Search Articles

Find Attorneys

Mass. High Court Rules: Trust Principal Not Countable as a Medicaid Resource

  • April 16th, 2001

One way to qualify for Medicaid is to put excess resources into an irrevocable trust. But Medicaid officials look closely at the extent to which the trustee of such a trust is allowed to give the trust beneficiary (the Medicaid applicant) any of the principal (the funds that make up the trust). If the trustee has the power to give some or all of the principal to the applicant, that amount is likely to be included in the applicant''s resources in determining Medicaid eligibility.

What if the trustee once had the power to give the beneficiary the principal, but the beneficiary later waives her right to receive it? Recently, the highest court in Massachusetts considered this question and ruled that in determining a Medicaid applicant''s eligibility for benefits, Medicaid officials cannot count the principal of a trust created by the applicant after she waived her right to any of the principal in her capacity as trust beneficiary. Guerriero v. Commissioner of the Division of Medical Assistance (Massachusetts Supreme Judicial Court) SJC-08194, April 3, 2001).

Local Elder Law Attorneys in Your City

Elder Law Attorney

Firm Name
City, State

Elder Law Attorney

Firm Name
City, State

Elder Law Attorney

Firm Name
City, State

Here are the facts of the case: In June 1987, Jeannette Guerriero created an irrevocable trust naming herself as a beneficiary. Ms. Guerriero was allowed to receive income and principal from the trust, based on the trustee''s discretion. In February 1991, Ms. Guerriero signed a document in which she irrevocably waived her right to receive any of the trust principal. In effect, she said she wanted to prevent herself from ever receiving any of the funds in the trust. Ms. Guerriero applied for Medicaid benefits in May 1998. The Massachusetts Division of Medical Assistance (DMA) denied her application because it said the trust principal should still be included among her "countable assets." This gave her more assets than Medicaid allows.

Ms. Guerriero appealed the DMA''s denial to the Board of Hearings, which upheld the denial. Ms. Guerriero appealed to the Superior Court, which agreed with her. The DMA then appealed this decision to Massachusetts'' Supreme Judicial Court (SJC).

Massachusetts'' Medicaid statute says that when deciding whether trust principal should be a countable asset, the DMA must consider "the greatest amount that the trustees in any set of circumstances might have discretion to pay out to the beneficiary." The question before the SJC was whether Ms. Guerriero had the power to amend the trust in the way that she did. The SJC ruled that Ms. Guerriero did not have the authority to amend the trust in her capacity as the person who created the trust (the trust "grantor"). However, the SJC held that when Ms. Guerriero signed the document waiving her interest in the trust principal, she did so in her capacity as the trust beneficiary. This, the SJC ruled, she was allowed to do.

When Ms. Guerriero waived her rights to the trust principal, she removed any possible circumstances in which the trustee could have the discretion to pay her the principal. Thus, the principal in the trust cannot be counted as among Ms. Guerriro''s assets in determining her Medicaid eligibility.

A copy of this decision can be found online at http://www.malawyersweekly.com/masup/1005201.htm


Last Modified: 04/16/2001
Learn the secrets of estate planning from an expert
ADVERTISEMENT
Medicaid 101
What Medicaid Covers

In addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.

READ MORE
How to Qualify for Medicaid

To be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.

READ MORE
Medicaid’s Protections for Spouses

Spouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.

READ MORE
What Medicaid Covers

In addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.

READ MORE
How to Qualify for Medicaid

To be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.

READ MORE
Medicaid’s Protections for Spouses

Spouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.

READ MORE
Medicaid Planning Strategies

Careful planning for potentially devastating long-term care costs can help protect your estate, whether for your spouse or for your children.

READ MORE
Estate Recovery: Can Medicaid Take My House After I’m Gone?

If steps aren't taken to protect the Medicaid recipient's house from the state’s attempts to recover benefits paid, the house may need to be sold.

READ MORE
Help Qualifying and Paying for Medicaid, Or Avoiding Nursing Home Care

There are ways to handle excess income or assets and still qualify for Medicaid long-term care, and programs that deliver care at home rather than in a nursing home.

READ MORE
Are Adult Children Responsible for Their Parents’ Care?

Most states have laws on the books making adult children responsible if their parents can't afford to take care of themselves.

READ MORE
Applying for Medicaid

Applying for Medicaid is a highly technical and complex process, and bad advice can actually make it more difficult to qualify for benefits.

READ MORE
Alternatives to Medicaid

Medicare's coverage of nursing home care is quite limited. For those who can afford it and who can qualify for coverage, long-term care insurance is the best alternative to Medicaid.

READ MORE
ElderLaw 101
Estate Planning

Distinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.

READ MORE
Grandchildren

Learn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.

READ MORE
Guardianship/Conservatorship

Understand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.

READ MORE
Health Care Decisions

We need to plan for the possibility that we will become unable to make our own medical decisions. This may take the form of a health care proxy, a medical directive, a living will, or a combination of these.

READ MORE
Estate Planning

Distinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.

READ MORE
Grandchildren

Learn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.

READ MORE
Guardianship/Conservatorship

Understand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.

READ MORE
Health Care Decisions

We need to plan for the possibility that we will become unable to make our own medical decisions. This may take the form of a health care proxy, a medical directive, a living will, or a combination of these.

READ MORE
Long-Term Care Insurance

Understand the ins and outs of insurance to cover the high cost of nursing home care, including when to buy it, how much to buy, and which spouse should get the coverage.

READ MORE
Medicare

Learn who qualifies for Medicare, what the program covers, all about Medicare Advantage, and how to supplement Medicare’s coverage.

READ MORE
Retirement Planning

We explain the five phases of retirement planning, the difference between a 401(k) and an IRA, types of investments, asset diversification, the required minimum distribution rules, and more.

READ MORE
Senior Living

Find out how to choose a nursing home or assisted living facility, when to fight a discharge, the rights of nursing home residents, all about reverse mortgages, and more.

READ MORE
Social Security

Get a solid grounding in Social Security, including who is eligible, how to apply, spousal benefits, the taxation of benefits, how work affects payments, and SSDI and SSI.

READ MORE
Special Needs Planning

Learn how a special needs trust can preserve assets for a person with disabilities without jeopardizing Medicaid and SSI, and how to plan for when caregivers are gone.

READ MORE
Veterans Benefits

Explore benefits for older veterans, including the VA’s disability pension benefit, aid and attendance, and long-term care coverage for veterans and surviving spouses.

READ MORE