In the latest decision on irrevocable trusts, Heyn v. Medicaid, the Appeals Court concludes that MassHealth erred in determining that property in an irrevocable trust was a “countable” asset and overturned the lower court’s decision affirming MassHealth’s holding. To learn more about this case and its implications for irrevocable trusts and Medicaid planning, click HERE.
Posts Categorized: Massachusetts Law
By: Sarah Roscioli (BCLS 3L)
Overview of Governor’s Proposed Changes to MassHealth Estate Recovery. The Governor’s proposed FY 2017 budget would have, among other things, expanded MassHealth estate recovery to include non-probate property for those becoming eligible for Medicaid (nursing facility benefits) on or after July 1, 2016.
Legislative Update. On April 13, 2016, the House Committee on Ways and Means made its recommendations for the FY 2017 budget, which do not include the Governor’s proposed expanded definition of “estate” for purposes of recovery against the assets of a deceased MassHealth long-term care benefits recipient.
Broadening Definition of “Estate.” Currently, M.G.L. Ch. 118E, Section 31(c) defines “estate” as all real and personal property and other assets included in decedent’s probate estate. The Governor’s proposed language would have redefined the term “estate” to include: (1) joint property, including joint tenancy and tenancy by the entirety; (2) life estates; (3) funded revocable trusts; and (4) other property passing by beneficiary designation. The Governor’s proposed language specifically excluded annuities and life insurance, with the exception of payments otherwise includable in the decedent’s probate estate.
Recovery Deferred for Surviving Spouse. It is important to note that the Governor’s proposed budget would not have hastened the Division’s recovery when the decedent is survived by a spouse, i.e., under Chapter 118E, Section 31(b), recovery may not commence until after the death of the surviving spouse.
Overview of Budget Approval Process. On January 27, 2016, Governor Baker and Lieutenant Governor Polito filed their budget proposal for the Fiscal Year 2017 (FY17). In mid-April, the House Ways & Means Committee reported its budget to the full House for debate and vote. Then, in mid-May, the Senate Ways & Means Committee will report its budget to the full Senate for debate and vote. The House and Senate budgets will then be reconciled into a single budget which will return to each chamber for a vote. Once the House and Senate pass the reconciled budget, it will go to the Governor to be signed. Following any legislative overrides, the final budget would go into effect for the fiscal year beginning July 1, 2016.
In a poorly-reasoned and somewhat murky decision, a Superior Court judge in Daley v. Sudders (Civil Action No. 15–CV–0188–D.Dec. 24, 2015) extends the Doherty decision to reject the MassHealth application of a man who, with his wife, placed his Worcester condominium into an irrevocable trust for long-term care planning purposes. To learn more about this case and its implications for life estate trusts, click HERE.
In Brissette v. Ryan, 2013 Mass. LEXIS 994 (November 29, 2013), the Appeals Court reversed a jury award to the plaintiff for $100,000 for a malpractice claim where the defendant attorney advised the plaintiff and her husband to transfer their home to their children without retaining a life estate in order to avoid healthcare liens, stating that the life estate would subject the property to healthcare liens. The defendant attorney was unaware that the law had changed a few years earlier to permit transferors to retain a life estate without subjecting the property to healthcare liens. When the plaintiff discovered the mistake she hired an attorney to reform the deed in the probate court, although the plaintiff’s son opposed the probate court proceeding and that proceeding was ultimately dismissed, leading the plaintiff to file a malpractice claim against the defendant.
After the jury verdict, the defendant filed a Motion for Judgment Notwithstanding the Verdict and a Motion for New Trial. The defendant challenged the verdict as being against the weight of the evidence and argued that the jury award was improperly grounded in sympathy and speculative damages. The Court agreed finding that the plaintiff did not incur any actual damages.
Despite the plaintiff’s claim that due to the defendant’s advice, she now owns nothing when she could have owned a life estate, the Court held that the loss of rights alone is not sufficient without proof of actual damages. The plaintiff did not testify that she had any plans to mortgage or rent the house and the plaintiff’s children never tried or threatened to evict her.
The Court felt that the jury likely felt sympathy for the plaintiff in awarding her $100,000 because the amount was speculative and there was no basis for that amount in the evidence. The plaintiff had not even presented any evidence for out-of-pocket expenses, such as attorney fees. The Court held that the plaintiff’s unease that her children might someday evict her, despite their testimony that they would never do that, and the fact that she did not show any actual damages, did not amount to an exceptional circumstance to warrant emotional distress damages.
The Court held that there were no set of circumstances which it may be reasonably inferred that the plaintiff suffered or will likely suffer damages due to the defendant’s legal representation.
Author: Sandy Christopher, JD, CTFA
Senior Trust & Fiduciary Specialist, Wells Fargo Private Bank
In Torres v. Torres (84 Mass. App. Ct. 1117; 995 N.E.2d 1152; 2013 Mass. App. Unpub. LEXIS 1029) the plaintiff, Jesse E. Torres, III (“Jesse”), appealed the ruling of the Superior Court concluding that Massachusetts law prohibits a claim for anticipatory breach of a contract to make a will. The Appeals Court vacated the judgment of the lower court and allowed the suit to go forward, but solely as an action in quantum meruit.
Jesse alleged that he and his mother, Sophie Torres (“Sophie”), had, in 2009, reached an agreement requiring Sophie to leave Jesse certain parcels of real property in her will. The purported contract permitted Sophie to sell or finance the various pieces of property during her life for her own benefit and required any proceeds not used by Sophie to become Jesse’s property upon Sophie’s death. As consideration for this, Jesse relinquished any claim he might have against Sophie or her estate for services rendered, or funds loaned to her, as long as the terms of the ostensible contract were respected. If the terms of the supposed contract were violated, “any monies and interest will become fully due and payable.” In 2011, subsequent to the execution of the alleged contract, Sophie executed a new will, which Jesse claimed was a breach of her contractual obligation to him under the 2009 agreement.
The Court noted that Jesse’s action “purports to raise several questions of first impression, namely whether we recognize contracts not to revoke a will, and whether an action for beach of such a contract is premature until the death of the testator, as in an action to make a will.” However, the Court, in an act of “judicial prudence” declined to address these questions, as it concluded that they were unnecessary to decide in this case, as Jesse had available to him a viable action in quantum meruit. The quantum meruit action was available to Jesse because “the contract specifies that Jesse’s damages will be the very monies and interest he loaned to his parents, whether the litigation is denominated a contract action or an action in quantum meruit, the merits and, if Jesse is successful, the relief, will be identical.”
Matthew Conroy, J.D., CFP®
Argent Wealth Management, LLC
This recent Essex Superior Court decision is the latest chapter of litigation between the Doherty family and the Commonwealth, dealing with issues of trust construction, trust reformation, and eligibility for Medicaid benefits under the MassHealth program. Ultimately, the instant case was dismissed due to a lack of standing on the part of the plaintiffs, who were challenging an earlier ruling denying their deceased aunt benefits from Medicaid.
In 2006, the decedent Muriel S. Doherty moved to a nursing home in North Andover. She applied for Medicaid benefits through the MassHealth program, and was subsequently denied by the Executive Office of Health and Human Services (“EOHHS”). The denial of benefits was based upon the fact that Muriel was the beneficiary of an irrevocable trust with a value of $630,000, which EOHHS argued was a countable asset well in excess of the maximum allowed for Medicaid eligibility. The Superior Court and Appeals Court upheld the EOHHS determination, reasoning that the trust instrument granted Muriel access to principal distributions, thereby triggering the inclusion of those assets for Medicaid eligibility purposes. As a result of this denial of benefits, almost $400,000 was paid to the nursing home until Mrs. Doherty’s death in 2010.
In 2012, Mrs. Doherty’s heirs obtained a judgment from the probate court, reforming the trust retroactive to April 12, 2000. Provisions allowing for principal distributions to Muriel were removed, as it was stipulated that Muriel never intended for trustees to have discretionary authority to make such distributions. With this reformed trust in hand, the heirs demanded that EOHHS reconsider the 2006 denial of benefits, and reimburse them the full amount paid by Mrs. Doherty to the nursing home. The EOHHS refused to reopen their 2006 determination, and Mrs. Doherty’s heirs filed suit in Superior Court.
The Superior Court ruled that the plaintiffs had no standing to sue the EOHHS. The Court reasoned that the plaintiffs could not allege an injury within the area of concern of the Medicaid statute, which is to provide benefits “for those eligible for financial assistance.” Admittedly, none of the heirs were indigent or in need of such benefits. In addition, the Court found no provisions in the statute allowing heirs of an estate to apply for them. Moreover, as a matter of public policy, the Court considered the adverse effects of allowing standing in this case. Permitting heirs to seek Medicaid benefits through the use of reformed trusts could bring “disastrous results” to the Medicaid program, “putting large amounts of public money into the hands of those who need it least.”
Because neither MassHealth nor the Courts will be sympathetic to heirs who challenge eligibility determinations of a deceased applicant, estate planners need to raise Medicaid eligibility at the planning stage. As clients with assets of $630,000 might become or want to become eligible for Medicaid benefits, the estate attorney – with elder care knowledge or in consultation with an elder law specialist – should discuss with clients the pros and cons of various planning and drafting strategies. What clients ultimately need to know is that creating new facts will not replace good planning.
In Waxman v. Waxman, 84 Mass.App.Ct. 314 (September 30, 2013), the Court affirmed two decisions of the Superior Court and addressed the distribution of assets upon the death of a party to a divorce proceeding during the pendency of the proceeding. The Court affirmed the summary judgment ruling with respect to the assets that the decedent held with his estranged wife as tenants by the entirety and as joint tenants, ruling that such assets passed to her by common law right of survivorship upon the decedent’s death, because there was no agreement between the parties overriding this right.
The Court also affirmed the summary judgment ruling regarding the decedent’s IRA, ruling that the decedent did not violate the automatic restraining order under Supplemental Probate Court Rule 411 as a matter of law when the decedent changed the beneficiary designation on his IRA three days prior to the filing of the complaint of divorce and before the automatic restraining order took effect. The record indicates that the decedent’s wife failed to raise at trial the issue of fact regarding the decedent’s state of mind when he changed the beneficiary designation on his IRA (i.e. whether the decedent intended to evade the automatic restraining order by changing the beneficiary designation shortly in advance of filing for divorce), so this issue was not preserved for appeal.
Nikki Marie Oliveira, Esq., LL.M., Margolis & Bloom, LLP
As we all know, the Massachusetts Uniform Trust Code (“MUTC”) has been adopted as M.G.L. ch. 203E. It replaced all but Part V of Article VII of the Massachusetts Uniform Probate Code (“MUPC”). The adoption of this new law brought about some changes for the probate process and the MUPC in general, as discussed below.
Both the MUPC and MUTC were adopted with the intent to make the processes more streamlined and efficient. As practitioners are navigating through these labyrinths, it appears that the underlining goals of these news laws are in sight. A foundational purpose of enacting the MUPC and the MUTC was to decrease judicial proceedings and court intervention overall. Accordingly, the usual court functions regarding trusts have changed quite a bit, lessening court involvement for the majority of trust administration.
One such change affects trustees of testamentary trusts. For example, it is no longer necessary to petition the court for the appointment of a trustee under a testamentary trust. After the will is approved, the new process merely requires the appointed trustee to confirm his appointment and seek the approval of an accompanying bond. The courts no longer issue letters to trustees appointed under the MUTC, but will send an attested copy of the statement form if the bond is approved by the court.
Another significant change involves the removal of trustees. Under the MUTC, the settlor, co-trustee or beneficiary may seek the removal of a trustee for reasons other than cause. In order for the court to grant the removal, the following three requirements must be satisfied: (1) removal serves the best interests of all beneficiaries of the trust; (2) removal does not interfere with a material purpose of the trust; and (3) there is a suitable co-trustee or successor trustee available and willing to serve.
The following is an overview of the forms changes:
- MPC 275- Statement of Confirmation of a Testamentary Trustee
- MPC 351- General Trust Petition for Appointment of Guardian ad Litem
- MPC 777- Decree and Order on General Trust Petition Appointing Guardian ad Litem
- MPC 266- Petition for Resignation/Removal/Appointment of a Successor Trustee
- MPC 782- Decree and Order on Petition for Resignation/Removal/Appointment of a Successor Trustee
- MPC 267- Petition to Terminate a Trust
- MPC 783- Decree and Order to Terminate a Trust
- MPC 201- General Trust Petition
- MPC 857- Petition for Allowance of Account
- MPC 791- Decree and Order of Allowance of Account
- MPC 295- Petition to Modify Bond
- MPC 776- Decree and Order to Modify Bond
- MPC 275- Petition for Appointment of Testamentary Trustee
- MPC 781- Decree and Order on Petition for Appointment of Testamentary Trustee
Heidi A. Seely, Esq., Pratt, Bator & Popov, LLP
On January 8, 2013, the Probate and Family Court announced that all publicly available Estate and Administration cases are now available online.Access is secured through the court website at www.masscourts.org.
Tamara L. Sturges, Esq., Pathway Law LLC