The Supreme Judicial Court rendered its long-awaited decisions in Daley v. HHS (SJC-12200) and Nadeu v. Medicaid (SJC-12205) today. The Court held that “neither the grant in an irrevocable trust of a right of use and occupancy in a primary residence to a [MassHealth] applicant nor the retention by an applicant of a life estate in his or her primary residence makes the equity in the home owned by the trust a countable asset for the purpose of determining Medicaid eligibility for long-term care benefits.”
The decisions make clear that transferring a primary residence into an irrevocable trust, properly done, will not make the residence countable for purposes of determining MassHealth nursing home benefit eligibility after the MassHealth five-year lookback period has run, so long as the applicant does not have access to principal under “any circumstances.” The value of a life estate retained by the grantor remains countable as well as any income to which the grantor of the trust is entitled.
The decisions describe some traps for the unwary. Such trusts should circumscribe trustee discretion to appoint trust assets to a non-profit organization. Provisions such as this are sometimes included to qualify for favorable tax treatment, or “grantor trust” status. Many skilled nursing facilities in Massachusetts are run by non-profits, and if the nursing facility meets the definition of a non-profit set forth in the trust, this may make the trust assets countable. Also, trust language that provides for the use of trust principal to pay for taxes creates countability. Lastly, the opinions suggest that the value of a grantor’s use of the premises, i.e. the fair market rental value, under a use and occupancy agreement is a countable asset.