While a recent decision in the case of Paul A. DeVico, et al. v. Annmarie Sullivan (Mass. App. Ct., No. 21-P-779, June 1, 2022) deals only with whether it is time-barred due to the statute of limitations, it involves an issue that often arises in the realm of Medicaid planning.
In 2006, Annemarie’s parents for purposes of MassHealth (Medicaid) planning transferred their home in Dorchester to her. She subsequently transferred it into a realty trust of which she was the sole beneficiary. Her father died in 2012 and her mother in 2015. In 2020, two of Annemarie’s brothers, Paul and David DeVico brought this suit alleging that Annemarie had promised their parents that she would transfer the home to a trust for the benefit of all their five children. They claim to have only discovered in 2019 that they were not beneficiaries of the trust.
Since the decision focused on whether Paul and David’s suit came too late, it’s a bit sparse on the details. But we can make some guesses as to why the older DeVicos did not transfer the house directly to all five children or into trust for their benefit.
Exceptions to the MassHealth Transfer Penalty
Most transfers cause five years of ineligibility for MassHealth. However, there are some exceptions to this so-called transfer penalty. Two may be relevant here. There is no penalty for transfers to disabled children or to caretaker children. Caretaker children are defined as those who have lived with their parents for at least two years prior to the transfer who also provided their parents over those two years sufficient care to prevent them from moving to a nursing home.
When parents need MassHealth coverage for home or nursing home care and they want to protect the property from MassHealth estate recovery (the right of MassHealth to recover its costs from the estate of the beneficiary after their death) they can do so by transferring the property to a child who qualifies for one of the transfer penalty exceptions. But what does that mean in terms of the child’s obligation to share the property with their siblings?
Obligation to Share?
In these cases, we’ve always advised our clients that recipient children have no legal obligation to share the property. They can do so if they choose, but are not required to do so. Our reasoning is that if there were a legal obligation for the disabled or caretaker child to share the property this would, in effect, be defrauding MassHealth. MassHealth is not imposing a transfer penalty only because the particular child qualifies for one of the exceptions. If the property were transferred to children who did not qualify, the five-year penalty would apply. If the qualifying child were legally obligated to retransfer the property to her non-qualifying siblings, how would this be any different from MassHealth’s point of view from a direct transfer to those siblings?
Statute of Limitations
We don’t know from the record why the DeVico parents transferred the house to Annemarie rather than to all their children, but the court does say it was for Medicaid planning purposes. That may play into how the case is ultimately decided. However, at this stage the issue is whether Paul and David came forward too late. The lower court dismissed their claim reasoning that they should have at least inquired into the status of the trust within the three years after their mother died in 2015.
The Appeals Court reverses on two grounds. Among the arguments they made, Paul and David claim that a “resulting” or “constructive” trust should be imposed on the property for the benefit of all the siblings. These are judicial constructions that impose trusts on property based on the facts. Such arguments are based on implied contact which are subject to a six-year, rather than a three-year, statute of limitations. The brothers filed their case well within six years from their mother’s death. (The reason that’s the important date rather than the creation of the trust in 2006 is the so-called “discovery” rule which delays the running of the time period until they discovered or should have discovered the breach.)
Paul and David’s further argument that Annemarie made oral promises to her parents to hold the property in trust for her siblings as well as herself, if successful, would not be subject to any statute of limitations since it would mean revising the current trust to reflect that promise. In effect, it’s an enforcement action rather than one based on any breach. Since the trust in this case is a realty trust, this would be as simple as revising the schedule of beneficiaries.
The Role of MassHealth Planning
The Court of Appeals remands the case back to the trial court for further discovery and trial. In a footnote it says: “We express no view on the likelihood of success of the plaintiffs’ claims; we hold only that they were prematurely dismissed.” It will be interesting to see how the role of MassHealth planning plays into the enforceability of Annemarie’s oral commitments, assuming it can be proved that she made them at all.