On January 5, 2017, the highest court in Massachusetts will hear oral arguments in two cases concerning the use of irrevocable trusts in Medicaid planning and denials of long-term care benefits. A synopsis of each case is provided below:
Nadeau v. Thorn– SJC 12205
In 2002, the applicant created and funded an irrevocable trust with his primary residence. He retained the right to use and occupy the residence held in the trust. The trust provided no circumstances under which the applicant could receive a distribution of trust principal. The Hearing Officer concluded, and the superior court later affirmed, that the trust was an entirely countable resource as a result of the use and occupancy interest. Under Massachusetts trust law, the use and occupancy interest provides no ability for the holder to invade trust principal. The hearing officer’s finding was made without any determination that any portion of the trust’s principal could be paid to the applicant for benefits, which is required by the Federal Medicaid statute in order for the trust to be deemed a countable resource.
Daley v. Sudders– SJC 12200
In this case, the applicant retained a life estate in a deed transferring a residence into an irrevocable trust. As in Nadeau, the Hearing Officer found that the life estate rendered the assets of the trust “available” and thus countable resources relative to the applicant’s eligibility for long-term care benefits from MassHealth. The superior court also affirmed this decision. This decision is notable in that it concludes that a life estate can render the assets of an irrevocable trust countable to an applicant for benefits even where no trust principal can be paid to the applicant. A life estate deed is a separate entity from the trust, and the appeal argues that it was an error of law for the superior court to uphold MassHealth’s determination that retaining a life estate in a deed somehow rendered the corpus of the irrevocable trust a countable resource to the applicant.
The National Academy of Elder Law Attorneys (NAELA) submitted an amicus brief to the SJC earlier this month regarding both cases. Additionally, the Massachusetts Chapter of NAELA has submitted an amicus brief in the Nadeau case. The Real Estate Bar Association (REBA) has submitted an amicus brief relative to the Daley case. The cases have generated much interest within the elder law and estate planning bars, and the decisions are widely anticipated.
I will be presenting the oral argument in the Nadeau matter before the SJC. We will post an update regarding the oral arguments after they occur next month.