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MassHealth Planning as Asset Protection Planning — Massachusetts

By Harry S. Margolis

Trusts created for MassHealth planning purposes protect assets both from having to be spent down so the grantor can become eligible for MassHealth coverage of nursing home care and from the state’s claim for reimbursement — known as “estate recovery” — upon the grantor’s death.

But can MassHealth planning trusts also provide asset protection for non-MassHealth purposes, such as protection from creditors or in the event of divorce?  The answer is “yes.”

Many of our older clients transfer assets, often their homes, into irrevocable trusts in order to protect the property in the event they need long-term care.  After a five-year wait, it permits them to qualify for benefits without having to spend down the assets in trust and, if the protected property is a home, it permits their children to sell the home without the proceeds having to be spent down.

These trusts, if properly drafted, have the added advantage of protecting assets from other risks, especially a lawsuit for any reason. They also avoid probate. In the event of a second marriage, they can be drafted to provide certain benefits to the surviving spouse while preserving assets ultimately for the grantor’s primary family.

Further, the trusts may be drafted to provide continuing protection for children and grandchildren from lawsuits, bankruptcy, divorce, and early death.  In short, when consulting with an elder care attorney about long-term care planning, it makes sense to ask whether the trust may serve further purposes, including asset protection.

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