Irrevocable Trusts

5 Ways Having Children Changes Your Estate Plan (and Your Life)

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After four months of precious bonding time with my new baby, I’m back at the firm and have returned to my fulfilling career as an estate planning and probate attorney. Having a second child changed my life just as much as having my first child changed my life. Before having each child, as an estate planning attorney I thought I had everything figured out: who the guardians of my children would be, how I wanted my assets distributed to my children should I no longer be around… but, of course, plans change when you have children, and it is important to recognize how such plans—including an estate plan—can change after having children. 

If you recently had a child or you already have children, it is important to include them in your estate plan. Estate planning plays a pivotal role in ensuring that your children are provided for in the event of unexpected circumstances. 

If you have already included your children in your estate plan, it is just as important to review and update your estate plan as your children get older because the plan you made five or ten years ago may not reflect your wishes now. This is especially true if your child is now an adult or if your child has developed a disability and is receiving needs-based government benefits.

 

Here are five ways having children affects your estate plan:

1.Naming a Guardian for Your Child

It is imperative that you name a guardian for your child in the event that you and the other parent die or become incapacitated. A guardian is someone who will take legal responsibility for your child’s physical well-being. A guardian has the authority to make all decisions regarding the care of your minor or incapacitated child, including healthcare decisions, residence, education, and religious upbringing.

You typically name a guardian in your Last Will and Testament to have custody of your minor or incapacitated child. Upon your death and the death of the other parent, the guardian you named will need to go through the court process to confirm their guardianship. The court will evaluate whether the proposed guardian is suitable and whether it is in the child’s best interest to be in the guardian’s care.

Once you name a guardian for your child, you should review your estate plan periodically to determine whether the guardian you picked is still a good fit. Who you thought you wanted to be the guardian of your child may change as your child gets older. Have you moved a significant distance away from the guardian you named? Has the guardian spent time with your child and developed a good, stable relationship with them? The answers to these questions may prompt you to change the guardian you chose.

2. Creating a Parental Appointment of Temporary Agent

Now that you have named a guardian, you should create another estate planning document called a Parental Appointment of Temporary Agent, or PATA for short. 

I’ve mentioned that a guardian named in your Will must go through a court process to be appointed, and that this court process can take a long period of time. What happens during this time that your guardian is waiting to be appointed by a court? Or what happens if you are in the hospital or otherwise incapacitated? Who takes care of your child and makes decisions for them? 

Massachusetts law allows parents of a minor or incapacitated child to designate through a PATA a temporary agent to take care of the child for up to 60 days. This temporary agent has the power that the parent had regarding care, custody, or property of the minor or incapacitated child until a permanent guardian or conservator is appointed by the court. 

Keep in mind that you and the other parent must appoint a temporary agent together unless the other parent consents to the appointment in writing or the other parent’s parental rights have been terminated. Also, keep in mind that like the guardian you named in your Will, you should review your estate plan as circumstances change and your children get older to determine whether the temporary agent is still a good fit.

3. Providing for Your Child in Your Estate Plan

Having a comprehensive Will is the cornerstone of any estate plan, especially for young parents and families. As I mentioned earlier, you can designate a guardian for your minor or incapacitated child in your Will. Your Will also specifies how your assets will be distributed to your child; however, it is important to note that your Personal Representative cannot distribute funds over $5,000 directly to a minor child.

In Massachusetts and many other states, minors under the age of 18 cannot assume control of property given directly to them through an inheritance. If you leave money or assets to your minor child through your Will and you do not specify how those assets are handled, then a conservator will need to be appointed by a court to manage the funds.

This can be avoided by establishing a trust for your minor or incapacitated child. A trust can manage and protect your child’s inheritance and be tailored to your preferences, specifying when and how your child will receive assets. You can also name a Trustee to manage the trust assets on behalf of your child. The Trustee may be a family member or friend, professional fiduciary (attorney or accountant), or corporate fiduciary (such as a bank).

Trusts aren’t only for minor or incapacitated children. You can create a trust for an adult child at your death to manage the child’s inheritance for a period of time, such as until the child turns 30 years of age, or for a child’s lifetime through a so-called “lifetime trust share.” A lifetime trust share helps protect a child’s inheritance from their creditors, such as a divorcing spouse or someone who initiates a lawsuit against your child. Although the protection offered by a lifetime trust share is impacted by the identity of the Trustee, the way the Trust is administered, and the state in which the beneficiary resides, these shares are a great tool to increase the protection of inherited assets in the event of divorce or from potential creditors.

4. Needing a Supplemental Needs Trust for a Disabled Child

While on the topic of trusts, if your child becomes diagnosed with a significant health issue or disability, you should consider whether you need to have a special type of trust called a Supplemental Needs Trust as part of your estate plan. A Supplemental Needs Trust (“SNT”) provides long-term management of the inheritance you leave to a disabled child while allowing the child to qualify for needs-based government benefits should such benefits become necessary for them in the future. SNTs can pay for and supplement medical and travel expenses, entertainment, pet care, and other expenses that can enhance an incapacitated person’s quality of life, especially when parents or grandparents are no longer around. 

5. Considerations As Your Child Becomes an Adult

Soon enough, and all too quickly, your child will grow up and become an adult. When that happens, there are different considerations for your estate plan than when your child was a minor. You may consider naming your child in a fiduciary role, such as your attorney-in-fact under your Durable Power of Attorney, your healthcare agent under your Health Care Proxy, or even the Trustee of your trust or a trust you create for your child after your death. Although a child who is a beneficiary of a SNT cannot be their own Trustee, your adult child can be the Trustee or Co-Trustee of their own separate trust share if you believe your child is mature enough to do so.

On the other hand, what if your child is not mature enough to handle their own Trust? Is your child on the brink of a messy divorce, or does your child spend every dollar they make the minute they receive it? You can name someone else to handle the inheritance you leave to your child or otherwise specify exactly how you want your child’s inheritance handled after your death.

There are numerous other considerations as well, such as whether you would like to provide for a grandchild in your Will or Trust or whether your child has moved far from home and retaining the house after your death is no longer be feasible. 

These are tough decisions that require thoughtful consideration and planning. As you have children and your family grows, the last thing you want to think about is what happens to your child if you are no longer around. Unfortunately, life is unpredictable, and taking proactive steps now will provide peace of mind knowing that you have taken care of your child’s well-being, no matter what the future holds. Estate planning is crucial in securing your child’s future and addressing the unique needs of your family, particularly as those needs change over the course of you and your child’s lifetimes.

Attorney Brittany Hinojosa Citron is a senior associate attorney with the law firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of trust and estate planning, estate settlement, and elder law matters. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. 

July 2025

© 2025 Samuel, Sayward & Baler LLC

Five Things to Think About When Considering an Irrevocable Long-Term Care Trust

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Five Things to Think About When Considering an Irrevocable Long-Term Care Trust

It’s no secret that the cost of long-term care is spiraling out of control in this country, and, consequently, it’s no wonder that more and more clients are expressing concerns to us about wanting to “protect” their assets from being depleted by the cost of such care. Clients will frequently mention either that they heard on the radio, TV, or the internet that they can accomplish this using an irrevocable trust or that they have a friend, neighbor, or relative who put their assets into an irrevocable trust for this purpose. While irrevocable trusts can absolutely be used to protect assets from being spent on long-term care, they are not a universal “one size fits all” solution, and they are not without drawbacks. With this in mind, here are five things to think about if you are considering an irrevocable trust to protect assets for long-term care purposes (an “irrevocable long-term care trust”):

  1. You Have to Give Up Control. Despite what numerous radio, TV, and internet ads would have you believe, you cannot protect your assets from being spent on nursing home care while retaining full control over them. Under federal and state law, assets in an irrevocable long-term care trust created by you (or your spouse) are subject to the “any circumstances” test, meaning that if there are any circumstances under which the assets could be distributed to you or used for your benefit, the assets will not be protected and would need to be spent on your long-term care before you would be eligible to receive public long-term care benefits (part of the Medicaid program, known as MassHealth in Massachusetts). As a result, in order for an irrevocable long-term care trust to function as intended, you cannot have any right to access the assets in the trust once they have been transferred into it, nor can the trustee (the person in charge of managing the trust’s assets) have any ability to distribute the assets directly to you or use them directly for your benefit. This means that, among other things, if your house is transferred into an irrevocable long-term care trust you will not be able to access its equity through a home equity line of credit or a reverse mortgage. Additionally, trust funds could not be used to directly pay for services for you, such as an assisted living facility or home health aides. Finally, while you would retain the ability to remove and replace the trustee, you could not serve as the trustee yourself and, therefore, would not be able to directly manage the assets in the trust.
  2. You Have to Have the “Right” Assets to Fund the Trust. When it comes to funding an irrevocable long-term care trust, not all assets are created equal. In particular, you cannot transfer tax-qualified retirement accounts (e.g., IRAs, 401(k)s, etc.) into a trust without immediate income tax consequences. This is because such accounts have to be converted into taxable brokerage accounts (or cash) in order to be transferred out of your individual name, meaning you would be taking a taxable distribution equal to the entire balance of the account. So, if you were to transfer a $300,000 IRA into the trust, you would have $300,000 of additional taxable income reportable on your personal income tax return for the year the transfer is made. Additionally, it is not generally a good idea to transfer a home with an outstanding mortgage into an irrevocable trust. This is because if you continue to pay the mortgage with your own non-trust funds, such payments could be considered additional gifts to the trust (since you no longer own the home in your individual name), which could create problems in the event you need to subsequently apply for MassHealth long-term care benefits.
  3. You Have to Wait Five Years Before Applying for Long-Term Care Benefits. In order to avoid the possibility of people transferring their assets into an irrevocable long-term care trust and then turning around and applying for MassHealth long-term care benefits the next day, state and federal law give MassHealth the authority to review all of your financial transactions for the 60 months (5 years) immediately preceding your application for long-term care benefits. Any and all gifts and other transfers for less than fair market value made during that time, known as the “lookback period,” are considered to be “disqualifying transfers,” which will delay the start of your MassHealth long-term care benefits for a period of time determined by the value of the assets transferred. If significant assets are transferred, this delay can last several months, if not years. Thus, an irrevocable long-term care trust is generally not a good idea unless you are confident that you will not need MassHealth long-term care benefits until after the end of the lookback period and/or you retain sufficient assets in your individual name to pay for your care needs during the lookback period.
  4. You Are Limiting Your Options Going Forward. A fellow practitioner once told me that he counsels clients that irrevocable long-term care trusts effectively guarantee that they’ll wind up in a nursing home if they need long-term care in the future. While this is a bit of an exaggeration, it is definitely true that an irrevocable long-term care trust severely limits your options going forward. This is because, as of now, MassHealth long-term care benefits are geared primarily towards nursing home care. Although there are some community-based long-term care benefits available, as a general rule these benefits do not cover 24/7 home health aides, nor do they generally cover assisted living facilities. Further, even within the realm of nursing home care, MassHealth long-term care benefits will only cover a semi-private room (meaning you would be sharing a room with someone else). By contrast, maintaining assets in your individual name gives you the ability to tap into those assets (through, e.g., a reverse mortgage or home equity line of credit on your home) to allow you to be cared for in the most comfortable, least restrictive setting possible for as long as possible.
  5. It Might Not Work. Eligibility for MassHealth long-term care benefits is governed by a complex web of state and federal statutes, regulations and court cases. These rules change frequently, particularly at the state level, and often apply retroactively, meaning that no exception is made for irrevocable long-term care trusts that were created prior to the new rules taking effect. Thus, what is permissible today may not be permissible tomorrow, and an irrevocable long-term care trust created under today’s rules may be in violation of the rules that exist at the time you apply for MassHealth long-term care benefits. Further, MassHealth has a history of aggressively reviewing and challenging applications for long-term benefits that include irrevocable trusts (the existence of an irrevocable trust must be disclosed to MassHealth even if it was created outside of the lookback period), and anecdotally most such applications appear to be denied on the first pass, necessitating a costly and time-consuming appeal.

A properly structured irrevocable long-term care trust can be an appropriate tool to protect assets from being spent on long-term care, but just like a power drill isn’t always the appropriate tool with which to fasten a screw, an irrevocable long-term care trust is not always the appropriate tool for long-term care asset protection. It is important, therefore, to consult with an experienced elder law attorney to determine the best tools to achieve your goals given your specific circumstances.

August 2021

© 2021 Samuel, Sayward & Baler LLC

Five Questions to Ask Before Creating an Irrevocable Trust

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Some of the most frequent questions I hear from clients in my estate planning law practice have to do with whether they should create an irrevocable trust.  Here are five questions to ask when deciding whether or not an irrevocable trust would be a good addition to your estate planning strategy.

  1. What is your reason for creating an irrevocable trust?  Before jumping in to create an irrevocable trust, talk to your estate planning attorney about your goals.  The two most common reasons for creating an irrevocable trust are 1) to save taxes; and, 2) to preserve assets from the reach of creditors, including long-term care costs.  Some typical tax savings trusts include irrevocable trusts that hold life insurance, trusts that pass assets to charity, or that are used to gift assets to family members.  Irrevocable trusts that are created for long-term care planning purposes typically provide for an income stream to the trust maker but forbid any access to the principal of the trust.
  2. Do you have the ‘right’ assets to fund an irrevocable trust?  If your goal is to preserve your assets against long-term care costs but your assets consist mostly of IRAs or other qualified retirement funds, transferring those accounts to an irrevocable trust is not a good plan.  The transfer of an IRA out of the name of the IRA owner is a taxable event.  For example, if you have a $500,000 IRA and you move it into the name of your irrevocable trust you will be deemed to have $500,000 of taxable income. This will mean an income tax bill in the neighborhood of $150,000 or so – not a good result.
  3. Will you need to have access to the principal?  A hallmark of most irrevocable trust planning is that once you transfer an asset to the irrevocable trust, you cannot get it back.  Understandably, many people are reluctant to transfer their money or investments to an irrevocable trust.  Transferring your home to an irrevocable trust can be a good way to protect property from medicaid and preserve the value of the home from having to be spent down on long-term care costs without really impacting your day to day life.  You may continue to live the home and even pay all the bills.  If the property is rental real estate, you can continue to receive the net rental income.  However, if the property in the irrevocable trust is sold, you would not have access to the sale proceeds, which would continue to be held in the irrevocable trust.
  4. What are the consequences of transferring your assets to an irrevocable trust?   Before transferring assets to an irrevocable trust, you should understand the consequences of the transfer on your estate plan and your inheritance planning. (See number 2 above.)  For example, even though the transfer of a home to an irrevocable trust will not result in an immediate tax consequence, there could be later tax consequences. Such a transfer may mean that the inheritors of the house will not be entitled to a stepped-up basis in the property when the trust maker passes away.  This may result in a significant capital gain tax upon the sale of the property that would have otherwise been avoided if the property had not been transferred or if the trust included certain provisions.  Similarly, if the home is sold while the person who transferred it to the irrevocable trust is still living, there may be capital gain tax payable on the sale that would have been avoided if the property had not been transferred to the irrevocable trust.  There can be non-tax consequences as well.  Transferring a home to an irrevocable trust usually makes it difficult to obtain a mortgage or home equity loan on the property.  This could impact the ability to make repairs or improvements to the property.
  5. Is there another way to accomplish your goal?  Since creating and funding an irrevocable trust can be complex (and expensive), explore whether there are other options for achieving your desired result.  For example, gifting the home, vacation home, or rental property directly to children subject to the parent’s right to live in the property (typically called a life estate deed) rather than to an irrevocable trust, might be a better way to preserve that property from spend down for long-term care in your situation.  If your goal is to benefit charity, maybe a donor-advised fund through one of the larger brokerages may be a simpler, easier option than creating an irrevocable charitable trust.

As with all estate planning, whether or not a particular type of trust or other planning is right for you depends entirely on your unique situation.  Speak with an experienced estate planning attorney, a lawyer for wills and trusts, about your situation and your goals and don’t forget to ask the above five questions.

Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.

July, 2018

© 2018 Samuel, Sayward & Baler LLC

Five Facts to Know about Irrevocable Trusts

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In my estate planning and elder law practice, many clients express curiosity about Irrevocable Trusts, wanting to know what an Irrevocable Trust is used for and how it works.  Here are five things to know about Irrevocable Trusts.

1. An Irrevocable Trust has beneficiaries who have rights to the Trust property. It is a common misconception about Irrevocable Trusts that no distributions can be made from the trust.  That is not true.  Very often, a parent or grandparent will create an Irrevocable Trust for the benefit of a child or grandchild.  The parent or grandparent may want to make a gift but does not want the beneficiary to have unlimited access to the gifted funds.  This could be because the beneficiary is young, has a disability, or simply has not demonstrated good judgment in money matters in the eyes of the grantor (the person creating the trust and making the gift).  The grantor may also want the gifted assets to be protected from the beneficiary’s creditors.  The grantor will specify in the trust document when and for what reasons the Trustee (think “manager”) may make distributions from the trust for the beneficiary.  For example, the trust might direct the Trustee to pay the beneficiary’s education or health expenses. Alternatively, the trust may permit the Trustee to use the trust funds for the benefit of the beneficiary for whatever reason the Trustee determines to be appropriate.

2. Under some circumstances, an Irrevocable Trust can be amended. As a general rule, the person who creates an Irrevocable Trust cannot amend it.  However, some Irrevocable Trusts contain a provision allowing someone else to amend the trust.  For example, parents who have a child with disabilities will often create an Irrevocable Trust to ensure that the assets the parents leave for the child will not cause the child to lose eligibility for government benefits.  These trusts may include a provision permitting the Trustee to amend the trust if the law changes and impacts the trust, causing the child to be ineligible for such benefits.

3. The Trust creator can retain the right to change the ultimate beneficiaries. A person who creates an Irrevocable Trust can retain the power to change how the trust property will ultimately be distributed – this is called a power of appointment.  For example, say Mary creates an Irrevocable Trust that states that when she dies, the trust assets will be distributed to her three children in equal shares.  After the trust is created, Mary’s son Alan becomes embroiled in a nasty divorce.  Mary is worried that if she dies while the divorce is ongoing, that Alan’s one-third of the trust property could end up going to Alan’s soon-to-be-ex-spouse.

Even though Mary’s trust is irrevocable and she cannot sign an amendment changing the trust terms, Mary can change how the trust assets will be distributed at her death via her Will because she reserved a power of appointment over the trust assets.  A reserved power of appointment over the ultimate distribution of the trust assets allows Mary to change the distribution so that Alan’s share of Mary’s trust assets will not be reachable by Alan’s divorcing spouse.

4. The Trust creator may still be considered the owner of the assets in the Irrevocable Trust. When you transfer assets to an Irrevocable Trust, you may or may not still be the “owner” of the assets in the trust for tax purposes. Sometimes it is advantageous to be deemed to be the owner and sometimes it is not.  For example, life insurance is taxable in the insured’s estate for estate tax purposes if the policy is owned by the insured.  If the policy is large and the insured has a taxable estate, this means that between 10 and 40 percent of the life insurance proceeds will be lost to estate taxes.  If the insurance policy is owned by an Irrevocable Life Insurance Trust, then the life insurance policy will not be deemed to be owned by the insured and the proceeds will not be taxable in the insured’s estate.  On a $1 million life insurance policy, this could save between $100,000 and $400,000 of estate tax.

On the other hand, sometimes it is desirable to be deemed to be the owner of Irrevocable Trust property for tax purposes.  For example, say Harry has a total estate of $850,000.  He has a house that he bought for $30,000 many years ago and that is now worth $350,000 and CDs totaling $500,000.  Harry does not need to be concerned about estate taxes because his total estate is valued at less than $1 million and there is no Massachusetts estate tax on estates of less than $1 million (the federal threshold is $5,490,000).  However, Harry should be concerned about capital gain tax.  If he is not the “owner” of his house for tax purposes when he passes away, then when Harry dies there will be capital gain tax payable on the difference between Harry’s tax basis in the property ($30,000) and the sale price ($350,000).  The capital gain tax on $320,000 ($350,000 — $30,000) would be about $64,000.

If the Irrevocable Trust included provisions that caused Harry to be deemed to be the owner for tax purposes, then when the house is sold following Harry’s death, there would be no capital gain tax payable because the house would receive a “stepped-up” basis at Harry’s death.  This means the tax basis in the house is equal to the fair market value at Harry’s death.

5. The person who creates the Irrevocable Trust may be the beneficiary. Clients often assume that if they transfer assets to an Irrevocable Trust they give up all rights to the assets.  This is not necessarily true. A very common Irrevocable Trust used for long-term care planning is an Irrevocable Income Only Trust.  In this type of trust, the grantor (the person creating the trust) receives the income generated by the assets in the trust.  For example, let’s say that Jane owns a three-family rental property and is worried that if she needs long-term nursing home care, the property will be consumed by the costs of that care.  She doesn’t want to give the property to her children because she is worried about her children’s creditors (divorcing spouse, bankruptcy, tax lien, etc.).  In addition, Jane wants to keep receiving the rental income.  Jane can transfer the property to an Irrevocable Income Only Trust and continue to receive the net rental income.  After the five-year ineligibility period for gratuitous transfers has passed, the property in the Irrevocable Trust would not be deemed to be owned by Jane in the event she applies for Medicaid (MassHealth) benefits to pay for her long-term care under the current law.

These are just five facts to know about Irrevocable Trusts.  If you want to know more about whether an Irrevocable Trust is right for your situation, contact an experienced estate planning to discuss your goals.

Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts.  This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020. 

July 2017

© 2017 Samuel, Sayward & Baler LLC

SJC Issues Favorable Decision for Irrevocable Income Only Trusts

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On May 30, 2017, the Supreme Judicial Court vacated the judgments of the Worcester County Superior Court companion cases, Daley and Nadeau, concluding that the right to use and occupy a residence does not make the assets contained within an irrevocable income only trust countable for MassHealth purposes.  The cases, which were argued before the SJC on January 5, 2017, will undoubtedly have a significant impact on the landscape of asset protection planning for long-term care purposes as the previously unsettled case law made it difficult for seniors to effectively plan for future nursing home care costs.  Irrevocable income only trusts, which were historically time-tested tools for protecting a nursing home resident’s home from a MassHealth lien, have been at the epicenter of elder law litigation since 2009.  With a favorable SJC decision on these cases, elder law attorneys and their clients can breathe a sigh of relief regarding previously created trusts which allow the grantor to continue to live in the home transferred into the irrevocable trust.  Going forward, elder law attorneys can feel more confident about advising their clients on the use of these protective instruments.

Click here to read the decision:

http://www.mass.gov/courts/docs/sjc/reporter-of-decisions/new-opinions/12200.pdf

Click here to read previous posts on this issue:

https://ssbllc.com/blog/masshealths-treatment-of-irrevocable-income-only-trusts-as-murky-as-ever/

https://ssbllc.com/blog/irrevocable-trust-update-favorable-decision-from-the-massachusetts-appeals-court-is-a-battle-won-but-not-the-end-of-the-war/

https://ssbllc.com/blog/time-for-the-big-leagues-irrevocable-trusts-get-called-up-to-the-sjc/

https://ssbllc.com/blog/options-to-protect-the-primary-residence-from-long-term-care-costs/

If you have specific questions about protecting your home from long-term care costs, please call our office  at 781/461-1020 and schedule an appointment with one of our attorneys.

June 2017

© 2017 Samuel, Sayward & Baler LLC

Time for the Big Leagues—Irrevocable Trusts Get Called Up to the SJC

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Pam_144pxAfter more than half a decade of uncertainly and speculation surrounding irrevocable income only trusts in the MassHealth context, the highest court in Massachusetts has decided to weigh in on the debate in deciding to review the Nadeau and Daley cases.  Hopefully a decision from the Supreme Judicial Court (SJC) sometime next spring will finally provide elder law attorneys and their clients with more defined guidelines as to what provisions these trusts may include in order to protect trust assets from liability for long-term care costs.

While the Heyn decision issued by the Massachusetts Appeals Court back in May 2016 marked the first precedential victory for irrevocable trusts since the 1990s, it left many questions unanswered.  Most notable was the question of whether language in a trust that explicitly gave the grantor (the creator of the trust) the right to use and occupy the home owned by the irrevocable trust made the property “countable” for the purpose of qualifying for MassHealth/Medicaid benefits in a nursing home.  As the property transferred into an irrevocable trust in the MassHealth planning context is often the grantor/MassHealth applicant’s primary residence, the right to use and occupy the home was beneficial to the grantor for many reasons including tax, mortgage and general notions of control and protection.  MassHealth has taken the position that an explicit right to use and occupy the property gives the grantor a level of control that makes the value of the asset “available” to the grantor.  The result of this “availability” is that the trust assets are deemed “countable” to the grantor which means the trust prevents the applicant from obtaining benefits since the assets exceed the MassHealth financial limit.  Alternatively, the property may be able to be returned to the applicant so that the state can place a lien the property and recoup the value of the benefits provided upon the applicant’s death.  This is the primary provision the SJC will review under the Nadeau and Daley trusts and it affects many, many seniors across the state.

While the two cases before the SJC are similar in that they both present the “use and occupancy” issue, they are different in ways that some elder law attorneys believe may yield a bizarre result. The Daley case deals with a life estate deed and an irrevocable income only trust while the Nadeau case focuses primarily on the use and occupancy provisions contained within the trust itself.  The Daley case also raises procedural and constitutional issues such as the inconsistency of administrative hearing decisions and other due process concerns.  In any case, the SJC has decided to hear both cases together and the decision will certainly provide more clarity on the use of irrevocable trusts in the future as well as how existing trusts will fare should the grantor apply for MassHealth benefits.

Stay tuned on the irrevocable trust saga as it continues to unfold over the coming year!

Pamela B. Greenfield

Wills • Trusts • Elder Law • Long-Term Care Planning • Estates

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