There are many documents you can and should use for your Massachusetts estate plan. Medical care considerations can become especially complicated as you weigh the resources available to help cover the cost. The recent Massachusetts Appeals Court case of Heyn vs. Dir. of the Ofc. of Medicaid (15-P-166) reinforces a grantor’s ability to create an irrevocable trust, which could then make him or her eligible for Medicaid benefits.
In this case, the grantor, now deceased, created a self-settled irrevocable inter vivos trust, transferring the title to her home to the trust, while retaining a life estate interest that would not make her ineligible for Medicaid benefits. The grantor moved into a skilled nursing facility and applied for Masshealth benefits to pay for the cost of her care, which were originally approved. After a little over a year at the nursing facility, she was notified that her benefits were terminated based on the agency’s determination that the home held by the trust should be considered a countable asset, rendering her ineligible for benefits.
The grantor of the estate appealed, but she died before a decision was issued upholding the termination of benefits. The hearing officer determined that the trust allowed the trustee to sell the assets and invest the proceeds of the sale in other forms of investments, like an annuity. The officer reasoned that annuity payments can create income for the grantor, which should be considered a “countable asset” for determining Medicaid/Masshealth benefits eligibility. The Superior Court upheld the hearing officer’s ruling, and the case went on to the Appeals Court of Massachusetts.
The Appeals Court did not agree with the hearing officer’s assessment of the law and understanding of annuity payments. Previous appellate cases have dealt with this topic, affirming the use of properly structured trusts that place assets beyond the grantor’s reach with no effect on the grantor’s Medicaid eligibility. An asset is considered “countable” if, at any moment, it can be paid to the benefit of the grantor, regardless of whether it actually is paid to the grantor or not.
The court chose to look at the trust document as a whole. The trust required quarterly distributions of income to the grantor for the remainder of her life. It also allows the trustee to distribute some or all of a portion of the trust principal to other persons already chosen to receive assets after the grantor’s death. The grantor retained power during her lifetime to give a part or all of the income or principal of the trust to any of her heirs, free of the trust.
The trustee was given the authority to deal with any of the trust assets, including the sale and distribution of the assets. The grantor was entitled to transfer trust assets in exchange for assets of equal value. The hearing officer focused particularly on this entitlement, reasoning that the trustee could sell the assets and invest the proceeds in an annuity, which would allow the grantor to benefit from an annuity’s income.
The appellate court did not feel the hearing officer’s decision correctly reflected the nature of annuity payments, nor did the decision consider established federal Medicaid law. The court described the constituent parts of annuity payments – those that return to the principal investment in the annuity itself, and the others that are considered investment income on the principal investment. The latter is paid to the grantor, but Medicaid law recognizes the structure of annuities, and it only looks at the amount of investment income available to the grantor, not the portion of the annuity returning to the principal. The court reversed the prior rulings of the Superior Court and the hearing officer that denied the grantor payment of benefits to the nursing home prior to her death.
Heyn shows the importance of having experienced Massachusetts estate planning attorneys at your side. The attorneys at Karsner and Meehan have the knowledge and understanding you need to help you draft and maintain your estate plan. Call today for a free, confidential consultation at 508.822.6600.
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Appeals Court of Massachusetts Case Reveals The Difficulty People Face When Contesting a Will, Massachusetts Injury Lawyers Blog, March 3, 2016
Rear-end Collision Appellate Case Helps Illustrate Burden of Proof Considerations in Massachusetts Personal Injury Cases, Massachusetts Injury Lawyers Blog, February 3, 2016