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Big Win for Irrevocable Trusts in Massachusetts

A ruling by the Supreme Judicial Court of Massachusetts on May 31, 2017, resulted in a big win for seniors everywhere when it comes to Medicaid estate planning and preventing assets from counting against Medicaid eligibility. The court reversed two cases — Nadeau v. Director of the Office of Medicaid, and Daley v. Secretary of the Executive Office of Health and Human Services — which pertained to eligibility for long-term assistance under the Massachusetts Medicaid program (MassHealth).

The cases questioned whether the fact that the individuals retained the right to use and occupy the homes, held in irrevocable trusts for more than five years prior to applying for entry into a nursing home under MassHealth, rendered the value of the homes an “available” asset in accordance with the Massachusetts regulation at 130 Code Mass. Regs., section 520.023 (C)(1)(d).

MassHealth denied coverage to the two seniors, contending that they had failed to meet eligibility requirements and that their homes were in fact assets. In order to qualify for MassHealth, individuals must have no more than $2,000 in assets. But the Supreme Judicial Court held that, “simply because the terms of the trust give the grantors the right of use and occupancy of the home” does not make the home “available” as an asset under Federal Medicaid requirements, which controls the situation.

By reversing these two cases, the Supreme Judicial Court has effectively allowed a person to put his or her own home into an irrevocable trust and maintain the right to occupy it without hampering their access to Medicaid assistance.

The decision will simplify the drafting of wills and trusts and estate planning for the elderly, and lawyers involved in the case said it will make it easier for them to plan their finances to include the possibility of future nursing home care.

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Lisa M. Neeley, a lawyer at the Worcester firm Mirick O’Connell who represented one of the plaintiffs, said “Over the past several years, MassHealth has been attacking these trusts, [The ruling] definitely gives assurance to people who have done estate planning that this is something MassHealth can no longer attack.”

The median cost of nursing home care in Massachusetts is more than $128,000 annually, according to a report cited in the court decision. About two-thirds of all Americans in nursing homes are covered by Medicaid.  In Massachusetts alone last year, MassHealth spent nearly $1.2 billion on nursing home care for 30,000 seniors, according to the agency.”

“The SJC’s decision reaffirmed the importance of maintaining the integrity of the MassHealth program to ensure that scarce federal and state resources are preserved for those without means,” MassHealth spokeswoman Sharon Torgerson said in a statement. “MassHealth is still reviewing the SJC’s decision to determine how to proceed in accordance with the Court’s order.”

“I’m pleased with the clarity. I’m pleased with the confirmation that these trusts are planning tools, as we all knew,” said Patricia Keane Martin, a Boston lawyer and director of the National Academy of Elder Law Attorneys’ Massachusetts chapter. The organization filed an amicus brief in the case.

Daley’s lawyer, Brian E. Barreira of Plymouth, called the ruling a win, but he did not agree that the decision provided the clarity they sought.  “The court didn’t even mention the inconsistency of the agency [MassHealth],” he said. “I was hoping the court would go broader and explain more about what the agency did wrong here and what they should do in the future.”

The case does not fully resolve the issue for the Daleys and Nadeau.  The court remanded for further consideration to MassHealth other possible ways for the trust properties to be countable assets for the grantors. In the Nadeau case, that includes the fact that the grantors retained the right to pay equity to a charity or nonprofit.  In both cases, MassHealth could potentially determine that certain taxes paid by the trust for the grantors’ income are countable assets.

To be continued…..

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