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Bloom Also Wins MassHealth Trust Case

By Harry S. Margolis

Last week, I reported on a fair hearing decision in favor of my partner, Patricia D’Agostino’s client. Not to be left out of the party, my other partner, Jeffrey A. Bloom, forwarded a recent fair hearing in favor of his client, also involving an irrevocable trust.

In the second case, MassHealth claimed that the house held by the trust was available to the client and countable against her asset limit due to three provisions in the trust:

  1. The trust gives the donor the right to appoint, in other words, give, the house to a charity. This provision is often included in trusts to make certain that any house in the trust will qualify for the $250,000 deduction in capital gains taxes if the house is sold. MassHealth argued that since a nursing home could be operated by a non-profit organization, and therefore the trust property could be used for her care.
  2. The donor could appoint anyone as trustee, including herself.
  3. The trustee is entitled to reasonable compensation. MassHealth argued that the client could appoint herself as trustee and then pay out all of the trust assets to herself as reasonable compensation.

Distribution to Charity

The Hearing Officer finds that the donor’s ability to appoint trust property to one or more charitable organizations does not give her access to the trust principal, finding that “once distributed to the organization, it is by no means certain that funds distributed would be used specifically for appellant’s care.”

Reasonable Trustee’s Fee

At the fair hearing, MassHealth conceded that it would not be reasonable for the trustee to receive all trust assets as a fee, but it did not determine how much it considered a reasonable fee, still arguing that all the trust funds were available to the client. The Hearing Officer finds that in failing to determine that amount, MassHealth did not meet its obligation of telling the client how much to spend down, and thus it’s argument that all the trust assets are available fails:

MassHealth has an obligation to determine the portion of trust principal accessible to appellant under the trust provision (Daley, 477 Mass. at 203). MaqssHealth failed to do so, leaving appellant with no specific asset amount to either dispute or accept. Further, without specific numbers, appellant is unable to reduce her assets in accordance 130 CMR 520.004. For these reasons, MassHealth’s argument that appellant has access to the entire trust principal under Articles 4.1 and 4.7 falls short as well.

Conclusion

As this case and the one reported last week demonstrate, while MassHealth is continuing to challenge many irrevocable trusts, applicants for coverage are finding more success defending those trusts at fair hearing without having to appeal to Superior Court.

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