BOARD OF HEARINGS Appellant Name and Address: Appeal Decision: Approved Appeal Number: 1512120 Decision Date: 12/15 Hearing Date: 10/22/15 Hearing Officer: Stanley Kallianidis Record Open Date: 11/05/15 Appellant Representative: MassHealth Representative: Debbie Farias, Springfield
APPEAL DECISION Appeal Decision: Approved Issue: Trust Assets Decision Date: 12/15 Hearing Date: 10/22/15 MassHealth Rep.: Debbie Farias Authority This hearing was conducted pursuant to Massachusetts General Laws Chapter 118E, Chapter 30A, and the rules and regulations promulgated thereunder. Jurisdiction Notice dated 08/18/15 was sent to the appellant stating that MassHealth had denied her application for MassHealth benefits due to excess assets (Exhibit 1). The appellant filed this appeal on 09/11/15 and, therefore, it is timely (see Exhibit 2 and 130 CMR 610.015). A denial of MassHealth benefits is grounds for appeal (130 CMR 610.032).
Action Taken by MassHealth MassHealth denied the appellant's MassHealth application due to excess assets. Issue Pursuant to 130 CMR 520.023(C), was MassHealth correct to count the assets of irrevocable trusts in determining the appellant s eligibility?
Summary of Evidence The MassHealth representative testified that the appellant filed a MassHealth application on April 16, 2015 and a re application on July 13, 2015 (Exhibits 3 & 4). The appellant s application was denied due to excess assets. According to the denial letter, the excess assets were over the $2000.00 limit. The assets totaled $775,862.00 and were from two trusts valued at $772,300.00, and other assets. The only issue and dispute was over whether or not assets held in irrevocable trusts were countable. The MassHealth representative explained that, on August 24, 1995, the appellant established a Nominee Trust, and on the same day, a Family Trust, which holds 100% of the beneficial interest of the Nominee Trust. The Nominee Trust holds real estate valued at $772,300; the Family Trust has no assets (Exhibits 5 & 6). Two of the appellant s children are trustees of the Nominee Trust. Under Section 4.1 of the Nominee Trust, the income and principal is paid to the beneficiary, which is the Family Trust. Under Section 5.1 of the Nominee Trust, it can be terminated by the Family Trust. In the event of termination, under Section 5.2, the Nominee Trust shall be distributed to the Family Trust. Under Section 6.1, the Nominee Trust can be amended by an instrument in writing signed by all of the Beneficiaries (Exhibit 5). The appellant s children are beneficiaries of the Family Trust, two of which also serve as trustees. Under Schedule A of the Family Trust, the trustees can sell, lease or mortgage property. Under Article Four of the Family Trust, Any vacancy in the Trusteeship may be filled by the Donor during her lifetime; subject to such power, vacancies may be filled by the remaining Trustee or Trustees Under Article Five of the Family Trust, the Trustees shall give to Donor s Executor or Administrator, any amounts requested to pay the donor s debts, funeral expenses and any estate and inheritance taxes by reason of her death (Exhibit 6).
The decision to count the assets of the trusts was based upon a memo from MassHealth s legal division, which held that, even though the both trusts are irrevocable, their principal is available to the appellant and therefore are countable assets. Specifically, she argues, the Family Trust as beneficiary can terminate the Nominee Trust and receive the property. Thereafter, under Article Five, the Family Trust can sell the property and apply the proceeds towards the appellant s debts (Exhibit 7). The appellant s attorney contended that the Nominee Trust is the only Trust which holds any asset; the Family Trust has not been funded. By deed in 1995, the appellant relinquished her interest in the property. There are no circumstances in either the Nominee Trust or Family Trust in which she could reclaim her interest in the real estate. The attorney noted that both the Nominee Trust and Family Trust are irrevocable and that the appellant is neither a trustee nor a beneficiary of either Trust (Exhibit 8). The record was left open for the appellant to respond to MassHealth s memorandum, and also, for MassHealth to reply to the appellant s memorandum (Exhibit 9). According to argument and a memo from the appellant s attorney, there are no circumstances in either the Nominee Trust or Family Trust in which the appellant may access principal. This limitation along with the limitation of the trustees to pay principal over to her, must be respected. In support of his position, the attorney cited Cohen v. Comm r of Div. of Med. Assistance, 423 Mass. 399, 410 (1996) (Exhibit 10). In its reply memo, MassHealth reiterated the arguments made in its initial brief. Additionally, she contended that the appellant could become a Trustee of the Family Trust, and by amending the Nominee Trust, become its sole beneficiary. She contended that this interpretation is consistent with the principals of Doherty v. Director of the, 74 Mass. App. Ct. 439 (2009) (Exhibit 11).
Findings of Fact The record shows, and I so find: 1. The appellant filed a MassHealth application on April 16, 2015 and a re application on July 13, 2015 (Exhibits 3 & 4). 2. The appellant s application was denied due to excess assets over the $2000.00 limit (Exhibit 1). 3. The countable assets in question were from two irrevocable trusts valued at $772,300.00 (Exhibit 1). 4. On August 24, 1995, the appellant established a Nominee Trust, and on the same day, a Family Trust, which holds 100% of the beneficial interest of the Nominee Trust (Exhibits 5 & 6). 5. The Nominee Trust holds real estate valued at $772.300; the Family Trust has no assets (Exhibits 5 & 6). 6. Two of the appellant s children are trustees of the Nominee Trust (Exhibit 5). 7. Under Section 4.1 of the Nominee Trust, the income and principal is paid to the beneficiary, which is the Family Trust (Exhibit 5). 8. Under Section 5.1 of the Nominee Trust, it can be terminated by the Family Trust (Exhibit 5). 9. In the event of termination, under Section 5.2, the Nominee Trust shall be
distributed to the Family Trust (Exhibit 5). 10. Under Section 6.1, the Nominee Trust can be amended by an instrument in writing signed by all of the Beneficiaries (Exhibit 5). 11. The appellant s children are beneficiaries of the Family Trust, two of which also serve as trustees (Exhibit 6). 12. Under Schedule A of the Family Trust, the trustees can sell, lease or mortgage property (Exhibit 6). 13. Under Article Four of the Family Trust, Any vacancy in the Trusteeship may be filled by the Donor during her lifetime; subject to such power, vacancies may be filled by the remaining Trustee or Trustees (Exhibit 6). 14. Under Article Five of the Family Trust, the Trustees shall give to Donor s Executor or Administrator, any amounts requested to pay the donor s debts, funeral expenses and any estate and inheritance taxes by reason of her death (Exhibit 6). Analysis and Conclusions of Law MassHealth regulation 130 CMR 520.023(C)(1), Irrevocable Trusts states.. (a) Any portion of the principal or income from the principal (such as interest) of an irrevocable trust that could be paid under any circumstances to or for the benefit of the individual is a countable asset. (b) Payments from the income or from the principal of an irrevocable trust made to or for the benefit of the individual are countable income.
(c) Payments from the income or from the principal of an irrevocable trust made to another and not to or for the benefit of the nursing facility resident are considered transfers of resources for less than fair market value and are treated in accordance with the transfer rules at 130 CMR 520.019(G). (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 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). (2) Portion Not Payable. Any portion of the principal or income from the principal (such as interest) of an irrevocable trust that could not be paid under any circumstances to or for the benefit of the nursing facility resident will be considered a transfer for less than fair market value and treated in accordance with the transfer rules at 130 CMR 520.019(G). In the instant appeal, I have found that the appellant filed a MassHealth application on April 16, 2015 and a re application on July 13, 2015. The appellant s application was denied due to excess assets. The countable assets in question were from two irrevocable trusts valued at $772,300.00. On August 24, 1995, the appellant established a Nominee Trust, and on the same day, a Family Trust, which holds 100% of the beneficial interest of the Nominee Trust. The Nominee Trust holds real estate valued at $772,300; the Family Trust has no assets.
The appellant s children are beneficiaries of the Family Trust, two of which also serve as trustees. Under Section 4.1 of the Nominee Trust, the income and principal is paid to the beneficiary, which is the Family Trust. Under Section 5.1 of the Nominee Trust, it can be terminated by the Family Trust. In the event of termination, under Section 5.2, the Nominee Trust shall be distributed to the Family Trust. Under Section 6.1, the Nominee Trust can be amended by an instrument in writing signed by all of the Beneficiaries Under Schedule A of the Family Trust, the trustees can sell, lease or mortgage property. Under Article Four of the Family Trust, Any vacancy in the Trusteeship may be filled by the Donor during her lifetime; subject to such power, vacancies may be filled by the remaining Trustee or Trustees Under Article Five of the Family Trust, the Trustees shall give to Donor s Executor or Administrator, any amounts requested to pay the donor s debts, funeral expenses and any estate and inheritance taxes by reason of her death. There is no dispute that the trusts are irrevocable. Herein, the pertinent question is whether the principal of the Nominee Trust and Family Trust are available to the appellant under any circumstance, and if so, to what extent? MassHealth has determined that both the Nominee Trust and Family Trust are countable assets. Principally, MassHealth argues that the Family Trust as beneficiary can terminate the Nominee Trust and receive the property. Thereafter, under Article Five, the Family Trust can sell the property and apply the proceeds towards the appellant s debts. This is simply not true. Even accepting the premise that the Nominee Trust may be terminated by the Family Trust, the trustees are limited to only paying the appellant s Executor or Administrator expenses by reason of her death. Clearly, the trustees have no discretion to pay any principal to her while she is alive.
As further grounds as to why the assets of the Nominee Trust and Family Trust are countable, MassHealth imagines a scenario where the appellant could become a trustee of the Family Trust, and by amending the Nominee Trust, become its sole beneficiary. Such an outcome is highly implausible if not impossible. First of all, while the appellant could potentially name herself to be a trustee of the Family Trust, she can do so only if there are vacancies. No such vacancies were noted in the hearing, however. More importantly, while the Family Trust may be amended, it can only be done with an instrument in writing signed by all of the Beneficiaries The appellant cannot amend the Family Trust on her own so as to make herself the sole beneficiary. The outcome which MassHealth envisions is one which is not only absent from the language of the Nominee and Family Trust, it is wholly contradicted by their terms. In conclusion, the assets of the Nominee Trust and Family Trust are unavailable to the appellant even accepting that the Family Trust may terminate the Nominee Trust. Accordingly, based upon the above cited regulations, none of these assets should have been counted in her eligibility determination. The appeal is therefore approved. Order for MassHealth Re open application and determine appellant s eligibility for MassHealth exempting all trust assets.
Implementation of this Decision If this decision is not implemented within 30 days after the date of this notice, you should contact your local office. If you experience problems with the implementation of this decision, you should report this in writing to the Director of the at the address on the first page of this decision. Stanley Kallianidis Hearing Officer _ cc: