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08/18/97 ESTATE DAWN CALHOUN v. ILLINOIS DEPARTMENT

August 18, 1997

IN RE THE ESTATE OF DAWN CALHOUN, (CHICAGO TRUST COMPANY, AS GUARDIAN OF THE ESTATE OF DAWN CALHOUN, PETITIONER-APPELLANT,
v.
THE ILLINOIS DEPARTMENT OF PUBLIC AID, RESPONDENT-APPELLEE.)



Appeal from the Circuit Court of Cook County. Honorable Benjamin Novoselsky, Judge Presiding.

Released for Publication October 9, 1997.

The Honorable Justice O'brien delivered the opinion of the court. Campbell, P.j., and Buckley, J., concur.

The opinion of the court was delivered by: O'brien

The Honorable Justice O'BRIEN delivered the opinion of the court:

We consider whether an Illinois Department of Public Aid (IDPA) lien on the proceeds of a personal injury settlement must be paid before those funds may be transferred to a supplemental needs trust, which is designed to provide for a disabled individual's special needs without duplicating Medicaid services or destroying Medicaid eligibility. We conclude that the IDPA is first entitled to payment of the lien from the proceeds of the personal injury settlement, leaving the remainder available for transfer to the trust.

Dawn Calhoun, a minor, suffered brain damage during and shortly after birth. Dawn's parents brought suit on her behalf against a hospital and certain physicians. The case settled for $3,500,000. After reduction of attorney fees and costs, Dawn's net proceeds amounted to $2,670,584.37. Pursuant to a court order from the law division, the settlement proceeds were to be distributed as determined by the probate division.

Dawn had received $223,223.12 in Medicaid benefits from the IDPA from the date of her injury to the date of the settlement. Neither party disputed the validity of the IDPA lien in the amount of $223,223.12, but a dispute arose over the timing of the payment of the lien. The law division judge ordered that the amount of the lien be segregated in an escrow account pending resolution of the payment issue in the probate court.

The Chicago Trust Company, the appointed guardian of Dawn Calhoun's estate, filed a petition to establish a supplemental needs trust for the benefit of Dawn. The guardian filed the petition because funds placed in a supplemental needs trust (sometimes referred to herein as a discretionary trust) are not considered resources available to a Medicaid recipient for the purpose of assessing the recipient's eligibility for benefits (see 42 U.S.C. § 1396p(d)(4)(A) (1994)); in other words, the creation of such a trust would enable Dawn to keep her Medicaid benefits. The guardian also requested the deferral of payment of the IDPA lien until Dawn's death. The probate court authorized the creation of the trust and permitted its funding with all assets other than the segregated funds. The court ordered briefs on the timing of the payment of the IDPA lien. After a hearing on April 12, 1996, the probate court ordered the guardian to pay the lien within 30 days. The guardian appealed, and the probate court stayed enforcement of the judgment pending resolution of the appeal.

The guardian concedes that section 120.347(d)(1) of the Administrative Code (89 Ill. Adm. Code § 120.347(d)(1)(1996)) requires it to immediately pay the IDPA lien. However, the guardian argues that section 120.347(d)(1)(89 Ill. Adm. Code § 120.347(d)(1)(1996)), conflicts with section 15.1 of the Trusts and Trustees Act (760 ILCS 5/15.1 (West 1996), which the guardian contends allows it to defer payment of the IDPA lien until Dawn's death.

The resolution of this issue requires us to construe section 15.1 of the Trust and Trustees Act. Because the construction of a statute is a matter of law, we may independently construe section 15.1. See Peoples Gas Light & Coke Co. v. Illinois Commerce Comm'n, 286 Ill. App. 3d 21, 23, 221 Ill. Dec. 339, 675 N.E.2d 246 (1996).

The primary rule of statutory construction is to ascertain and give effect to the true intent of the legislature. Peoples Gas, 286 Ill. App. 3d at 23. In determining legislative intent, a court first considers the statutory language. Peoples Gas, 286 Ill. App. 3d at 23. Where the language of the statute is clear, it will be given effect without resort to other aids for construction. Peoples Gas, 286 Ill. App. 3d at 23.

Accordingly, we begin our analysis by examining the relevant language of section 15.1:

"A discretionary trust for the benefit of an individual who has a disability that substantially impairs the individual's ability to provide for his or her own care or custody and constitutes a substantial handicap shall not be liable to pay or reimburse the State or any public agency for financial aid or services to the individual except to the extent the trust was created by the individual or trust property has been distributed directly to or is otherwise under the control of the individual, provided that such exception shall not apply to a trust created with the disabled individual's own property or property within his or her control if the trust complies with Medicaid reimbursement requirements of federal law. Notwithstanding any other provisions to the contrary, a trust created with the disabled individual's own property or property within his or her control shall be liable, after reimbursement of Medicaid expenditures, to the State for reimbursement of any other service charges outstanding at the death of the disabled individual." 760 ILCS 5/15.1 (West 1996).

The above-quoted language of section 15.1 indicates a legislative intent that a discretionary trust created with a disabled individual's property or property within her control must comply with "Medicaid reimbursement ...


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