This case concerns Jeannette Guemero’s application for Medicaid benefits. The division of medical assistance (division) denied the application on the ground that Guemero held sufficient, available resources as a beneficiary of the principal of a self-settled trust. Guemero filed a complaint in the Superior Court pursuant to G. L. c. 30A, § 14, challenging the division’s inclusion of the trust principal as a basis for denying her benefits. Relying on an amendment to the Medicaid statute enacted by Congress in 1993, a Superior Court judge reversed the division’s decision. We granted the division’s application for direct appellate review. We affirm the judgment of the Superior Court but on grounds different than those on which the trial judge relied.
On February 4, 1991, Guerriero signed a notarized document entitled “Waiver of Jeannette L. Guerriero,” in which she declared that she did “irrevocably and unequivocably [szc] waive, renounce and refuse to accept any and all right, title or interest which [she] may have now or in the future in the principal of the ‘Guerriero Family Trust.’ ” Approximately seven years later, on May 15, 1998, Guerriero submitted an application for Medicaid benefits to the division. In evaluating Guerriero’s application, the division counted the assets in the trust, which the division valued at $87,118. Because of the program limit of $2,000 for “countable assets,”
Guerriero appealed to the division’s board of hearings (board), which upheld the division’s decision. Guerriero then filed the present action seeking review of the division’s decision. Citing 42 U.S.C. § 1396p(d)(3)(B)(ii), as enacted in 1993, the Superior Court judge overturned the division decision, concluding that the division should have excluded the principal of the trust because Guerriero’s waiver deprived the trustee of any discretion to pay trust principal to Guerriero.
2. Medicaid qualifying trusts. As explained in the related case of Lebow v. Commissioner of the Div. of Med. Assistance, ante 171, 172 (2001), Congress enacted 42 U.S.C. § 1396a(k)(l) to
“In the case of a medicaid qualifying trust . . . the amounts from the trust deemed available to a grantor, for purposes of [determining Medicaid eligibility], is the maximum amount of payments that may be permitted under the terms of the trust to be distributed to the grantor, assuming the full exercise of discretion by the trustee or trustees for the distribution of the maximum amount to the grantor. For purposes of the previous sentence, the term ‘grantor’ means the individual referred to in paragraph (2).”
42 U.S.C. § 1396a(k)(l).
When this section was enacted, § 1396p(c)(l) of the Medicaid statute already provided a thirty-month look-back period for discovering transfers of assets for less than fair market value made in order to render the transferor eligible for Medicaid benefits.
In 1993, Congress amended the Medicaid statute, repealing the entire provision of § 1396a(k) and replacing it with § 1396p(d). Cohen v. Commissioner of the Div. of Med. Assistance, 423 Mass. 399, 405-406 & n.13 (1996). With specific regard to irrevocable trusts, § 1396p(d)(3)(B) now excludes
Relying on the amended portions of the statute, specifically § 1396p(d)(3)(B)(ii), the Superior Court judge ruled that the assets of the trust could not be counted in determining Medicaid eligibility because after the “irrevocable waiver” was executed by Guerriero, “no payment could under any circumstances be made to the individual.” The judge’s reliance on this section was in error because the amended statutory section applies only prospectively, and the trust was established in June, 1987, almost six years prior to the amendment’s enactment. Thus, the trust is subject to review under the earlier 42 U.S.C. § 1396a(k) (1988).
3. Counting Assets Under 42 U.S.C. § 1396a(k). As we explained in Cohen v. Commissioner of the Div. of Med. Assistance, supra at 413:
“[An MQT] is any trust established by a person (or that person’s spouse) under which that person may receive any payments. This general definition is qualified only by the requirement that the trustees must be permitted to exercise some discretion — that is, the conditions for distribution may not be completely fixed for all circumstances.”
If the trust qualifies as an MQT, we proceed under the statute to determine how much money is deemed available:
“That amount is the greatest amount that the trustees in any set of circumstances might have discretion to pay out to the beneficiary. Thus, if there is a peppercorn of discretion, then whatever is the most the beneficiary might under*632 any state of affairs receive in the full exercise of that discretion is the amount that is counted as available for Medicaid eligibility.”
Id. Accordingly, in order to decide if the principal of the trust is “available” to Guerriero, we must determine whether the trustee maintained discretion to distribute principal to Guerriero under the terms of the trust after the execution of the “irrevocable waiver.”
In a written trust, the nature and extent of a trustee’s discretion as to any issue is defined by (1) the terms of the trust instrument and (2) in the absence of any provision in the terms of the trust, by the rules governing the duties and powers of the trustee. Restatement (Second) of Trusts § 164 (1959).
When Guerriero signed her “irrevocable waiver,” she effectively transferred her interest back to the trust for the benefit of the remaining beneficiaries. Once the trustee of the trust had knowledge of Guerriero’s “irrevocable waiver,” the trustee was deprived of any legal discretion to pay trust principal to Guerriero. Restatement (Second) of Trusts, supra at §§ 210 comment d & 226 comment c. See Security Bank of N.Y. v. Callahan, supra at 89.
Although the amendments are not directly applicable because
The division contends that we should ignore Guerriero’s “irrevocable waiver” because the trust instrument does not authorize Guerriero “to relinquish her interest in the trust assets.” This contention, however, ignores Gueniero’s dual role as settlor and as beneficiary. Although Guerriero expressly waived her right as settlor to “alter, amend, revoke or terminate this Trust,” as a beneficiary Guerriero had the right to transfer her interest absent a limitation in the trust instrument.
The division contends that Guerriero’s “irrevocable waiver” should be disregarded because the waiver is a mere limitation on trustee discretion analogous to the limitations we reviewed in the Cohen case where we considered trust instruments with written provisions purporting to limit the trustee’s discretion to make payments to an amount less than would disqualify the beneficiary for Medicaid benefits. Cohen v. Commissioner of the Div. of Med. Assistance, supra at 407. Although we concluded in Cohen the limitations on discretion should be disregarded, we noted that “[i]t is true that a trust might be written to deprive the trustee of any discretion (for instance allowing the payment only of income) and that such a limitation would be respected.” Id. at 418. The present situation conforms to that observation because Guerriero’s execution of the “irrevocable waiver” did not merely “limit” the trustee’s discretion, rather it deprived the tmstee of any legal discretion to pay Guerriero any part of the trust principal.
The judgment of the Superior Court is affirmed.
So ordered.
Countable assets are “all assets that must be included in the determination of [Medicaid] eligibility.” 130 Code Mass. Regs. § 520.007 (1999).
Guerriero also claimed that the division committed an error of law by treating her “irrevocable waiver” as an attempted, and failed, disclaimer under G. L. c. 191A, § 3. The Superior Court judge rejected the division’s reliance on this statute, and the division has not challenged this ruling on appeal.
Prior to 1993, § 1396p(c)(l) provided, in pertinent part:
“In order to meet the requirements of this subsection ... the State plan must provide for a period of ineligibility for nursing facility services and for a level of care in a medical institution equivalent to that of nursing facility services . . . in the case of an institutionalized individual . . . who, or whose spouse, at any time during or after the 30-month period immediately before the date . . . the individual applies for such assistance while an institutionalized individual disposed of resources for less than fair market value. The period of ineligibility shall begin with the month in which such resources were transferred and the number of months in such period shall be equal to the lesser of — (A) 30 months . . . .” Id.
The Restatement (Second) of Trusts § 164 (1959) provides that “[t]he nature and extent of the duties and powers of the trustee are determined (a) by the terms of the trust. . . and (b) in the absence of any provision in the terms of the trust, by the rules stated in §§ 169-196.” Explaining the nature of a trustee’s extra-instrument duties, comment h to § 164 provides, in pertinent part:
“Duties determined by trust relationship. Many of the duties of the trustee to the beneficiary are imposed by the terms of the trust, either in words or by other manifestations of the settlor’s intent. Some of the duties of the trustee, however, may not be imposed by the terms of the trust, but may arise from the nature of the relationship.”
Restatement (Second) of Trusts, supra at 343-344.
Section 201 provides: “A breach of trust is a violation by the trustee of any duty which as the trustee he owes to the beneficiary.” Id. at 442.
The question of income is not at issue because in cases such as this involving an institutionalized person, the applicant’s countable income does not affect Medicaid eligibility. Such eligibility is typically based only on the applicant’s available “assets,” a term that does not include income from a trust. See 130 Code Mass. Regs. § 520.003 (1997); 130 Code Mass. Regs. § 520.001 (1997); 130 Code Mass. Regs. § 520.009(A) (1997).
Section 132 provides: “Except as stated in § 133 and §§ 149-162 [the sections on restraint on alienation], the beneficiary of a trust has power to transfer his interest.” Id. at 288.
The parties have not raised any issue concerning the trustee’s notice of the transfer.
Guerriero’s transfer of her equitable interest distinguishes this case from Lebow v. Commissioner of the Div. of Med. Assistance, ante 171, 176
Even though Guerriero’s waiver is subject to § 1396p(c)(l)’s earlier thirty-month look-back period, she is not subject to any period of ineligibility because she executed her waiver approximately seven years prior to her application for benefits.
Although the trust instrument contains a spendthrift clause, art. VII, both parties agree that this clause would not affect Guerriero’s ability (as beneficiary) to transfer her equitable interest back to the trust. Cf. Merchants Nat’l Bank v. Morrissey, 329 Mass. 601, 605 (1953) (under Massachusetts law, where settlor is also beneficiary of trust, she cannot keep property beyond reach of creditors by placing it in a spendthrift bust for her own benefit).
Cf. Lebow v. Commissioner of the Div. of Med. Assistance, supra at 174, 176 (although consent requirement in trust instrument limited trustee’s discretion, it did not completely deprive trustee of discretion because the co-beneficiary, who was also trustee, held power to modify the terms of the trust).