Heyn v. Director of the Office of Medicaid
89 Mass. App. Ct. 312
Mass. App. Ct.2016Background
- Everlenna Roche created an irrevocable inter vivos trust ~8.5 years before entering a nursing facility; she retained a life estate in the home then transferred into the trust.
- Roche applied for MassHealth; initial approval was later terminated when MassHealth treated the trust-held residence as a countable asset exceeding the asset limit.
- A MassHealth hearing officer upheld termination, reasoning that trustee powers (sell assets, buy annuity, allocate income) could make proceeds available to Roche as income.
- Roche died during the administrative process; her personal representative appealed the MassHealth decision to Superior Court, which affirmed the termination; this appeal followed.
- The core legal question: whether any provision of the trust could make trust principal available to Roche “under any circumstances,” thereby rendering it a countable asset for Medicaid eligibility.
Issues
| Issue | Plaintiff's Argument (Roche) | Defendant's Argument (Director of Medicaid) | Held |
|---|---|---|---|
| Whether annuity purchased with trust proceeds could make principal available to grantor | Annuity payments would be income distributable to Roche, so sale + annuity converts principal into available income | Annuity payments could render trust assets available to Roche and thus countable | Court: Only the income portion of annuity payments could be distributed; return of principal remains trust principal and thus not available; sale + annuity does not make corpus available |
| Whether trustee’s allocation power (principal vs income) permits distributions of principal to grantor | Trustee could allocate payments to income and distribute them to Roche | Allocation authority lets trustee characterize proceeds as income and make them available | Court: Allocation power constrained by "reasonable accounting principles and state law"; statutory presumption allocates unidentified receipts to principal, so trustee cannot lawfully convert principal into income to make corpus available |
| Whether grantor’s general power to appoint principal to issue could indirectly make principal available to grantor | Grantor could appoint principal to a child who could then convey it back to grantor | That roundabout transfer would make corpus available to grantor | Court: Power to appoint to others does not make principal available to grantor; third-party beneficiaries’ holdings are not treated as grantor’s assets absent legal obligation |
| Whether grantor’s power to compel exchange of trust assets for assets of equivalent value makes principal available | Grantor could force exchange (e.g., receive house back) and thereby obtain trust assets | That exchange permits grantor to obtain corpus and be treated as possession | Court: Exchange swaps trust assets for other assets of equivalent value and does not reduce corpus; any assets used by grantor to effect exchange would themselves be countable, but the trust principal remains unavailable |
Key Cases Cited
- Cohen v. Commissioner of the Div. of Med. Assistance, 423 Mass. 399 (1996) (discusses when self-settled trusts are countable for Medicaid)
- Lebow v. Commissioner of the Div. of Med. Assistance, 433 Mass. 171 (2001) (treats "any circumstances" test for trust availability)
- Guerriero v. Commissioner of the Div. of Med. Assistance, 433 Mass. 628 (2001) (addresses trustee distributions to beneficiaries other than settlor)
- Doherty v. Director of the Office of Medicaid, 74 Mass. App. Ct. 439 (2009) (analyzes trust provisions under post-1993 Medicaid law)