BOARD OF HEARINGS Appellant Name and Address: Appeal Decision: Approved Appeal Number: 1501446 Decision Date: 9/14/15 Hearing Date: July 20, 2015 Hearing Officer: B. Padgett Record Open: August 10, 2015 Appellant Representative: MassHealth Representative: S. DeSousa
APPEAL DECISION Appeal Decision: Approved Issue: 130 CMR 520.023 Decision Date: 9/14/15 Hearing Date: July 20, 2015 MassHealth Rep.: S. DeSousa Appellant Rep.: Hearing Location: Taunton Authority This hearing was conducted pursuant to Massachusetts General Laws Chapter 118E, Chapter 30A, and the rules and regulations promulgated thereunder. Jurisdiction The Appellant received a notice dated December 20, 2014 stating: Although on September 20, 2014 you submitted one or more verification to begin reapplication process, you did not submit the additional necessary verifications within 30 calendar days of that date. Therefore your reapplication for MassHealth is denied because: You remain over asset. The real estate in the 2008 Irrevocable Trust is countable (Exhibit 1). The Appellant filed this appeal timely on
1 January 20, 2014 (130 CMR 610.015(B); Exhibit 2). Denial of assistance is grounds for appeal (130 CMR 610.032). Action Taken by MassHealth The Appellant s application for long term care benefits was denied. Issue Is the Appellant over assets limit for long term care eligibility? Summary of Evidence MassHealth testified the Appellant applied for long term care benefits on July 29, 2014 and was denied on September 10, 2014 for insufficient verifications. The Appellant submitted additional verifications on September 26, 2014 and the application was re stamped as of that date. On 2 December 30, 2014 the application was denied as the Appellant has property valued at greater 3 than $2,000.00 contained in the Ralph L. Andrade 2008 Irrevocable Trust (Trust or R.L.A.) which MassHealth deemed countable. MassHealth argued that the Article 4(2), 4(3), 4(5), 5(1), 20(1), 20(2), 20(4), 20(8), 20(11) and 26, all contain provision which allow the Appellant to access principal and available for use towards payment of the Appellant's nursing facility costs. 1 On February 18, 2015 the Appellant passed away and appeal was held from scheduling until a representative for the estate could be appointed by the Probate Court. On April 30, 2015 the Bristol Probate and Family Court appointed the Appellant's daughter SS as Personal Representative of the Estate. 2 The entire corpus of the Trust is the assessed value of the Appellant s primary residence. 3 130 CMR 520.003.
MassHealth submitted a memorandum from its legal department (Exhibit 4). MassHealth s legal memorandum dated April 01, 2014 argues applicants for MassHealth have the burden to prove their eligibility including that their total countable assets are below 4 $2,000.00 (130 CMR 520.007). MassHealth argues the income and principal of the RLA Trust are countable in determination of MassHealth long term care eligibility (130 CMR 520.023(C)(1)(a)) as the Appellant established and funded the Trust which should be used to pay the Appellant's nursing facility bills. MassHealth maintains the federal Medicaid statute provides that the countability of a self settled inter vivos trust is made without regard to whether the Trustee can exercise discretion under the trust or whether distributions may be made from the trust and asserts federal Medicaid law effectively creates a presumption that trusts containing the assets of an applicant and/or spouse are countable for eligibility determination 42 U.S.C. 1396p et seq. Medicaid is a statutory program governed by regulations and is not a program in equity and cannot be trumped by common law, state law or equitable principals and is designed to provide health care for the poor and that individuals are expected to deplete their own resources before obtaining assistance from the government. MassHealth insists this sentiment is echoed by the Supreme Judicial Court in Cohen v. Comm r of the Div. of Med. Assistance, 423 Mass. 299, 403 (1996). The SJC stated that in an evaluation of trusts under Medicaid eligibility determination, the common law of trusts and general trust laws principals cannot be used to circumvent the Medicaid statute for the purpose of having your cake and eating it too. The purpose of the statute is to prevent individuals from using trust law to ensure their eligibility for Medicaid coverage, while preserving their assets for themselves or their heirs ( citing Lebow v. Comm r of 4 Countable assets include assets to which the applicant would be entitled whether or not these assets are actually received when the failure to receive such assets results from the action or inaction of the applicant or person acting on his or her behalf.
the Div. of Med. Assist., 433 Mass. 171, 172 (2001)). The issue is not whether the trustee has the authority to make payments to the grantor at a particular moment in time. Rather, if there is any state of affairs, at any time during the operation of the trust, that would permit the trustee to distribute trust assets to the grantor, those assets count in calculating the grantor s Medicaid eligibility ( citing Doherty v. Director of the, 74 Mass. App. Ct. 439, 443 (2009)). MassHealth asserts the Medicaid statutes dictate that a trust is countable if there is any circumstance which allows income and/or principal to be made available for the benefit of the applicant. MassHealth argues that any circumstances can be found in Article 4(2) which allows the Appellant income distribution; Article 4(5) the Appellant has the power to appoint the principal during his lifetime to a charitable organization; Article 5(1) Appellant has the power to appoint the property by will; Article 15(9) Appellant has the right to remove and replace Trustees with or with out cause; Article 20(1) Trustee may invest and reinvest property; Article 20(2) Trustee may acquire property; Article 20(4) Trustee can make secure and unsecure loans; Article 20(8) Trustee may execute deeds, sell or dispose of any and all property; Article 20(11) Trustee may purchase and pay premiums from the principal for annuities or other forms of insurance for the Appellant or any other beneficiary; Article 26 Trustee is entitled to compensation. The Appellant was represented by counsel who was accompanied by Appellant s daughter and son in law. Counsel maintained that the Appellant's home was transferred into the self settled irrevocable trust in 2008 which is beyond the 5 year look back period. Further the plain reading of Article 4(3) which states The Trustee shall have no power to make distributions of principal to or for the benefit of the Donor as well as Article 20 which describes the Trustee s powers clearly demonstrates the principal of the Trust is not available to the Appellant. The Appellant submitted into evidence the RLA Trust, case law and memorandum (Exhibit 5). At the Appellant's counsel s request the record remained open until August 10, 2015 to respond to the MassHealth legal memorandum (Exhibit 6).
The Appellant s counsel submitted a response within the required time limits arguing the Appellant established an irrevocable trust beyond the 60 month look back period which only contains a remainder interest in real estate. The Trust grants the trustee power to distribute income to the Appellant (which the Appellant agrees is countable) and discretionary power to distribute principal for the benefit of the Donor s living issue. Article 4(3) of the Trust states that the Trustee shall have no power to make any distributions of principal to or for the benefit of the Donor this unambiguously eliminates all possibility that the Trustee can under any circumstance distribute principal to the Appellant and makes it explicitly clear the Appellant cannot under any circumstances access portion of the Trust principal. Although MassHealth maintains that the Appellant who originally served as trustee, had access to trust principal based on the right to collect trustee compensation, the payment of compensation qualifies only as 5 income and would not make principal then available. Further MassHealth disregards the fact the Trust contains only the remainder interest of the Trust asset and any income generated which would only be available to the Appellant as the life tenant and not the Trustee. MassHealth suggests the Trustee can purchase an annuity under Article 20, however the Appellant could only receive income generated from an annuity and again does not allow access to principal. MassHealth also asserts principal is countable through the powers of appointment granted in Article 4(5) and 5(1) but these articles are not reads in isolation and when the document is read as a whole it clearly intends to deprive the Appellant from access to principal as stated in Article 4(3). Counsel concludes that language of the Trust does not give the Appellant sufficient control of the principal of the Trust so as to make it available to use for long term care purposes. The Trustee has never, under any circumstance, allowed the Appellant access to principal, nor is there language in the Trust which could reasonably foresee a circumstance under which the explicit language of the Trust could be undermined to allow distribution of Trust principal to the Appellant. The Trust holds only a remainder interest in the single asset of the 5 The Appellant was succeeded by his son as Trustee three weeks prior to his application for MassHealth long term care benefits.
Trust, which consists solely of the Appellant's former home. No aspect of the Trust justifies MassHealth determination regarding the Appellant's ownership or control of the assets in the Trust other than equitable title by life estate, which is permissible under the MassHealth long term care benefit regulations (Exhibit 7). Findings of Fact Based on a preponderance of the evidence, I find the following: 1. The Appellant is a 92 year old single male residing in a nursing facility who filed an application for MassHealth long term care benefits on July 29, 2014 (Testimony). 2. On September 10, 2014 the application was denied due to excess assets greater than $2,000.00 (Testimony). 3. The Appellant submitted verifications on September 26, 2014 and the application was re stamped as of that date (Testimony). 4. On December 30, 2014 the application was denied as MassHealth determined the Appellant had access to assets in the R.L.A. 2008 Irrevocable Trust valued at greater than $2,000.00 (Exhibit 1). 5. On June 25, 2008 the Appellant as Grantor established the R.L.A. 2008 Irrevocable Trust (Exhibit 4). 6. The entire corpus of the R.L.A. 2008 Irrevocable Trust is the remainder interest of the Appellant s primary residence in Bristol, MA (Exhibit 4).
7. The Appellant's son is the Trustee of the Trust (Exhibit 4). 8. Article 4(2) states: The Trustee shall pay to the Donor so much of net income, if any, as the Trustee deem advisable in the Trustee s sole and absolute discretion. Article 4(3) states: The Trustee shall have no power to make any distributions of principal to or for the benefit of the Donor. Article 4(5) states: Notwithstanding the foregoing, the Donor reserves a limited or special power of appointment, exercisable during his lifetime by written instrument delivered to the Trustee, to appoint the remaining principal and any undistributed income of the Trust, outright or upon trusts, powers of appointments, conditions or limitations, to such person or persons (whether in equal or unequal shares) among the members of the class consisting of Donor s issue of all generations or charitable organizations other than governmental entities, but no such power or payment shall be used to discharge a legal obligation of the Donor. Article 5(1) states: Upon death of the Donor, the remaining principal and any undistributed income of the Trust shall be paid over to such person or persons (whether in equal or unequal shares and whether in trust or otherwise) among the class consisting of Donor s issue of all generations, but excluding the Donor s estate, creditors of the Donor or creditors of the Donor s estate, as the Donor shall appoint by a will specifically referring to his power. Any portion or all of such property not fully and effectually so appointed shall be distributed as hereinafter provided. Article 20 states: In addition to and not in limitation of all authority which it may have at common law and by statute, the Trustee shall have the following powers (except as
otherwise provided herein) which, together with all other powers, may be exercised without application to, or decree of or license of, any court, whether or not the Trustee is personally interested in the exercise of such powers, and which shall continue beyond the termination of the Trust hereunder for purposes of distribution: (1) To retain any investment and (except as may be otherwise provided herein) invest and reinvest in any property (2) To acquire property outright or upon any other terms and conditions. (4) To make unsecured loans and secured loans, and with respect to mortgages and other securities held as a fiduciary, to modify the terms thereof, to release partially, to foreclose and to purchase at foreclosure sales. (8) To sell, exchange, partition or otherwise dispose of all or any part of the property held as a fiduciary at public or private sale without license from any court, for its fair market value (11) To hold, retain, purchase, dispose of or otherwise deal with life insurance, annuities, endowment policies or other forms of insurance on the life of the Donor Article 26 states: The Trustee shall be entitled to reasonable compensation for its services and such (Exhibit 5). Analysis and Conclusions of Law The Appellant is a resident of a nursing facility who applied for MassHealth benefits on July 29, 2014. The request was denied on September 10, 2014 and the Appellant submitted verifications on September 26, 2014 and the application was re stamped as of that date. The application was subsequently denied on December 30, 2014. The Appellant timely appealed the re stamped application denial therefore September 26, 2014 will be the earliest date of application regarding this decision.
On June 25, 2008 the Appellant established and funded the R.A.L. 2008 Irrevocable Trust; therefore, regulations at 130 CMR 520.023 (Trusts or Similar Legal Devices Created on or after August 11, 1993) are controlling. The MassHealth long term care program is designed to assist in providing health care for the poor and therefore MassHealth has the obligation to scrutinize trust documents as it is expected that applicant s deplete their own resources before obtaining assistance from the government. While there are individuals and trusts which go to great lengths to appear to transfer funds out of their control while administering the trust in a manner so that they continue to maintain authority over the funds, there are also trusts that have been properly drafted to provide for a family member in life as well as preserving and protecting assets for beneficiaries upon the family member s death, that are not an attempt of the applicant to have their cake and eat it to. It is clear that under 42 U.S.C 1396p(d)(2)(A) that the Appellant established a Trust which was funded with the remainder interest of the Appellant's former residence. MassHealth asserts the assets contained in the Appellant's trust are countable based on a number of Trust provisions 6 including 4(2), 4(5), 5(1), 15(9), 20(1)(2)(4)(8)(11), and 26 maintaining these provisions allow 7 access to the principal of the Trust under 130 CMR 520.023(C)(1)(d). However I do not agree 6 Article 4(2) states the Trust shall pay the Appellant any net income. Article 4(5) the Appellant has the power to appoint the principal during his lifetime to his issue or a charitable organization; Article 5(1) Appellant has the power to distribute property by will; Article 15(9) Appellant has the right to remove and replace Trustees with or with out cause; Article 20(1) Trustee may invest and reinvest property; Article 20(2) Trustee may acquire property; Article 20(4) Trustee can make secure and unsecure loans; Article 20(8) Trustee may execute deeds, sell or dispose of any and all property; Article 20(11) Trustee may purchase and pay premiums from the principal for annuities or other forms of insurance for the Appellant or any other beneficiary; Article 26 Trustee Appellant is entitled to compensation. 7 (C) Irrevocable Trusts. (1) Portion Payable. (d) The home or former home of a nursing facility resident or spouse held in an irrevocable trust that is available according to the terms of the trust is a countable asset. Where the home
as the Trust provisions in this case, considered collectively, create such an instrument that renders assets noncountable in the determination of Medicaid eligibility and do not allow the Appellant or the Trustee to circumvent the intended purpose of the irrevocable trust or specifically Article 4(3) which states the Trustee shall have no power to make any distributions of principal to or for the benefit of the Donor. What is relevant in determining the countability of assets held in an irrevocable Trust established by an applicant or spouse or funded with an applicant s assets is the any circumstances test mandated at 42 U.S.C 1396p(d)(3)(B)(i) and 130 CMR 520.023(C)(1). To understand the federal statue and the MassHealth regulations, the decisions of Cohen and Doherty provide the most constructive guidance. The Court in Cohen directs: if there is a peppercorn of discretion, then whatever is the most the beneficiary might under any state of affairs receive in the full exercise of that discretion is the amount that is counted as available for Medicaid eligibility. The Court in Doherty held that a clause may not be read in isolation; rather, it must be construed and qualified in light of the trust instrument as a whole, but also concludes that assets held in trust can be so insulated as to render the assets non countable in a determination of Medicaid eligibility. Regarding the treatment of assets held in an irrevocable trust, under both federal law and MassHealth regulations, it is the Trustee s ability to make payment from principal that renders resources countable. It must be noted that the Trust asset in this case consists only of a remainder interest in property. So while MassHealth insists the asset is available it is unclear how the Appellant would actually access his remainder interest unless the entire property was sold or he could find a buyer for his interest. Nevertheless a plain reading of the Trust at hand indicates Article 4(2) affects the payment of any net income, which has been acknowledged by the Appellant and does not affect principal. Article 4(5) allows the Appellant to distribute principal or former home is an asset of the trust, it is not subject to the exemptions of 130 CMR 520.007(G)(2) or 520.007(G)(8).
during his lifetime to his issue or a charitable organization. As the Appellant is neither his own issue nor a charitable organization he does not have the ability to access principal. Article 5(1) involves the power to distribute property after the Appellant's death to his issue and does not allow the Appellant to access property for himself while living. Article 15(9) gives the Appellant the right to remove and replace Trustees, which even if the Appellant appointed himself as Trustee would not allow him to access principal of the Trust. Article 20 contains standard trust provisions which detail Trustee powers regarding his/her fiduciary responsibilities to the Trust. This Article also does not allow the access of principal for a non beneficiary to the detriment of declared beneficiaries. Finally Article 26 relates to the Trustee s entitlement to compensation for administration of the Trust, which does not give access to Trust assets. After review of the Trust articles I find there is no set of circumstances that allows discretion to pay principal to the non beneficiary Appellant as claimed by MassHealth or constitute the any circumstance which MassHealth is suggesting. Further any uncertainty caused with regard to these provisions does not eliminate the language which definitively denies the Appellant access to principal and affirmatively state the Trust is irrevocable. This appeal is approved.
Order for the MassHealth Redetermine long term care eligibility as of date of application after disregarding assets contained in the Ralph L. Andrade 2008 Irrevocable Trust Implementation of this Decision If this decision is not implemented within 30 days after the date of this decision, you should contact your MassHealth Enrollment Center. If you experience problems with the implementation of this decision, you should report this in writing to the Director of the Board of Hearings, Division of Medical Assistance, at the address on the first page of this decision. cc: MassHealth representative: Taunton MEC Brook Padgett Hearing Officer