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.