THE EVERETT ADVOCATE – FRIDAY, JULY 16, 2021 Page 23 “YOUR FINANCIAL FOCUS” JOSEPH D. CATALDO MASSHEALTH SUPERIOR COURT CASE A recent Massachusetts Superior Court Judge held against MassHealth with respect to the countability of assets housed in an irrevocable Trust. It is well settled law that for purposes of determining eligibility for MassHealth benefits, countable assets include any portion of the Trust principal that could under any circumstances be paid to or for the benefit of the applicant. Such circumstances need not have occurred, or even be imminent, in order for the principal to be treated as countable assets; it is enough that the amount could be made available to the applicant under any circumstances. This was set forth in the Heyn case, a Massachusetts Appeals Court case decided in 2016. In this Superior Court case, the applicant had retained a limited or special power of appointment in the Trust that she created that she could have exercised during her lifetime “to appoint the remaining principal and any undistributed income of the Trust among the members of the class consisting of her issue of all generations or charitable organizations other than governmental entities, but no such power or payment shall be used to discharge a legal obligation of the applicant”. In a simple sense, appoint is another word for distribute and an example of issue would be children or grandchildren. MassHealth argued that if the applicant appointed Trust principal to family members, those family members could then in turn return the Trust principal to the applicant to be used for her benefit. The Superior Court once again cited the Heyn case which stated that “Medicaid does not consider assets held by other family members who might, by reason of love but without legal obligation, voluntarily contribute monies toward the grantor’s support”. The grantor of the Trust is also referred to as the Settlor or Donor, and in this case, was the applicant for MassHealth benefits as well. The court also stated that “the limited power of appointment is exercisable only in favor of permissible appointees, and any attempt to exercise a limited power of appointment in favor of an impermissible appointee (i.e. to use principal for the personal benefit of the grantor), is therefore invalid. An appointment to a permissible appointee is ineffective to the extent that it was: 1. Conditioned on the appointee conferring a benefit on the impermissible appointee 2. Subject to a charge in favor of an impermissible appointee 3. Upon a trust for the benefit of an impermissible appointee 4. In consideration of a benefit conferred upon or promised to an impermissible appointee 5. Primarily for the benefit of the appointee’s creditor, if that creditor is an impermissible appointee, or 6. Motivated in any other way to be for the benefit of an impermissible appointee. The above six items are set forth in the Restatement (Third) of Property and the Superior Court judge held that MassHealth cannot argue that Trust principal could ever be distributed to a permissible appointee in order to benefit the applicant and held that none of the Trust principal was countable. The applicant then qualified for MassHealth benefits. In the case at hand, no principal could under any circumstances be appointed to the applicant. The applicant clearly was not a permissible appointee. If she was, her retained right would have been deemed a general power of appointment thereby providing her a right to receive Trust principal.
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