Court Terminates Irrevocable Trust when Circumstances Change

By Doug Chalgian on July 16, 2022

Talonda was injured in a car accident as a child.  An irrevocable Medicaid payback trust (aka “d4A Trust”) was established to hold the funds recovered from a personal injury settlement.

Turns out the traumatic brain injury she experienced following the accident was not altogether disabling.  In fact, by the time she was 34 years-old she had a college degree, a good job, and was managing her life in all ways without limitation from her TBI.  So, Talonda petitioned the probate court to terminate the Trust, settle up with the State as required to satisfy the “payback” requirement, and distribute the rest of the money to her.

Talonda’s parent, who was also the settlor and trustee of the Trust, opposed the request.  The trial judge ruled in favor of Talonda and ordered that the Trust be disbanded.  Parent/settlor/trustee appealed.

The COA looked at MCL 700.7412(2) which says a probate court “may … terminate the trust if, because of circumstances not anticipated by the settlor … termination will further the settlor’s stated purpose.”

The COA finds that the stated purpose for creating this Trust was to protect the resources for Talonda’s benefit, and that the reason that protection was needed was because of the cognitive impairment resulting from her brain injury.  Evidence of Talonda’s successful recovery eliminated those concerns.  Accordingly, the demands of MCL 700. 7412 were met and the trial court was justified in terminating the trust.

To read In Re Special Needs Trust fbo Talonda Moss click on the name.

It’s not clear why the Court of Appeals saw fit to publish this case, but it did.

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mm By: Doug Chalgian
Doug Chalgian

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