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No. 21CA0206. Matter of Brockman Disability Trust.

2022 COA 75. Colorado Uniform Trust Code—Disability Trusts—Trust Modification or Termination.

July 14, 2022

Brockman’s wife was gravely injured in a car accident. He petitioned to establish the Mendy Brockman Disability Trust (Trust), with himself as trustee, so his wife could remain financially eligible for Medicaid. The Colorado Department of Health Care Policy and Financing (Department) determined that the Trust conformed to federal and state requirements for disability trusts, and the court approved the Trust. Based on a subsequent periodic review of Mrs. Brockman’s financial resources, the El Paso County Department of Human Services (El Paso Department) determined that she no longer qualified for Medicaid because she had resources outside of the trust that exceeded the $2,000 Medicaid resource limit. A few months later, the Department demanded that the Trust be terminated and that it be reimbursed $422,486.60 for medical assistance paid on behalf of Mrs. Brockman.

Mrs. Brockman did not appeal the El Paso Department’s determination. Instead, she sought declaratory and injunctive relief in the US District Court for the District of Colorado. The federal court dismissed the case for lack of subject matter jurisdiction after concluding that interpretation of the Trust was a matter of state law and there was no statutory basis for federal court jurisdiction. Mrs. Brockman did not appeal the dismissal. Following the dismissal, the Department filed a petition to terminate the Trust in the El Paso County district court. The court granted the petition.

On appeal, Brockman argued that the federal court’s substantive analysis in its order dismissing the case for lack of subject matter jurisdiction, which stated that the Trust had not terminated, required the district court and Court of Appeals to give the order preclusive effect. However, a court that determines it lacks subject matter jurisdiction has no authority to address or opine on matters beyond the question of subject matter jurisdiction. Accordingly, the federal court’s analysis on the merits is legally void and is not entitled to preclusive effect here.

On the merits, Brockman argued that the district court erred by terminating the Trust because Mrs. Brockman did not consent to termination under CRS § 15-5-411(2). Here, the plain language of the Trust requires termination on Mrs. Brockman’s death or her ineligibility for Medicaid in Colorado. Mrs. Brockman did not appeal or challenge the Department’s determination that she was financially ineligible for Medicaid benefits in Colorado. Therefore, the Trust terminated by its own terms, and CRS § 15-5-411(2) was not applicable.

Brockman further argued that the district court erred by failing to apply CRS § 15-5-411(5) and not requiring a factual determination that Mrs. Brockman’s interests will be adequately protected before permitting the Trust’s termination. This section is inapplicable, where, as here, a trust terminates by its terms under CRS § 15-5-410(1)(a).

Brockman also contended that the district court erred by terminating the Trust because Department of Health Care Policy and Financing Regulation 8.100.7.E.6.b.i.e, 10 Code Colo. Regs. 2505-10, is inconsistent with federal and state law. However, this regulation is not inconsistent with federal law.

Brockman further contended that the Colorado regulation is inconsistent with CRS § 15-5-411(2). This section specifically excepts disability trusts by its express terms, so the Colorado regulation, which mandates when disability trusts terminate, is not inconsistent with CRS § 15-5-411(2).

Lastly, Brockman argued that the district court erred in granting the Department’s petition to terminate the Trust after he filed a motion to dismiss under CRCP 12(b)(5) and before he filed an answer to the Department’s petition. Even if the district court procedurally erred, it properly terminated the Trust, so any error did not affect the substantial rights of the parties.

The order was affirmed.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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