80/20 information for my readers in the area of asset protection and nursing home cost planning for elders
A recent decision by the Massachusetts Appeals Court brought relief to seniors who had implemented an irrevocable trust in order to protect their assets from nursing home costs. If you are responsible or will be responsible for aging parents/relatives, you need to read this and watch my video.
Nursing Home Irrevocable Trusts in Massachusetts (IIOT) OK Again!
In my video below I outline the problem that existed since the Doherty Decision (2009) which was recently cleared up completely in the Heyn Decision (2016) (for now – there’s always the Supreme Judicial Court if someone wants to push it further).
The Problem with Nursing Home Irrevocable Trusts in Massachusetts and Medicaid
Even though many people thought that the Doherty case cleared up the confusion, Masshealth (The Massachusetts version of Medicaid) began denying nursing home Medicaid applications with increasing frequency.
The Main Issue – Access to the Principal
The issue brought up by Masshealth was the provisions they found in many applicants’ irrevocable income only trust (IIOT) documents which allowed trustees to access principle. The contention was that even though the creator (grantor) of the trust did not have access to principal (just the income), the trustee could access it and give that principal to the grantor.
Therefore, Masshealth counted the trust assets on the Medicaid application and by doing so, disqualified applicants requesting Medicaid assistance with nursing home costs.
Heyn Says So What
In the Heyn case, the MA Appeals Court addressed the issue of Nursing Home Irrevocable Trusts in Massachusetts and basically said “SO WHAT” to Masshealth.
Could the trustee take principal and back door it to the applicant? So what!
The Appeals Court told Masshealth to quit making an issue out of this. It doesn’t matter what the trustee does with the money. If the trust says it’s ok that the trustee can do what she pleases, then it’s ok. The rules for Medicaid only state that the grantor of the trust can not have access to the principal.
Sigh of Relief from Elder Law Attorneys
As you can imagine, attorneys were relieved. It’s likely that thousands of people had trusts set up like this. And without the Heyn decision, there was a risk that all of these trusts would need to be rewritten. Not only that, it’s likely most of these people would not have been updated. Unless they contacted an attorney themselves.
We would have had many more Masshealth applicants get denied with no recourse. Thankfully, the MA Appeals Court settled that issue . For now.
Your 80/20 Planning Action Plan
Contact your legal adviser and understand how your trust works. Is it an IIOT and what is the trustee/beneficiary set up?
Once you understand how it works, ask your advisor if you need to adjust your documents and take appropriate action. If you don’t know who to talk to, or your advisor is no longer around, feel free to call me or schedule a phone appointment:
Call our office: 888.278.9433 x5 (me)
Schedule via my online booking system for a phone meeting: wha.setmore.com
I take a few calls and emails each week from people around the country asking various planning questions. I I am happy to help.
Thanks for reading!
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For further reading, try Attorney Brian Barreira’s excellent blog post summary of the Heyn decision HERE
For a summary of the Doherty case, go HERE
For a summary of Heyn, go HERE.
Remember, I am not an attorney (but have a few on my team!). So this is not legal advice. I recommend you consult with a legal advisor to determine what, if any action you may need to take. See my full disclosures for more information on this blog and advice.
