Massachusetts Budget Proposal Would Radically Change MassHealth Estate Recovery Rules and the Elder Law Practice

March 2, 2016


In January, Governor Charlie Baker released his administration’s budget proposal for 2017. While the plan covers numerous areas, one part, Outside Section 11 or “OS 11,” proposes changes that would significantly expand the scope of estate recovery claims that MassHealth could pursue after the death of residents aged 55 and older who received MassHealth benefits prior to their deaths.  These proposed changes would affect all applicants who qualify for MassHealth after July 2016, regardless of any prior estate planning done by applicants or their spouses. Therefore, anyone who has done such planning should closely follow this proposal and plan accordingly.

MassHealth, which is the Massachusetts version of the federal Medicaid program that pays for long term care services, is available to people who qualify.  Many people aged 55 and older apply for MassHealth either because they require nursing home care or because they need substantial in-home care in order to remain at home. Under current law, MassHealth has a claim against the probate assets of any deceased person who received these kinds of MassHealth benefits prior to his or her death. However, the agency has no claim against the assets of a MassHealth recipient’s surviving spouse.  OS 11 in the proposed budget seeks to change that.

Under OS 11, MassHealth would have a claim against any interest that a deceased MassHealth recipient had at the moment of his or her death in assets that are not subject to the probate process.  These assets include life estates in real property and joint ownership interests in real estate or other kinds of property, such as bank accounts, stocks, and bonds, as well as annuities, life insurance policies and retirement accounts.  Additionally, OS 11 allows MassHealth to have a claim against the estate of the surviving spouse of the MassHealth recipient, regardless of whether the surviving spouse ever received MassHealth benefits or has since remarried or moved outside of Massachusetts.  Potential MassHealth claims could thus survive for years or even decades after a MassHealth recipient’s death.

How could OS 11 affect elder law? For years, elder law attorneys have worked with clients who are concerned that they could be impoverished by the high costs of home care or nursing home care should they later become afflicted with Alzheimer’s disease, any other disease causing dementia, or any illness that caused them to need more care than could be provided at home.  Often these are people who have saved all their lives, who own their home, have paid off their mortgage, and hope to leave something to their children when they pass away.  For these clients,  elder law attorneys often advise clients to convey a so-called “remainder interest” in their home to their children or to an irrevocable trust for the benefit of their children, while reserving a “life estate” in the home, which is the right to live in the property until death.  Under OS 11, the value of such a life estate interest at death would be subject to a MassHealth claim for recovery.

Similarly, married couples who are concerned that one partner may need to qualify for MassHealth currently have the option of transferring some or all assets to the healthy spouse so the healthy spouse can continue to live at home.  OS 11 would expose the assets of that healthy spouse, if he or she survives the spouse who received MassHealth, to a MassHealth claim upon the death of the healthy spouse to the extent that those assets were subject to the probate process.

Numerous bills are submitted to the Massachusetts legislature every year, but very few of them actually become law.  The state budget, however, is one exception. The legislature will inevitably approve a budget in some form, likely by this summer.  But the question remains as to whether OS 11 will pass, either in its current form or amended in some way.  In its current form, OS 11 would affect all life estates and other property interests that are not subject to probate.  In the next few months we should better know the fate of OS 11.

About Arthur Bergeron

Art has been practicing law in Massachusetts for over 30 years. He focuses his practice on elder law, estate planning, probate and trust administration, and land use matters. Art counsels senior citizens and their loved ones regarding elder law and special needs planning, asset protection and Medicaid planning. He works with individuals in all areas of estate planning, including wills, trusts, durable powers of attorney, health care proxies and living wills.
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