trustee shall immediately pass to
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my other children, namely: Lois Jensen, Alberta Reitz and Ronald
Riessen.
It is my specific will and request that in the event that the
owners of both Tracts 3 and Tract 4 should at any time sell said
tracts, then in that event only the Trustee shall have the right to
purchase from himself Tract No. 2. The purchase price shall be
determined in the following manner: the inheritance tax appraisers
for Ida County at that time shall place a valuation on said Tract No. 2
which shall be the selling price.
My reason for giving this power to the Trustee herein named
is that it is my hope and desire to keep the entire property in the
family.
The terms of the will were carried out, and Ronald served as trustee of the
trust. During Joan’s lifetime, the trust provided no funds for Joan’s medical care.
Instead, her medical needs were paid for by Title XIX medical assistance
(Medicaid). Following Joan’s death in 2020, the Iowa Department of Human
Services sought reimbursement from the trust for the Medicaid assistance Joan
received. The probate court ordered the trust to reimburse the department. The
trustee appeals.
I. Standard of Review
This claim was tried as a probate proceeding. “Contested claims in probate
are tried and reviewed at law.” In re Est. of Melby, 841 N.W.2d 867, 871 (Iowa
2014), see also Iowa Code § 633.33 (2021). Likewise, we review the probate
court’s interpretation of statutes for legal error. Id.
II. Discussion
Under Iowa Code section 249A.53(2), when Medicaid funds are used to
provide medical assistance to “an individual who is fifty-five years of age or older,
or who is a resident of a nursing facility, intermediate care facility for persons with
an intellectual disability, or mental health institute, who cannot reasonably be
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expected to be discharged and return to the individual’s home” a recoverable debt
is created that is “due [to] the department from the individual’s estate for all medical
assistance provided on the individual’s behalf, upon the individual’s death.” “For
purposes of this section, the estate of a medical assistance recipient, . . . includes
. . . interests in trusts.” Iowa Code § 249A.53(2)(c).
“[T]o determine whether a trust should be subjected to Medicaid recovery
under Iowa Code section 249A.[53(2)]” we follow a three-step process. In re Est.
of Gist, 763 N.W.2d 561, 565 (Iowa 2009). “First, we must classify the trust at
issue. Next we must determine whether the beneficiary’s interest in the trust is the
kind of interest encompassed by section 249A.[53(2)(c)]. Finally, we must decide
whether that interest was present at the time of the beneficiary’s death.” Id.
(internal citations omitted).
Turning to the first step in our analysis, the trustee urges us to classify this
as a trust without standards. Conversely, the department urges us to classify the
trust as a discretionary trust with standards.1 Both parties highlight different trust
language to support their arguments.
As a preliminary observation, it may not matter how we classify the trust.
Although set forth in our case law as a three-step approach, our supreme court
has noted that determining whether trust assets are available to the department
for satisfaction of its claims “may be resolved by any of the three inquiries, and
thus the analysis need not follow the same sequence in every case.” Melby, 841
1Case law uses the phrases “discretionary support trust” and “discretionary trust
with standards” interchangeably; the two terms refer to the same type of trust. Gist,
763 N.W.2d at 565 (“Regardless of whether we refer to a trust as a discretionary
support trust or a discretionary trust with standards, they are the same animal.”).
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N.W.2d at 871 n.5. Further, even if this is a pure discretionary trust as claimed by
the trustee, it may not shield the trust’s assets from the department’s claim. As
noted by a recognized authority:
Even with a pure discretionary trust in which the trustee’s
discretion is “sole and absolute,” or “uncontrolled,” and the trust is
without standards, the beneficiary may obtain judicial review to
determine whether the trustee has abused that discretion. If there
were no judicial review, and the terms were taken literally, the trustee
would, in effect, be the owner of the trust property and the settlor’s
trust terms would be precatory only.
Helene S. Shapo, George Gleason Bogert & George Taylor Bogert, Bogert’s the
Law of Trusts and Trustees § 228 (June 2022 Update); see also Gist, 763 N.W.2d
at 565 (citing Bogert’s with approval).
Although classification of the trust may not be required, we do so here. We
side with the department and conclude the trust language creates a discretionary
trust with standards.
[A] settlor creates a [discretionary trust with standards] if the “stated
purpose of the trust is to furnish the beneficiary with support, and the
trustee is directed to pay to the beneficiary whatever amount of trust
income [or principal] the trustee deems necessary for his support.”
Generally, if the trust is a [discretionary trust with standards],
the beneficiary has a right that the trustee pay him the
amount which in the exercise of reasonable discretion
is needed for his support . . . ; and the beneficiary can
transfer this interest or his creditors may reach it,
unless it is protected by a spendthrift clause.
Gist, 763 N.W.2d at 565 (second and third alteration in original) (quoting In re
Barkema Trust, 690 N.W.2d 50, 54 (Iowa 2004)). The trust language required the
trustee to pay out net income for Joan’s benefit and to invade the trust corpus when
“necessary for the benefit” of Joan. Cf. id. at 564.; In re Kinsel, No. 08-1625, 2010
WL 446551, at *3 (Iowa Ct. App. Feb. 10, 2010) (emphasizing that the trust at issue
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was a discretionary support trust when it provided “the trustee with the discretion
to invade the principal or the corpus of the trust in order to meet [a] minimum level
of support”). So, the trust language made clear that the trustee was required to
provide benefit to Joan when needed, even permitting the trustee to invade the
corpus when necessary. See Barkema, 690 N.W.2d at 54 (citing trust language
that permitted the trustee to invade the trust corpus when necessary for the
beneficiary’s support as evidence the trust at issue was a discretionary support
trust). While it gave the trustee discretion to determine when to make such
payments for Joan’s benefit, it still required the trustee to pay when the time was
right.
In an attempt to avoid classifying the trust as a discretionary trust with
standards, the trustee points to Iowa Code section 633A.4702, which provides:
In the absence of clear and convincing evidence to the
contrary, language in a governing instrument granting a trustee
discretion to make or withhold a distribution shall prevail over any
language in the governing instrument indicating that the beneficiary
may have a legally enforceable right to distributions or indicating a
standard for payments or distributions.
However, in Kinsel, we determined section 633A.4702 is not applicable to trusts
established before the section’s enactment in 2004 because the legislature did not
intend to materially alter trusts already in existence at the time of enactment. 2010
WL 446551, at *4–5. This trust was established long before 2004, so we apply the
same reasoning from Kinsel and conclude section 633A.4702 does not alter this
trust. The trustee asks us to overrule Kinsel as being overly broad, but he does
not provide any supporting argument. In addition to there being no supporting
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argument in favor of abandoning Kinsel, we find Kinsel’s reasoning to be sound.
So, we decline to overturn Kinsel, choosing instead to follow it.
The trustee also argues we must consider Walter’s intent as the testator
when classifying this testamentary trust. It is true that when we interpret a
testamentary trust, like this one, “the intent of the testator is the polestar and must
prevail.” Strojek v. Hardin Cnty. Bd. of Supervisors, 602 N.W.2d 566, 571 (Iowa
Ct. App. 1999). To determine a testator’s intent, we consider: “(a) all of the
language contained within the four corners of the will, (b) the scheme of
distribution, (c) the surrounding circumstances at the time of the will’s execution
and (d) the existing facts.” In re Est. of Rogers, 473 N.W.2d 36, 39 (Iowa 1991).
The trustee highlights the following passage of Walter’s will, “My reason for giving
this power to the Trustee herein named is that it is my hope and desire to keep the
entire property in the family.” The trustee argues this makes clear Walter did not
intend to create a discretionary trust with standards that could result in family
property held by the trust be sold outside the family to satisfy debts.
We find the trustee’s argument unpersuasive for two reasons. First, the
passage relied upon by the trustee follows provisions for what happens if the tracts
given to Lois and Alberta were sold. In that event, Ronald was given the authority
to purchase the land in the trust himself. It was in this context that Walter
expressed the hope and desire to keep the property in the family. We do not view
this passage as a proclamation that Walter intended to prevent Joan’s needs from
being met in favor of a desire to keep the land in the family. Second, we also
consider the fact that Walter specifically permitted the corpus of the trust to be
invaded for Joan’s benefit when necessary. This suggests Walter had a
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preference to keep the property within the family but understood it might be
necessary to break it up to provide for Joan. And like in Kinsel, because “Medicaid
estate recovery had not yet been enacted by the legislature,” “it would not have
occurred to [Walter] to try to shield assets from [the department]’s eventual reach
by making their availability to [Joan] purely discretionary.” 2010 WL 446551, at *5.
Having considered Walter’s intent, we are still satisfied that this is a discretionary
trust with standards.
Having classified the trust as a discretionary trust with standards, we must
determine whether Joan’s interest in the trust is the kind of interest encompassed
by section 249A.53(2)(c). See Gist, 763 N.W.2d at 565. “[A] person has an
‘interest’ in the trust to the extent the assets of a trust are actually available to a
trust beneficiary, as that term is used in section 249A.[53(2)(c)].” Barkema, 690
N.W.2d at 55. “In order for an asset to be considered an actually available
resource, an applicant must have a legal ability to obtain it.” Id. (citation omitted).
The trust here required the trustee to make payments to Joan for her benefit and
permitted the trustee to invade the corpus when “necessary for the benefit” of Joan.
That permitted Joan “the legal ability to compel the trustee to invade the corpus of
the trust and make distributions to her for her support.” Id. at 56. As a result, she
had an interest in the corpus of the trust.
Finally, we consider whether Joan had an interest in the trust at the time of
her death. Gist, 763 N.W.2d at 565. This means her interest at the point in time
immediately before her death. Barkema, 690 N.W.2d at 56. Nothing terminated
her interest in the trust immediately prior to her death. So, the department acquired
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her interest in the trust and the right to recover for the medical expenditures
following her death.
III. Conclusion
For the foregoing reasons, we affirm the district court and conclude the
trustee shall pay the department’s claim for reimbursement.
AFFIRMED.
Vaitheswaran, P.J, concurs; Danilson, S.J., dissents.
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DANILSON, Senior Judge (dissenting).
I respectfully dissent. As the trial judge in In re Barkema Trust, 690 N.W.2d
50 (Iowa 2004), and Strojek ex rel. Mills v. Hardin County Board of Supervisors,
602 N.W.2d 566 (Iowa Ct. App. 1999), I have previously acknowledged the State’s
authority to recoup Medicaid expenditures from a beneficiary who was entitled to
trust distributions. However, I disagree that Riessen’s trust provisions can be
interpreted to identify an ascertainable or measurable standard upon which the
beneficiary had an interest subject to recoupment by the State. Thus, I would
reverse.
Walter Riessen, an Iowa landowner, entrusted his only son to serve as
trustee. He granted his son “sole and absolute discretion” to invade the trust
corpus when his son deemed “it necessary for the benefit of my daughter, Joan
Riesssen.” Riessen gave this authority to his son stating, “This again is a personal
right belonging to the [t]rustee herein named, and shall not be the right of any
subsequent [t]rustee.” Along with the personal and broad discretion, the standard
imposed by the terms of the trust—“necessary for the benefit”—does not reference
support, care, maintenance, comfort, general welfare, or any other standard upon
which to ascertain or measure an interest in the trust. One authority discussing
distribution standards stated: “The fact of the matter is that there is a continuum of
discretionary trusts, with the terms of distributive powers ranging from the most
objective (or ‘ascertainable,’) of standards (pure ‘support’) to the most open ended
(e.g., ‘happiness’) or vague (‘benefit’) . . . .” Restatement (Third) of Trusts § 60
cmt. a (Oct. 2022 update) (internal citation omitted).
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One court facing a similar issue attempted to define the word “benefit” by
citing to dictionaries and reviewing related authorities, and it ultimately concluded
the trustee was “vested with absolute discretion to determine in the first instance
the amount to be expended for the benefit of” the beneficiary. In re Emmons’ Will,
300 N.Y.S. 580, 585 (Surr. Ct. 1937). In Emmons, the court stated, “this court has
no power to determine or to give instructions to the trustee in relation thereto until
such time as an interested party can show that said trustee has abused its
discretion or failed to exercise the same.” Id.
In Barkema, the Iowa Supreme Court concluded if the beneficiary had the
legal ability to compel the trustee to invade the trust corpus the beneficiary had an
interest in the trust corpus. 690 N.W.2d at 56. In concluding the State could
recoup the monies expended on the beneficiary’s behalf for Medicaid, the court
found the trust “contained enough of a distribution standard to create an interest”
in the trust corpus. Id. The Barkema trust required the trustee to pay the
beneficiary “the amount which in the exercise of reasonable discretion [was]
needed for [the beneficiary’s] support.” Id. (first alteration in original) (citation
omitted).
Here, if Riessen intended for the trust corpus to encompass support, care,
maintenance, or some other clearly ascertainable or measurable standard, he
could have easily included such language. Instead, Riessen expressed his utmost
respect for his son’s exercise of authority as trustee and provided only vague
instructions on the use of the trust corpus. The terms of the trust simply do not
provide “enough of a distribution standard” as required in Barkema. Id. To
interpret “benefit” under the facts of this case to be an ascertainable standard
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constituting an interest in the trust would modify the terms of the trust. Moreover,
on this record there is no evidence the trustee abused his discretion. I would
reverse.
In re Trust of Riessen
Combined Opinion