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One way to qualify for Medicaid is to put excessresources into an irrevocable trust. But Medicaid officials look closely at theextent to which the trustee of such a trust is allowed to give the trustbeneficiary (the Medicaid applicant) any of the principal (the funds that makeup the trust). If the trustee has the power to give some or all of the principalto the applicant, that amount is likely to be included in the applicant''sresources in determining Medicaid eligibility. What if the trustee once had the power togive the beneficiary the principal, but the beneficiary later waives her rightto receive it? Recently, the highest court in Massachusetts considered thisquestion and ruled that in determining a Medicaid applicant''s eligibility forbenefits, Medicaid officials cannot count the principal of a trust created bythe applicant after she waived her right to any of the principal in her capacityas trust beneficiary. Guerriero v. Commissioner of the Division of MedicalAssistance (Massachusetts Supreme Judicial Court) SJC-08194, April 3, 2001). Here are the facts of the case: In June 1987,Jeannette Guerriero created an irrevocable trust naming herself as abeneficiary. Ms. Guerriero was allowed to receive income and principal from thetrust, based on the trustee''s discretion. In February 1991, Ms. Guerriero signeda document in which she irrevocably waived her right to receive any of the trustprincipal. In effect, she said she wanted to prevent herself from ever receivingany of the funds in the trust. Ms. Guerriero applied for Medicaid benefits inMay 1998. The Massachusetts Division of Medical Assistance (DMA) denied herapplication because it said the trust principal should still be included amongher "countable assets." This gave her more assets than Medicaidallows. Ms. Guerriero appealed the DMA''s denial to theBoard of Hearings, which upheld the denial. Ms. Guerriero appealed to theSuperior Court, which agreed with her. The DMA then appealed this decision toMassachusetts'' Supreme Judicial Court (SJC). Massachusetts'' Medicaid statute says that whendeciding whether trust principal should be a countable asset, the DMA mustconsider "the greatest amount that the trustees in any set of circumstancesmight have discretion to pay out to the beneficiary." The question beforethe SJC was whether Ms. Guerriero had the power to amend the trust in the waythat she did. The SJC ruled that Ms. Guerriero did not have the authority toamend the trust in her capacity as the person who created the trust (the trust"grantor"). However, the SJC held that when Ms. Guerriero signed thedocument waiving her interest in the trust principal, she did so in her capacityas the trust beneficiary. This, the SJC ruled, she was allowed to do. When Ms. Guerriero waived her rights to the trustprincipal, she removed any possible circumstances in which the trustee couldhave the discretion to pay her the principal. Thus, the principal in the trustcannot be counted as among Ms. Guerriro''s assets in determining her Medicaideligibility. A copy of this decision can be found online at http://www.malawyersweekly.com/masup/1005201.htm
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