Close this search box.

State Court Ordered to Approve Special Needs Trust

Print Article
State court

When an individual receiving Medicaid benefits receives a significant personal injury award, federal law permits creation of a “special needs” trust to hold the proceeds. That way, the individual can continue to receive Medicaid and other government benefits. Although every state’s Medicaid program allows such trusts, state court judges often balk at the concept. A recent Indiana case was a good illustration of the problem.

Timothy Robbins’ accident

In 2013, Indiana resident Timothy Robbins, then age 42, was driving on Interstate 74 west of Indianapolis. A semi-truck driven by one Terri Hampton collided with Mr. Robbins’ vehicle, and he was ejected from his car. He sustained serious injuries, including extensive head trauma, and he has been a total-care patient since the accident. He will require extensive care for the rest of his life.

Mr. Robbins’ father arranged to file a lawsuit against the driver and trucking company responsible for his son’s injuries. After a week-long jury trial, Mr. Robbins won a judgment for $18.5 million dollars.

Of course there were outstanding medical bills to pay. Mr. Robbins’ attorneys took their share of the judgment. The defendants negotiated a reduction in the judgment before agreeing not to appeal. A share of the funds paid for a structured settlement annuity, to assure Mr. Robbins would have a substantial income for life.

Still, after all those payments were calculated and distributed, almost $7 million remained. Mr. Robbins’ father asked the judge overseeing his conservatorship to direct that all that money would be transferred into a special needs trust.

Special Needs trusts

Even though Mr. Robbins had received a substantial amount of money, his care would likely exhaust the money before his death. A special needs trust would allow him to retain his eligibility for Medicaid. It might even permit him to continue to receive a small Supplemental Security Income payment each month. That way, his settlement proceeds could be extended for his lifetime.

Such a special needs trust is not a free ride. There would be some significant restrictions on the use of the funds. They would only be available for Mr. Robbins’ care, and not for his family’s benefit. And on Mr. Robbins’ death, the state Medicaid program would receive reimbursement for all of its expenditures on his behalf — at least up to the amount left in the trust. Only after repaying Medicaid could the trust go to Mr. Robbins’ father.

The Hon. Kevin Barton, the Indiana judge assigned to Mr. Robbins’ conservatorship case, didn’t like the idea. He explained that he didn’t personally approve of the practice of getting “wealthy” people eligible for Medicaid. He thought that the program should not allow Mr. Robbins to receive Medicaid benefits when he had significant assets that could be used for his care.

Judge Barton decided that just $1 million of the judgment proceeds could go to the special needs trust. The rest would have to be spent on the care that Medicaid would otherwise cover.

The appeal

Of course, setting aside just a share of the proceeds would be the worst result of all. Mr. Robbins would not receive Medicaid benefits, but a share of his funds would still be subject to the special needs trust’s restrictions. If he were to die before his money ran out, the judge’s order would subject a share of his assets to repayment for Medicaid services from before his accident.

Mr. Robbins’ father appealed, and the Indiana Court of Appeals last year agreed that the state court judge was wrong. Federal law allows Mr. Robbins (through his father) to establish a special needs trust. Indiana law implementing the Medicaid program affirms that right. The state court judge had no business preventing or limiting the special needs trust amount. The appellate judges returned the case to Judge Barton, but with an instruction that he approve the special needs trust and direct all the lawsuit proceeds into the trust. In re Guardianship of Robbins, July 26, 2018.

What about Arizona?

Would an Arizona court agree with the Indiana Court of Appeals? Almost certainly.

Mr. Robbins’ case was based on federal law, which would also apply in Arizona. It also referred to Indiana’s state law implementing Medicaid; Arizona has equivalent laws, though we call our Medicaid program AHCCCS (the Arizona Health Care Cost Containment System).

But if it’s a federal law, shouldn’t federal courts establish and monitor special needs trusts? No, because guardianship, conservatorship and probate proceedings (where trust oversight takes place) are strictly state court activities.

Does this mean that state courts sometimes deviate from the federal court requirements? Yes. In fact, Arkansas state courts famously refused to allow special needs trusts until their own State Supreme Court decided the federal law applied. Other (usually lower-level) state court judges balk at establishing special needs trusts from time to time, but usually lawyers can overcome any opposition.

Stay up to date

Subscribe to our Newsletter to get our takes on some of the situations families, seniors, and individuals with disabilities find themselves in. These posts help guide you in the decision making process and point out helpful tips and nuances to take advantage of. Enter your email below to have our entries sent directly to your inbox!

Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.