commonwealth of massachusetts appeals court ac no. 2016-p-1123 mary e. daley, personal

COMMONWEALTH OF MASSACHUSETTS

APPEALS COURT

A.C. NO. 2016-P-1123

MARY E. DALEY,

PERSONAL REPRESENTATIVE OF THE ESTATE OF JAMES DALEY

Plaintiff-Appellant

v.

KRISTIN THORN, DIRECTOR OF THE OFFICE OF MEDICAID

and

MARYLOU SUDDERS, SECRETARY OF THE EXECUTIVE OFFICE OF HEALTH AND

HUMAN SERVICES

Defendants-Appellees

ON APPEAL FROM A FINAL JUDGMENT OF THE

WORCESTER SUPERIOR COURT

BRIEF OF PLAINTIFF-APPELLANT

Nicholas G. Kaltsas, Esq. Brian E. Barreira, Esq.

BBO # 549898 BBO# 544433

255 Park Avenue 118 Long Pond Road

Suite 410 Suite 206

Worcester, MA 01609 Plymouth, MA 02360

(508) 755-6525 (508) 747-8282

[email protected] [email protected]

Attorneys for the Plaintiff-Appellant

October 4, 2016 Oral Argument Requested

mailto:[email protected]

TABLE OF CONTENTS

TABLE OF AUTHORITIES.................................iv

SECTION I - STATEMENT OF ISSUES.......................1

SECTION II - STATEMENT OF THE CASE....................2

SECTION III - STATEMENT OF FACTS......................3

SECTION IV – SUMMARY OF THE ARGUMENT..................6

SECTION V – LEGAL ARGUMENTS...........................9

I. SELF-SETTLED IRREVOCABLE INCOME-ONLY SPENDTHRIFT

TRUSTS ARE VALID UNDER MASSACHUSETTS LAW AND

FEDERAL MEDICAID TRUST LAW AND DO NOT

CONSTITUTE COUNTABLE ASSETS FOR

MASSHEALTH PURPOSES..............................9

II. FEDERAL MEDICAID TRUST LAW REQUIRES THAT THE

PLAINTIFF’S IRREVOCABLE TRUST BE SCRUTINIZED

UNDER INSOLVENCY ANALYSIS.......................12

III. THE OFFICE OF MEDICAID HAS NO LEGAL AUTHORITY TO

TREAT A MASSHEALTH APPLICANT’S HOME IN A

SELF-SETTLED IRREVOCABLE INCOME-ONLY TRUST

AS PER SE “AVAILABLE” AND THEREFORE A

COUNTABLE ASSET.................................16

A. The MassHealth Regulation at 130 CMR

520.023(C)(1)(d), as Newly Misinterpreted by

the Office of Medicaid, Is Not in Accordance

with Federal Medicaid Trust Law...............16

B. The Office of Medicaid Is Newly Misinterpreting

Two Sentences that Have Long Been Available in

the State Medicaid Manual.....................23

C. The Actual Rationale for the MassHealth

Regulation at 130 CMR 520.023(C)(1)(d)

Is Found in the Office of Medicaid’s Last

Known Position Statement Regarding Federal

Medicaid Trust Law............................25

ii

D. Previous Written Positions of the Office of the

Attorney General in Massachusetts Appellate

Court Cases Are Inconsistent with the

Defendant’s Position..........................27

E. The Board of Hearings, in Rendering the

Final Decision of the Office of Medicaid,

Has Issued Inconsistent Decisions Regarding

What “Available” Means in 130 CMR

520.023(C)(1)(d), and the Agency

Therefore Fails to Engage in Administrative

Consistency...................................28

IV. FEDERAL MEDICAID LAW AND THE STATE MEDICAID

MANUAL REQUIRE THAT THE OFFICE OF MEDICAID

CONSIDER AND FOLLOW SSI LAW IN ITS

ELIGIBILITY DETERMINATIONS REGARDING TRUSTS.....34

V. THE TRIAL COURT ERRED AS A MATTER OF LAW IN

FINDING THAT THE SETTLOR OF THE TRUST WAS

AFFORDED ACCESS TO TRUST PRINCIPAL, AND THE

APPELLANT IS ELIGIBLE FOR MASSHEALTH BECAUSE

THE APPELLANT’S IRREVOCABLE TRUST ALLOWS

DISTRIBUTIONS TO THE APPELLANT OF INCOME ONLY...38

A. The Trial Court Made an Error of Law in

Analyzing the Property Relationship

Between the Trust and the Reserved

Life Estate in the Deed.......................40

B. The Trial Court Made an Error of Law in

Interpreting the Holding in Doherty v.

Director of the Office of Medicaid,

and by Not Basing Its Decision upon a

Review of the Trust Instrument as a Whole.....41

C. The Trial Court’s Holding Against the

Trust on the Basis of the Power to Substitute

Assets Is Incorrect as a Matter of Law

and Was Effectively Overruled by the

Later-Decided Case of Heyn v. Director

of the Office of Medicaid.....................43

D. In Determining Whether the Principal of an

Irrevocable Trust Is Countable, Grantor Trust

Treatment for Tax Purposes Is Not a Relevant

Issue.........................................45

iii

VI. BECAUSE OF ITS UNEXPLAINED INCONSISTENCY,

THE OFFICE OF MEDICAID IS NOT ENTITLED TO

DEFERENCE.......................................48

VII. CONCLUSION AND RULE 16(K) CERTIFICATION.........50

iv

TABLE OF AUTHORITIES

Cases

Barnett v. Weinberger, 818 F.2d 953, 960-961 n.74

(D.C. Cir. 1987).....................................50

Bellermann v. Fitchburg Gas and Electric Light

Company, 470 Mass. 43, 60 (2014).....................28

Boston Gas Co. v. Dep't of Pub. Utilities,

367 Mass. 92, 104 (1975).............................29

Boston Police Superior Officers Federation v. City of

Boston, 414 Mass. 458 (1993..........................50

Bowman Transp., Inc. v. Arkansas-Best Freight Sys.,

419 U.S. 281, 285-286 (1974).........................48

Brown v. Day, 434 F. Supp. 2d 1035, 1037-38 (D. Kan.

2006)............................................35, 36

Cohen v. Division of Medical Assistance,

423 Mass. 399 (1996).............................passim

Costello v. Department of Public Utilities,

391 Mass. 527, 535-536 (1984)........................48

Cruz v. Commissioner of Pub. Welfare,

395 Mass. 107, 112 (1985)............................14

Davila–Bardales v. Immigration and Naturalization

Service, 27 F.3d 1, 5 (1st Cir. 1994)................29

Doherty v. Director of the Office of Medicaid,

74 Mass. App. Ct. 439 (2009).....................passim

Groden v. Kelley, 382 Mass. 333, 335 (1981)..........43

Guerriero v. Commissioner of the Division of Medical

Assistance, 433 Mass. 628 (2001).............21, 25, 27

Harrison v. Marcus, 396 Mass. 424, 429 (1985)........43

Hershman-Tcherepnin v. Tcherepnin, 452 Mass. 77, 88 n.

20 (2008)............................................40

v

Heyn v. Director of the Office of Medicaid,

89 Mass. App. Ct. 312 (2016).....................passim

Hinckley v. Clarkson, 331 Mass. 453 (1954)...........25

In re Moses, 167 F.3d 470 (9th Cir. 1999)............15

Langlois v. Langlois, 326 Mass. 85 (1950)........22, 25

Lebow v. Commissioner of the Division of Medical

Assistance, 433 Mass. 171 (2000).....................27

Lewis v. Alexander, 685 F.3d 325 (3d Cir. 2012)

.................................................20, 36

Lopes v. Board of Appeals of Fairhaven,

27 Mass. App. Ct. 754, 755 (1989)....................33

Morin v. Commissioner of Pub. Welfare, 16 Mass. App.

Ct. 20, 24-25 (1983) ............................49, 50

Orthopaedic Hosp. v. Belshe, 103 F.3d 1491, 1495 (9th

Cir. 1997) ..........................................23

Patterson v. Shumate, 504 U.S. 753, 758 (1992).......15

Reinholdt v. N.D. Department of Human Services,

760 N.W.2d 101 (2009)............................15, 16

Shirk v. Walker, 298 Mass. 251, 261 (1937)...........43

Spring v. Hollander, 261 Mass. 373 (1927)........22, 25

Statutes

11 U.S.C. § 541(c)(2)................................15

26 U.S.C. §§ 671-679 (Internal Revenue Code

Sections 671-679)....................................46

42 U.S.C. § 1396a(a)(10)(C)(i)(III)..............36, 38

42 U.S.C. § 1396a(a)(17).............................36

42 U.S.C. § 1396a(r)(2)..........................36, 38

vi

42 U.S.C. § 1396a(r)(2)(A)(i)........................35

42 U.S.C. § 1396p(d)(2)(C)...........................13

42 U.S.C. § 1396p(d)(3)(B)(i)....................10, 39

42 U.S.C. § 1396p(d)(3)(B)(ii).......................30

42 U.S.C. § 1396p(d)(2)(A)(B) and (C)................30

42 U.S.C. § 1396p(d)(3)(B)...........................31

M.G.L. c. 30A, § 14...................................3

M.G.L. c. 118E, § 48.................................32

M.G.L. c. 203D, § 3(a)(4)............................42

M.G.L. c. 203D, § 13(1)..............................39

M.G.L. c. 203E, § 505(a)(2)...................8, 47, 48

M.G.L. c. 203E, § 803................................20

M.G.L. c. 203E, § 808(c).............................44

Title XIX of the Social Security Act.............18, 34

Other Authorities

Black’s Law Dictionary, Fifth Edition............44, 45

Brisk, William J. and Flewelling, Rebecca M., “Trusts

Used in Medicaid Planning: The Doherty Challenge to

Irrevocable Income Only Trusts and its Aftermath,”

96 Mass. Law Review 4 (Aug. 2015) ................48, 49

Charles E. Rounds, Jr. and Charles E. Rounds,

III, Loring and Rounds: A Trustee’s Handbook

(2013 Edition), §5.4.1.3 at 376-377..................22

Division of Medicaid Assistance, now known as the

Office of Medicaid, legal policy statement dated

April 29, 1992, entitled “Transfer and Trust Issues

Reconciliation of Department Policy”.............25, 26

vii

Fair Hearing Decision 1102569........................36






Fair Hearing Decision 1402188................29, 30, 47






Fair Hearing Decisions 1501183/1501994...............47









Fair Hearing Decision 1602421....................32, 44


Fair Hearing Decision 1603821....................32, 47

viii


Geoffrey C. Hazard, Jr. & W. William Hodes,

The Law of Lawyering, s. 29.11, at 29-16 (3rd ed.

2000)................................................34

HCFA Transmittal 64..................................34

Kenneth Culp Davis and Richard J. Pierce, Jr.,

Administrative Law Treatise 13.4 at 260 (1994).......33

Manual for Conducting Administrative Adjudicatory

Proceedings, Office of the Attorney General of the

Commonwealth of Massachusetts (Robert L. Quinan, Jr.,

Editor), p. 64 (2012)................................19

Restatement (Second) of Trusts, § 156 (1959).....12, 26

Restatement (Second) of Trusts, § 164 (1959).........21

Restatement (Third) of Trusts, §233, comment p.......39

Richard W. Murphy, “Judicial Deference, Agency

Commitment, and Force of Law,” 66 Ohio State Law

Journal 1013, 1015 (2005)............................50

State Medicaid Manual............................passim

Regulations

130 CMR 515.001..................................18, 40

130 CMR 520.007......................................39

130 CMR 520.009......................................39

130 CMR 520.009(A)(3)................................10

130 CMR 520.009(E)...................................39

130 CMR 520.019(G)...................................17

130 CMR 520.019(I)...................................41

130 CMR 520.021......................................14

ix

130 CMR 520.023(C)...................................16

130 CMR 520.023(C)(1).........................9, 30, 48

130 CMR 520.023(C)(1)(a) & (b).......................39

130 CMR 520.023(C)(1)(d).........................passim

940 CMR 4.09.........................................14

20 C.F.R. § 416.1201(a)(1).......................36, 37

20 C.F.R. § 416.1207.................................39

42 C.F.R. § 435.601..................................36

42 C.F.R. § 435.901..................................33

42 C.F.R. § 483.12(a)(2).............................14

416 C.F.R. § 1201....................................37

Social Security Administration, Program Operating

Manual System ("POMS") § S01120.200(D)(2)............36

Social Security Administration, Program Operating

Manual System ("POMS")...........................36, 38

1

SECTION I - STATEMENT OF ISSUES

This is an appeal from a Superior Court judgment that

has entered as to all issues and all parties. The

matter is ripe for appellate review of the legal

issues, which are the following:

(1) Whether federal Medicaid trust law requires that

the Appellant’s irrevocable trust be scrutinized

under insolvency analysis.

(2) Whether the Office of Medicaid has any legal

authority to treat a MassHealth applicant’s home

in a self-settled irrevocable income-only trust

as per se “available” and therefore countable.

(3) Whether the MassHealth regulation at 130 CMR

520.023(C)(1)(d), as newly interpreted by the

Office of Medicaid, is in accordance with federal

Medicaid trust law.

(4) Whether the Board of Hearings, in rendering the

final decision of the Office of Medicaid, has

issued inconsistent decisions regarding what

“available” means in 130 CMR 520.023(C)(1)(d),

and whether the Office of Medicaid has ignored

those decisions and therefore fails to engage in

administrative consistency.

2

(5) Whether federal Medicaid law and the State

Medicaid Manual require the Office of Medicaid to

consider and follow SSI law in its eligibility

determinations regarding trusts.

(6) Whether the Trial Court erred as a matter of law

in finding that the settlor of the trust was

afforded access to trust principal, and by not

basing its finding upon a review of the trust

instrument as a whole.

(7) Whether, because of its unexplained

inconsistency, the Office of Medicaid is not

entitled to any deference.

SECTION II - STATEMENT OF THE CASE

This is an appeal filed by Mary E. Daley, as

the Personal Representative of the Estate of James

Daley ("Appellant") and arises out of the denial

of eligibility of the Appellant for MassHealth

long-term care benefits. RA001.1 After a fair

hearing conducted at the MassHealth Enrollment

Center on June 17, 2014, a Fair Hearing Decision

dated October 22, 2014 was issued upholding the

1 The Record Appendix is cited as “RA[page number].”

The Addendum to Appellant’s brief is cited as

“ADD[page number].”

3

MassHealth denial. RA009. The fair hearing

officer found that “the fact that the Trust does

not allow distributions of principal to the Donors

does not defeat application of 130 CMR

520.023(C)(1)(d)” which “directs that such

principal is countable for MassHealth eligibility

purposes.” RA017. The Fair Hearing Decision made no

other finding.

Thereafter, pursuant to M.G.L. c. 30A, § 14, the

Appellant filed a complaint in the Worcester Superior

Court on February 11, 2015 to appeal the hearing

officer's finding. RA000. Following a hearing held on

December 1, 2015, the Trial Court issued a denial of

the Appellant's Motion for Judgment on the Pleadings

and ruled in favor of the Appellee. RA189.

SECTION III - STATEMENT OF FACTS

The Appellant entered CareOne at Millbury on

December 20, 2013. Subsequent to his admission, on

February 21, 2014, the Appellant filed an application

for MassHealth long-term care benefits, seeking an

eligibility start date of January 19, 2014. RA012.

On December 19, 2007, six years before entering

the nursing home, the Appellant and his wife had

deeded their primary residence located at 215 Mill

4

Street, Unit 203, Worcester, Massachusetts ("the

residence") to Patricia A. Tupaj and Michael E. Daley,

as Trustees of The James Daley and Mary E. Daley

Irrevocable Trust ("the Trust"). RA113. The Appellant

and his wife retained a life estate in the deed

transferring the residence into the Trust. RA146. The

Appellant lived in the residence until his nursing

home admission. The Appellant and his wife are

grantors of the Trust, which is irrevocable but does

not state that they have any right to live in the

residence. Article FIRST (A) allows distributions of

narrowly-defined net income to them but specifically

prohibits any distribution of principal to either of

them:

“So long as either of the Donors are living,

the Trustee shall pay to either Donor so

much of the net income of the Trust as

either Donor shall request in a writing

delivered to the Trustee. For purposes of

this Trust, “net income” is defined as

investment interest and dividends … but not

including appreciated value of Trust assets

or capital gain from the sale of Trust

assets. The Trustee shall have no authority

or discretion to distribute principal of the

Trust to or for the benefit of either

Donor.” (emphasis found in original) RA113.

The evidence of assets in this matter, as adduced at

the fair hearing, consisted of a bank account (in the

5

name of the Appellant’s wife) of $18,176.00 and the

value of the Trust principal of $150,943.00. RA013.

On April 14, 2014, the agency denied the

Appellant's application for MassHealth long-term care

benefits, following a determination that his total

countable assets exceeded $2,000.00. RA001. The

Appellant timely appealed this denial. RA006. A fair

hearing on this matter was held at the MassHealth

Enrollment Center in Springfield on June 17, 2014.

The sole issue on appeal was whether the principal of

the Trust was a countable resource.

On October 22, 2014, the hearing officer issued

his fair hearing decision counting the Appellant's

Trust as a resource in his eligibility determination.

The hearing officer based his decision solely on his

interpretation of 130 CMR 520.023 (C)(1)(d). RA016.

Another Trust provision that the hearing officer

discussed in his decision (but made no finding about)

was Article Eighth, which allows for the reimbursement

of the Appellant's income taxes caused by the Trust.

On February 11, 2015, the Appellant filed a

complaint to appeal the fair hearing decision to the

Worcester Superior Court. RA029. A hearing on Motion

for Judgment on the Pleadings was held on December 1,

6

2015 and on December 23, 2015, the Trial Court affirmed

the agency's decision. RA190.

SECTION IV – SUMMARY OF THE ARGUMENT

Income-only trusts are permitted under federal

Medicaid trust law, so the Trust should not have been

deemed a countable asset for purposes of assessing

MassHealth eligibility. See pp. 9-12. Federal

Medicaid trust law compels that the Office of Medicaid

adhere to an insolvency analysis, not done here, in

determining whether Trust principal is available to

the Appellant, or else a nursing home could end up

providing substantial services without any eventual

payment source. See pp. 12-16.

There is nothing in the plain language of Federal

Medicaid trust law that allows the Office of Medicaid

to treat a MassHealth applicant’s home in an income-

only irrevocable trust differently than types of other

assets therein, yet the agency’s new interpretation of

the MassHealth regulation at 130 CMR 520.023(C)(1)(d),

aided by its new interpretation of two sentences in

the State Medicaid Manual that have existed since

1994, and also aided by its ignoring its longstanding

MassHealth definition of the word “available,” has

resulted in a new, unique, incorrect view of the

7

treatment of a MassHealth applicant’s home in a Trust.

See pp. 16-25. This unexplained change in the agency’s

long-standing position is inconsistent with its last-

known legal policy statement dated April 29, 1992.

See pp. 25-27.

Deference is only available to an agency when it

is consistent, and this agency has not even attempted

to be consistent or to make any explanation of

anything contrary to its position. Previous written

positions in Massachusetts appellate court cases are

inconsistent with the agency’s new position. See pp.

27-28. Further, the Board of Hearings, in rendering

final decisions of the agency, has issued numerous

inconsistent decisions regarding the meaning of

“available” in 130 CMR 520.023(C)(1)(d). See pp. 28-34.

The Office of Medicaid violates federal law

whenever, as here, it utilizes any eligibility

methodology more restrictive than that used by the SSI

program, and federal law and the State Medicaid Manual

both require that the agency follow SSI law in making

Medicaid eligibility determinations. See pp. 34-38.

Other issues mentioned by the Trial Court had not

even been ruled upon below by the hearing officer. The

8

Trust states in Article FIRST that the Appellant is

entitled to only a narrow definition of Trust income,

and that the Appellant’s children are the only

beneficiaries entitled to distributions of Trust

principal; thus, Article FIRST is the controlling

provision regarding distributions of principal and

income, and, reading the Trust as a whole, dictates

the proper interpretation of other Trust provisions.

Article EIGHTH contains a fair market value purchase

option, but it does not allow the Appellant to profit

from a transaction with the Trust; such a trust

provision was subsequently found to be not problematic

in Heyn v. Director of the Office of Medicaid, 89

Mass. App. Ct. 312 (2016). Article EIGHTH merely

restates Massachusetts trust law, M.G.L. c. 203E, §

505(a)(2), by containing tax reimbursement provisions

when Trust income ends up being taxable to the

Appellant under the grantor trust rules of the

Internal Revenue Code. The Board of Hearings, in

rendering final decisions of the Office of Medicaid,

has issued numerous inconsistent decisions on both of

these issues. In ruling against the Appellant on these

two grounds, the Trial Court committed an error of

law. See pp. 38-48.

9

Due to its unexplained inconsistency, the agency

is not entitled to any deference. See pp. 48-49.

For the above reasons, this Court should reverse

the decision of the Trial Court and find that the

assets of the Trust are not countable under federal

Medicaid law and MassHealth regulations implementing

it.

SECTION V – LEGAL ARGUMENTS

I. SELF-SETTLED IRREVOCABLE INCOME-ONLY SPENDTHRIFT

TRUSTS ARE VALID UNDER MASSACHUSETTS LAW AND

FEDERAL MEDICAID TRUST LAW AND DO NOT CONSTITUTE

COUNTABLE ASSETS FOR MASSHEALTH PURPOSES

For purposes of assessing an applicant’s

eligibility for MassHealth long-term care benefits,

the Office of Medicaid determines whether the

applicant has excess countable assets. In order for

the assets in the Appellant’s Trust to be included in

the determination of the countable assets, principal

from the Trust must be payable to or accessible by the

Appellant. See 130 CMR 520.023(C)(1). The Appellant’s

ability to receive income from the Trust does not

cause the Trust principal to be a countable asset, as

income is treated separately than assets under

MassHealth regulations and becomes added to the

10

Patient Paid Amount upon approval. 130 CMR

520.009(A)(3).

The proper review of self-settled irrevocable

trusts for countability is set forth in federal

Medicaid trust law at 42 U.S.C. § 1396p(d)(3)(B)(i),

which simply states:

“In the case of an irrevocable trust, if

there are any circumstances under which

payment from the trust could be made to or

on behalf of the individual, the portion of

the corpus from which, or the income on the

corpus from which, payment to the individual

could be made shall be considered resources

available to the individual.”

The plain language of the federal law makes it clear

that the simple question posed by the federal Medicaid

trust law is whether a payment can be made to or for

the benefit of the settlor. In this case, only income

is payable for the settlor’s benefit, and only the

income is considered available and countable.

The Supreme Judicial Court (“SJC”) has already

concluded in the leading Massachusetts case regarding

federal Medicaid trust law, Cohen v. Division of

Medical Assistance, 423 Mass. 399 (1996), that a self-

settled irrevocable income-only spendthrift trust is

valid under Massachusetts law and federal Medicaid

trust law:

11

“[A] trust might be written to deprive the

trustee of any discretion (for instance

allowing the payment only of income) and …

such a limitation would be respected.” Cohen

at 418.

In 2009, the Massachusetts Appeals Court in Doherty v.

Director of the Office of Medicaid, 74 Mass. App. Ct.

439 (2009) reached the same conclusion:

"Finally, we take this opportunity to stress

that we have no doubt that self-settled,

irrevocable trusts may, if so structured, so

insulate trust assets that those assets will

be deemed unavailable to the settlor."

Doherty at 442-43.

In 2016, the Massachusetts Appeals Court in Heyn

perceived the need to reiterate the legal conclusion

that such income-only irrevocable trusts are

allowable:

“The legislative history and case law

concerning the treatment of self-settled

trusts reflect awareness of the possibility

that comparatively affluent individuals

might avail themselves of such trusts as an

estate planning tool, in order to qualify

for benefits. See Cohen, supra at 403-404. …

Nonetheless, it is settled that, properly

structured, such trusts may be used to place

assets beyond the settlor's reach and

without adverse effect on the settlor's

Medicaid eligibility.” Heyn at 312-314.

The comment made in 1985 when Congress was

implementing federal Medicaid trust law about

preventing Medicaid applicants from “having your cake

and eating it too” related to a trust variation, then

https://scholar.google.com/scholar_case?case=11968839572577878944&q=related:EuSHL_u7yVcJ:scholar.google.com/&hl=en&as_sdt=6,30&as_vis=1

12

strangely allowable, where the Trustee could be given

the unfettered discretion to give the trust’s assets

directly back to the settlor, but if the Appellant in

this case cannot reach the cake, or be given the cake

by the Trustee, then the Appellant cannot eat it.

II. FEDERAL MEDICAID TRUST LAW REQUIRES THAT THE

PLAINTIFF’S IRREVOCABLE TRUST BE SCRUTINIZED UNDER

INSOLVENCY ANALYSIS

In Cohen, the SJC held that the essence of

federal Medicaid trust law was whether a creditor

could reach the settlor-applicant’s interest in the

trust:

“Restatement (Second) of Trusts, § 156

(1959) … provides: “Where the Settlor is a

Beneficiary . . . (2) Where a person creates

for his own benefit a trust for support or a

discretionary trust, his transferee or

creditors can reach the maximum amount which

the trustee under the terms of the trust

could pay to him or apply for his benefit. …

Under such a trust, a grantor puts his

assets in a trust of which he is the

beneficiary, giving his trustee discretion

to pay out monies to gratify his needs but

limiting that discretion so that the trustee

may not pay the grantor's debts. Thus, the

grantor hopes to put the trust assets beyond

the reach of his or her creditors.” Cohen at

414.

The Cohen court described a successful self-

settled, spendthrift trust as putting the trust assets

beyond the reach of the settlor’s creditors, then

proceeded to find that the trusts in the consolidated

13

case had not done so because the Trustees had

discretion to make distributions of principal directly

to the settlors of those trusts.

The plain language of the current federal Medicaid

trust law shows that it is the ability to make payment

from the trust, ignoring attempted limitations on the

Trustee’s discretion, that makes the trust countable.

Being “available” under federal Medicaid trust law

means that the Trustee can make a payment to or for

the settlor under the terms of the trust, which would

not coincidentally also allow a creditor of the

settlor to reach the assets under state debtor-

creditor law. “[I]f, in any circumstances any amount

of money might be paid to a beneficiary, the maximum

of such amount is deemed to be available to the

beneficiary.” Cohen at 406-407.

Scrutiny of a trust under the 1993 federal

Medicaid trust law at 42 U.S.C. § 1396p(d)(2)(C)

specifies four and only four aspects of state trust

law that may be ignored in determining eligibility:

“(C) …this subsection shall apply without

regard to—

(i) the purposes for which a trust is

established,

(ii) whether the trustees have or exercise

any discretion under the trust,

14

(iii) any restrictions on when or whether

distributions may be made from the trust, or

(iv) any restrictions on the use of

distributions from the trust.”

All of these exceptions relate to trust provisions

that would not be protective of a trust’s assets

against a creditor of the settlor. Thus, the

Congressional intention of requiring states to

implement insolvency analysis on irrevocable trusts

ensured that the settlor’s creditors, especially the

nursing home providing services to the settlor, would

have access to legal remedies against the settlor’s

interest in the trust upon a Medicaid denial.

The Office of Medicaid is required to follow this

federal law: "Where there is a conflict between State

and Federal regulations, the Legislature intended that

the [agency] comply with the Federal rule." Cruz v.

Commissioner of Pub. Welfare, 395 Mass. 107, 112

(1985). The agency’s own regulation at 130 CMR 520.021

confirms that federal law is controlling:

“In the event that a portion of

130 CMR 520.021 through 520.024 conflicts

with federal law, the federal law

supersedes.”

Congress did not intend to leave a nursing home

(which under 42 C.F.R. § 483.12(a)(2) and 940 CMR 4.09

cannot easily discharge or evict its nonpaying

15

residents) with the possibility of being required to

render a substantial amount of services during the

Medicaid application and fair hearing processes with

the possibility of no eventual payment source. Federal

Medicaid trust law mirrors bankruptcy law, as a

beneficial interest in a valid spendthrift trust is

not considered property of the bankruptcy estate. 11

U.S.C. § 541(c)(2). Section 541(c)(2) of the

Bankruptcy Act provides that a ”restriction on the

transfer of a beneficial interest of the debtor in a

trust that is enforceable under applicable non-

bankruptcy law is enforceable” in bankruptcy, and this

section has been held to apply to spendthrift

provisions in trust documents. See Patterson v.

Shumate, 504 U.S. 753, 758 (1992) and In re Moses, 167

F.3d 470 (9th Cir. 1999).

The case of Reinholdt v. N.D. Department of Human

Services, 760 N.W.2d 101 (2009), cited below by the

Office of Medicaid, is instructive on the level of

inquiry needed to determine whether the assets in the

Appellant’s Trust are countable under federal Medicaid

trust law:

“If an applicant has a colorable legal

action to obtain assets through reasonable

legal means, the assets are available. … The

16

'actually available' requirement must be

interpreted reasonably, and the focus is on

the applicant's actual and practical ability

to make an asset available as a matter of

fact, not legal fiction.” Reinholdt at 105

(citations omitted).

Under the Cohen holding and a plain reading of

the federal Medicaid trust law, if the nursing home

cannot reach the Trust as a creditor of the settlor,

then the principal of the Trust is not a countable or

available asset under federal Medicaid trust law.

III. THE OFFICE OF MEDICAID HAS NO LEGAL AUTHORITY TO TREAT A MASSHEALTH APPLICANT’S HOME IN A SELF-

SETTLED IRREVOCABLE INCOME-ONLY TRUST AS PER SE

“AVAILABLE” AND THEREFORE A COUNTABLE ASSET

A. The MassHealth Regulation at 130 CMR

520.023(C)(1)(d), as Newly Misinterpreted by the

Office of Medicaid, Is Not in Accordance with

Federal Medicaid Trust Law

The regulation at issue in this case is 130 CMR

520.023(C):

(C) Irrevocable Trusts.

(1) Portion Payable.

(a) Any portion of the principal or income

from the principal (such as interest) of an

irrevocable trust that could be paid under

any circumstances to or for the benefit of

the individual is a countable asset.

(b) Payments from the income or from the

principal of an irrevocable trust made to or

for the benefit of the individual are

countable income.

(c) Payments from the income or from the

principal of an irrevocable trust made to

another and not to or for the benefit of the

nursing-facility resident are considered

transfers of resources for less than

17

fair-market value and are treated in

accordance with the transfer rules at

130 CMR 520.019(G).

(d) The home or former home of a nursing-

facility resident or spouse held in an

irrevocable trust that is available

according to the terms of the trust is a

countable asset. Where the home or former

home is an asset of the trust, it is not

subject to the exemptions of

130 CMR 520.007(G)(2) or 520.007(G)(8).

(2) Portion Not Payable. Any portion of the

principal or income from the principal (such

as interest) of an irrevocable trust that

could not be paid under any circumstances to

or for the benefit of the nursing-facility

resident will be considered a transfer for

less than fair market value and treated in

accordance with the transfer rules at 130

CMR 520.019(G).

One reason for this appeal is that (1)(d) in this

regulation was misinterpreted by the Hearing Officer.

Under (1)(a) and (1)(b), the analysis correctly is

whether a payment can be made to or for the

settlor. Following a new interpretation of (1)(d)

urged on the Hearing Officer by the agency but not

disclosed to him as being new, he ruled that the

residence in the Trust was “available,” and therefore

countable, due to its being the Appellant’s former

home.

The Office of Medicaid argued below that if the

settlor of the Trust can or does use the home, then it

is always “available,” and per se countable, yet the

18

regulatory interpretation is not in accordance with

federal Medicaid trust law or the Office of Medicaid’s

long history of implementing the law correctly.

Before January 1, 2014, the Office of Medicaid

had an official, published position on what the term

“available” meant, as under the “Definition of Terms”

in 130 CMR 515.001, the term “available” was defined

as “a resource that is countable under Title XIX of

the Social Security Act.” That definition of

“available” had existed in MassHealth regulations all

the way back to October 1, 1999, when the 1993 federal

Medicaid trust law changes were implemented by

regulation in Massachusetts.2 Thus, from October 1,

1999 through December 31, 2013, it was clear that an

asset was considered available if it was countable,

and not the other way around.

Since January 1, 2014, the word “available” has

no longer been defined anywhere in the MassHealth

regulations, and the Office of Medicaid did not

disclose to the hearing officer the pre-2014

definition of the word “available” or the agency’s

long history of treating a MassHealth applicant’s home

2 See ADD044-054, which contains pages from the

agency’s regulations and the Massachusetts Register

from 1999 to 2013.

19

as available only when the trust principal was payable

to or for the applicant. By choosing not to present

such pertinent information to the hearing officer, the

Office of Medicaid violated its duty of administrative

consistency, according to the manual on administrative

adjudicatory proceedings published by members of the

Office of the Attorney General and available online in

the Administrative Law Division area of mass.gov:

“In cases in which a board is departing from

longstanding precedent, the board must

explain its rationale carefully. Although

not bound in a strict sense by stare

decisis, boards and administrative tribunals

are under a special duty to explain

themselves where they depart from an

established line of decisions.” Manual for

Conducting Administrative Adjudicatory

Proceedings, Office of the Attorney General

of the Commonwealth of Massachusetts (Robert

L. Quinan, Jr., Editor), p. 64 (2012).

The MassHealth regulation at 130 CMR

520.023(C)(1)(d) itself does not support the

interpretation given to it by the Office of Medicaid,

the hearing officer or the Trial Court, where after

the word “available” comes the phrase “according to

the terms of the trust.” The Trial Court invoked (d)

in the regulation by incorrectly imputing the life

estate in the deed as though it were one of the terms

of the trust.

20

A provision in a deed or trust that allows the

settlor to live in the settlor’s former home does not

somehow vest the Trustee with discretion to deed the

home to the settlor in violation of the Trustee’s

fiduciary duties to the other beneficiaries.3

Massachusetts law is controlling, as the United

States Court of Appeals for the Third Circuit has

already made a thorough examination of Congressional

intent in the context of federal Medicaid trust laws

in Lewis v. Alexander, 685 F.3d 325 (3d Cir. 2012) and

concluded that state law matters in the analysis:

“Congress rigorously dictates what assets

shall count and what assets shall not count

toward Medicaid eligibility. State law

obviously plays a role in determining

ownership, property rights, and similar

matters. … “Trusts are, of course,

required to abide by a State’s general law

of trusts. … [T]here is no reason to

believe [Congress] abrogated States’ general

laws of trusts. … …[W]e reject the

conclusion that application of these

traditional powers is contrary to the will

of Congress. After all, Congress did not

pass a federal body of trust law, estate

law, or property law when enacting

Medicaid. It relied and continues to rely

on state laws governing such

issues.” Lewis at 334, 335, 343.

3 See, e.g., the Trustee’s duty of impartiality under

M.G.L. c. 203E, § 803: “If a trust has 2 or more

beneficiaries, the trustee shall act impartially in

investing, managing and distributing the trust

property, giving due regard to the beneficiaries'

respective interests.”

21

Moreover, in Guerriero v. Commissioner of the Division

of Medical Assistance, 433 Mass. 628 (2001), the SJC

has already ruled that Massachusetts trust law is

controlling in a determination of whether a

distribution of assets can be made to the settlor of a

trust.4 In applying federal Medicaid trust law,

Massachusetts trust law must first be reviewed to

determine the settlor’s interests, and if a

distribution cannot be made to the settlor, then the

trust’s assets cannot be treated as countable assets:

“The statute asks only what the maximum

amount of funds available to the beneficiary

are in any circumstances pursuant to the

exercise of the trustee's

discretion.” Cohen at 424.

To the extent that the usage of the home could be

viewed as a payment from an irrevocable income-only

4 “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). If the trustee violates any

duty to a beneficiary, the trustee will be liable

for "breach of trust." Restatement (Second) of

Trusts, supra at § 201.” Guerriero at 632.

22

trust, it would be treated as income because the

principal is not being consumed by living there.5

In addition to the foregoing, a renowned legal

treatise on trust law states that the principal of a

trust is not distributable or available without

written specificity in the trust:

“Nowadays, it is default law that the

current beneficiary of a trust is entitled

to the net trust accounting income. It is

also default law that a trust is income

only, i.e., the current beneficiary is not

entitled to principal, unless the governing

instrument indicates that the settlor

intended otherwise. Thus, a trust for the

“benefit” of C, remainder to D is normally

income only absent additional language

suggesting the contrary. Without such

additional language, the trustee would have

no power to invade principal for the income

beneficiary.” Charles E. Rounds, Jr. and

Charles E. Rounds, III, Loring and Rounds: A

Trustee’s Handbook (2013 Edition), §5.4.1.3

at 376-377.

Nowhere in federal Medicaid trust law or federal

Supplemental Security Income (“SSI”) law is the

countability of an irrevocable trust evaluated based

5 A person with a limited lifetime interest in real

estate is not considered under Massachusetts law to

have access to principal. See Spring v. Hollander,

261 Mass. 373 (1927), where the SJC held that upon a

sale of real estate a life tenant is entitled to

income only, and principal is not available to the

life tenant, and see Langlois v. Langlois, 326 Mass.

85 (1950), where it was held that a beneficiary with a

life interest does not have power to consume the

principal of the property.

23

upon the trust’s investments. The regulatory

interpretation in this case was arbitrary, capricious

and an error of law.

Where all of the issues on appeal involve de novo

judicial review of the interpretation of a federal

statute, the state agency’s interpretation is not

entitled to any deference.6

B. The Office of Medicaid Is Newly Misinterpreting

Two Sentences that Have Long Been Available in

the State Medicaid Manual

Although not cited at the fair hearing as a

reason for the Office of Medicaid’s adverse

eligibility determination, on appeal in Superior Court

the agency added the new post-hoc rationale that the

State Medicaid Manual, at 3259.1 A.6., states:

6 “We review de novo a state agency's interpretation of

a federal statute. … A state agency's interpretation

of federal statutes is not entitled to the deference

afforded a federal agency's interpretation of its own

statutes under Chevron U.S.A. Inc. v. Natural

Resources Defense Council Inc., 467 U.S. 837, 843, 104

S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). "Chevron's

policy underpinnings emphasize the expertise and

familiarity of the federal agency with the subject

matter of its mandate and the need for coherent and

uniform construction of federal law nationwide. Those

considerations are not apt [to a state agency]."

Turner, 869 F.2d at 141. What concerns us is whether

the state law and regulations are consistent with

federal law. Neither the district court nor we defer

to the state to answer that question.” Orthopaedic

Hosp. v. Belshe, 103 F.3d 1491, 1495-1496 (9th Cir.

1997).

24

Payment.--For purposes of this section a

payment from a trust is any disbursal from

the corpus of the trust or from income

generated by the trust which benefits the

party receiving it. A payment may include

actual cash, as well as noncash or property

disbursements, such as the right to use and

occupy real property.

This section of the State Medicaid Manual, available

to the agency since 1994, contemplates that a payment

could be either income or principal, and that usage of

the Appellant’s home could be treated as a

payment. The new position of the agency (apparently

not yet even developed at the time of the Appellant’s

fair hearing, as the issue was raised for the first

time in Superior Court) appears to be that mere usage

of or ability to use a home transferred to a trust is

per se a payment of principal, yet the list of what

may be considered a “payment” in that section of the

State Medicaid Manual does not support the agency’s

position. The first sentence declares expressly the

distinction between income and principal, a

distinction that is fundamental to trust and property

laws. The second sentence does not disturb that

distinction, even indirectly; it establishes only that

a payment, as defined in the first sentence – i.e., a

disbursal of either principal or income – can be in

25

cash or in kind. The right to use real property is

offered as an example of the latter, and does not

convert an equitable, discretionary beneficial

interest into entitlement to the principal, nor does

it somehow vest the Trustee with the authority to make

any such distribution. Per Cohen, Guerriero and Heyn,

Massachusetts law is used to make such determinations,

yet the Defendant apparently ignores it, as a life

tenant is entitled to only income, and cannot consume

principal. See Spring v. Hollander, 261 Mass. 373

(1927), Langlois v. Langlois, 326 Mass. 85 (1950) and

Hinckley v. Clarkson, 331 Mass. 453 (1954). The

Trustee has a fiduciary duty to preserve the principal

of the Trust for the benefit of the remainder

beneficiaries. Hinckley at 455.

C. The Actual Rationale for the MassHealth

Regulation at 130 CMR 520.023(C)(1)(d) Is Found

in the Office of Medicaid’s Last Known Position

Statement Regarding Federal Medicaid Trust Law

The long-standing position of the Division of

Medicaid Assistance, now known as the Office of

Medicaid, regarding irrevocable trusts was established

in a legal policy statement dated April 29, 1992,

entitled “Transfer and Trust Issues Reconciliation of

Department Policy,” where on page 3 the standard of

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review, similar to Restatement (Second) of Trusts, §

156 as described in Cohen, was simply that a trust was

“countable up to the limit of the trustee’s discretion

to distribute it to the applicant.” See ADD 380-384.

The Appellant knows of no other official position

statement by the agency.

Note that Question 2, parts (a) and (b), on pages

2-3 of the agency’s April 29, 1992 position statement,

addresses the issue of whether a home transferred to a

trust should remain noncountable, and provides the

reasoning behind the promulgation of 130 CMR

520.023(C)(1)(d): to cause the settlor’s home to lose

its noncountable status when it is transferred to a

trust. A home is usually considered to be a

noncountable asset if it is in the MassHealth

applicant’s name, but the Commonwealth is not

disadvantaged by its being noncountable because after

the MassHealth recipient’s death there is an estate

recovery claim against it for reimbursement by the

Commonwealth for MassHealth benefits paid on the

recipient’s behalf. If, however, the home were in a

trust yet still considered to be noncountable despite

being distributable to the MassHealth recipient, the

transfer of the home to the trust would avoid a post-

27

death estate recovery claim against it for

reimbursement by the Commonwealth simply due to its

avoiding probate. Thus, the reason for 130 CMR

520.023(C)(1)(d) was to avoid this incongruous result,

i.e., the usage of a trust to maintain ownership of a

home yet avoid a MassHealth estate recovery claim.

D. Previous Written Positions of the Office of the

Attorney General in Massachusetts Appellate Court

Cases Are Inconsistent with the Defendant’s

Position

The major Massachusetts appellate court cases to

date have been Cohen in 1996, Lebow v. Commissioner of

the Division of Medical Assistance, 433 Mass. 171

(2000), Guerriero in 2001, Doherty in 2009 and Heyn in

2016, and the briefs filed in those cases by the

Office of the Attorney General support the Appellant’s

contention that the principal of a trust is only

countable when a payment from principal can be made to

or for the settlor of the trust. In all references in

those briefs as to whether an asset in a trust is

“available,” the context is whether the asset is

distributable by the Trustee to the settlor-applicant.

In Doherty, which is known to have involved the

Plaintiff’s home held in the trust (as the decision

specifically mentions Muriel Doherty’s right to live

28

there), there is no mention in the briefs filed at any

level by or on behalf of the Office of Medicaid about

Muriel Doherty’s home being a countable asset due to

her living there and it therefore being “available”

and per se countable.

In Heyn, the Court wrote that the trust owned

“her former residence, held by the trust.” Heyn at

313. At the fair hearing underlying Heyn, the hearing

officer had rejected the “available” home argument

made by the agency,7 yet on appeal in Heyn the agency

did not request the Court to review that portion of

the decision. Thus, the agency is estopped from

raising the “available” home argument here after

having acquiesced in Heyn.8

E. The Board of Hearings, in Rendering the Final

Decision of the Office of Medicaid, Has Issued

Inconsistent Decisions Regarding What “Available”

Means in 130 CMR 520.023(C)(1)(d), and the Agency

Therefore Fails to Engage in Administrative

Consistency

7 The hearing officer in the underlying Heyn appeal,

Fair Hearing Decision 1306280, on page 10 had

specifically rejected the arguments of the Office of

Medicaid regarding the home being “available” under

130 CMR 520.023(C)(1)(d). 8 Under the doctrine of offensive issue preclusion,

also known as offensive collateral estoppel, the

agency is prohibited from continuing to bring up

issues where its position had already been ruled

against. Bellermann v. Fitchburg Gas and Electric

Light Company, 470 Mass. 43, 60 (2014).

29

The Appellant is entitled as a matter of law to

reasoned consistency in agency decision-making by the

Office of Medicaid:

“A party to a proceeding before an agency

has a right to expect and obtain reasoned

consistency in the agency’s

decisions.” Boston Gas Co. v. Dep't of Pub.

Utilities, 367 Mass. 92, 104 (1975). “The

law demands a certain orderliness. If an

administrative agency decides to depart

significantly from its own precedent, it

must confront the issue squarely and explain

why the departure is reasonable. … [T]he

prospect of a government agency treating

virtually identical legal issues differently

in different cases, without any semblance of

a plausible explanation, raises precisely

the kinds of concerns about arbitrary agency

action that the consistency doctrine

addresses.” Davila–Bardales v. Immigration

and Naturalization Service, 27 F.3d 1, 5

(1st Cir. 1994)

Unfortunately, agency decisions at fair hearings

involving irrevocable trusts can often depend on who

the hearing officer is that was assigned to the case,

and the agency does nothing to reconcile its

inconsistent decisions.

In Fair Hearing Decision 1402188, ADD 143-161

decided on November 10, 2014, in approving an

irrevocable trust, Hearing Officer Christopher S.

Taffe wrote on page 15:

“I conclude that under the terms of the

Trust, there is no evidence that there is

any "portion" of the Realty Trust which is

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30

"payable" to the Appellant; I will note that

while the regulation in 130 CMR

520.023(C)(1)(d) is somewhat vague as to

what "available" means in terms of the

former home, the fact that the entire

subsection in the regulation at 130 CMR

520.023(C)(1) is titled "Portion Payable"

suggests that, for there to be a finding of

countability and availability, there must be

some circumstances in the trust language

which gives an LTC applicant some colorable

claim and ability to receive some form

of payment from the resource in the trust

corpus. This is also consistent with

42 U.S.C. § 1396p(d)(3)(B)(ii), quoted by

MassHealth in its memorandum, which uses the

phrase "...payment from the trust ..." to

describe the "any circumstances" test.”

In Fair Hearing Decision 1404746, ADD 162-179, decided

March 30, 2015, Hearing Officer Thomas J. Goode on

pages 16-17 ruled that the home or former home of the

applicant in a trust should not be treated differently

than other assets:

“I disagree with the MassHealth position

that because Appellant's former residence is

"available" to the spouse under the terms of

the Trust, it is therefore countable under

42 U.S.C. § 1396p (d)(2)(A)(B) and (C) and

under 130 CMR 520.023(C)(l)(d). In the case

of an irrevocable trust, 42 U.S.C. §

1396p(d)(3)(B) imposes the "any

circumstances" test under which either

income or principal can be paid to the

applicant, and considers available the

amount that could be paid to the individual

from income or from the corpus of the

trust. ... MassHealth interprets the word

"available" under 520.023(C)(l)(d) to

include the equitable title retained under

the life estate interest that allowed

Appellant and the spouse the right to use


31

the property during their lifetime. The

MassHealth position implies that by

retaining a life estate interest in the

former home under a trust the former … home

becomes countable. However, regulation 130

CMR 520.023(C)(l)(d), read within the

context of the "any circumstances" test at

42 U.S.C. § l396p(d)(3)(B), requires that

Trust property, whether the former home or

not, is "available" such that it would

result in Trust principal being paid to the

applicant. ... There is no preclusion

under either federal law or MassHealth

regulations restricting an applicant from

retaining a life estate interest in the

former residence. Therefore, it would be

inconsistent to determine that the former

home held in Trust is automatically

countable under 520.023(C)(l)(d) without a

finding that, according to the terms of the

Trust, the Trustee can sell the property,

and pay the proceeds to the individual to be

used for the benefit of the

applicant. … As I have found that there

are no such circumstances under the terms of

the Trust that allow the sale of the former

home such that the proceeds, i.e., Trust

principal, could be paid to Appellant or the

spouse to be used for the benefit of the

applicant/individual, the former home is not

countable.”

In Fair Hearing Decision 1509625, ADD 248-262,

dated November 2, 2015, Hearing Officer Thomas J.

Goode analyzed the new position of the Office of

Medicaid regarding Section 3259.1 A.6 of the State

Medicaid Manual and soundly rejected the legal

argument as a matter of law:

“Assuming the right to occupy the property

is properly considered a disbursal, and is

therefore a payment dated to the Trust’s

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32

inception, the value of the payment would be

limited to the value of the right to occupy

the property, i.e., Appellant’s equitable

interest that she reserved. However,

characterizing the right to occupy as a

payment to Appellant does not vest in the

Trustee the discretion or requirement to

make legal title to the property available

to Appellant. Moreover, as Appellant is an

income only beneficiary, and cannot receive

payments from principal, it follows that

characterizing the right to occupy the

former residence as a payment would result

in an income payment and not a payment from

principal. … As a practical matter, the

presumption here is that the proceeds could

be paid to the individual/applicant free of

Trust to pay for the cost of nursing

facility care. The availability of an

equitable interest only cannot accomplish

this goal.”

In addition, in 2016, eight additional fair

hearing decisions, 1601959, 1516247, 1602421, 1600653,

1600434, 1602142, 1603821 and 1604346, rejected the

agency’s “available” home argument and reached the

conclusion that a MassHealth applicant’s home is not

countable unless principal can be explicitly

distributed back to the applicant. ADD 163-376. Under

M.G.L. c. 118E, § 48, “[t]he decision of the referee

shall be the decision of the division.” It is a

violation of the duty of administrative consistency to

continue to issue eligibility determinations that both

ignore and are inconsistent with the previous fair

33

hearing decisions of the agency.9 It is a violation of

the Appellant’s rights, including Equal Protection

under the United States and Massachusetts

Constitutions, to receive a different result than the

appellants in those cases on the issue of the

interpretation of the word “available” in MassHealth

trust regulations.10 In addition, there may be many

more eligibility determinations and fair hearing

decisions that are known to the agency yet unknown to

the Appellant on the issue of whether a home being

lived in by a MassHealth applicant is “available,” and

the agency has a duty to disclose those eligibility

9 “The principles of claim preclusion and issue preclusion … apply both to administrative boards and

to courts.” Lopes v. Board of Appeals of Fairhaven,

27 Mass. App. Ct. 754, 755 (1989). “Courts routinely

apply collateral estoppel to issues resolved by

agencies.” Kenneth Culp Davis and Richard J. Pierce,

Jr., Administrative Law Treatise 13.4 at 260 (1994).

10 The Office of Medicaid is failing to fulfill the agency's duties, where under 42 C.F.R. § 435.901,

“[t]he Medicaid agency's standards and methods for

determining eligibility must be consistent with the

objectives of the program and with the rights of

individuals under the United States Constitution, the

Social Security Act, title VI of the Civil Rights Act

of 1964, section 504 of the Rehabilitation Act of

1973, and all other relevant provisions of Federal and

State laws.” The Office of Medicaid has a duty under

all of these laws to treat all MassHealth applicants

fairly and consistently, yet has not reconciled its

fair hearing decisions on similar facts and issues.

34

determinations and fair hearing decisions and explain

any similarities or differences therein.11

IV. FEDERAL MEDICAID LAW AND THE STATE MEDICAID MANUAL REQUIRE THAT THE OFFICE OF MEDICAID CONSIDER AND

FOLLOW SSI LAW IN ITS ELIGIBILITY DETERMINATIONS

REGARDING TRUSTS

In 1994, the Health Care Financing

Administration, now known as the Centers for Medicare

and Medicaid Services, issued HCFA Transmittal 64,

which eventually became part of the State Medicaid

Manual, which is binding on the states by contract.

The Foreword to the State Medicaid Manual, at B.1.,

states:

Contents.-- The manual provides

instructions, regulatory citations, and

information for implementing provisions of

Title XIX of the Social Security Act (the

Act). Instructions are official

interpretations of the law and regulations,

and, as such, are binding on Medicaid State

agencies. This authority is recognized in

the introductory paragraph of State plans.”

11 “ “[L]egal authority[]” … should be understood to

include not only case law precedents, but also

statutes, ordinances, regulations, and administrative

rulings. Indeed, the duty to reveal the latter kinds

of authority is of greater practical significance,

precisely because they are less likely to be

discovered by the tribunal itself.” Geoffrey C.

Hazard, Jr. & W. William Hodes, The Law of Lawyering,

s. 29.11, at 29-16 (3rd ed. 2000).

35

In section 3259.6 D. of the State Medicaid Manual,

states are instructed to apply SSI law in their

Medicaid eligibility determinations involving trusts:

1. Payments Made From Revocable Or

Irrevocable Trusts to or on Behalf of

Individual.--Payments are considered to be

made to the individual when any amount from

the trust, including an amount from the

corpus or income produced by the corpus, is

paid directly to the individual or to

someone acting on his/her behalf, e.g., a

guardian or legal representative.

…

NOTE: A payment to or for the benefit of the

individual is counted under this

provision only if such a payment is

ordinarily counted as income under the SSI

program. (emphasis added)

In violation of this section of the State Medicaid

Manual, the Office of Medicaid never made any

eligibility determination that usage of the

Appellant’s home caused it to be treated as income

under the SSI program, and neither the hearing officer

nor the Trial Court made any such finding.

The Office of Medicaid violates federal law

whenever it utilizes any eligibility methodology that

is more restrictive than that used by the SSI program:

“In determining income and resource

eligibility for Medicaid, states may not

employ a methodology which renders an

individual ineligible for Medicaid where

that individual would be eligible for

SSI. See 42 U.S.C. § 1396a(r)(2)(A)(i). In

addition, states must use reasonable

36

standards for determining eligibility which

only take into account income and resources

which are available to the recipient and

which would not be disregarded in

determining eligibility for SSI. 42 U.S.C. §

1396a(a)(17). For SSI purposes, if an

individual has no authority to liquidate a

property right, it is not considered an

"available resource." 20 C.F.R. §

416.1201(a)(1). Social Security

Administration guidance further explains

that a trust is an "available resource" only

if the beneficiary has the legal authority

to compel the use of trust assets for her

own support and maintenance. See Social

Security Administration, Program Operating

Manual System ("POMS") §

S01120.200(D)(2).” Brown v. Day, 434 F.

Supp. 2d 1035, 1037-38 (D. Kan. 2006).

See also Lewis v. Alexander, 685 F.3d 325 (3d Cir.

2012), 42 U.S.C. § 1396a(r)(2), 42 U.S.C. §

1396a(a)(10)(C)(i)(III), 42 C.F.R. § 435.601, and Fair

Hearing Decision 1102569, where the agency conceded

that it is bound by the doctrine of SSI comparability.

There is no section in SSI law, SSI regulations

or the Program Operations Manual System (“POMS”) of

the Social Security Administration that would result

in the Appellant’s home in the Trust being deemed

countable based on its usage, and the hearing officer

made no such finding or even considered SSI

law. Under the SSI program, if an individual's home

is in a trust of which the individual is a beneficiary

and the individual uses it, it does not count as in-



37

kind support and maintenance income. Further, a home

or former home held in an irrevocable trust is not

considered a resource under SSI law and

regulations. The term “resources” is defined for SSI

purposes at 416 C.F.R. § 1201 as “cash or other liquid

assets or any real or personal property that an

individual (or spouse, if any) owns and could convert

to cash to be used for his or her support and

maintenance.” The SSI regulation further provides:

If the individual has the right, authority

or power to liquidate the property or his or

her share of the property, it is considered

a resource. If a property right cannot be

liquidated, the property will not be

considered a resource of the individual (or

spouse)." 20 C.F.R. § 416.1201(a)(1).

Thus, where there was no finding by the hearing

officer that the Appellant’s home could be sold and

the proceeds distributable to the Appellant or for the

Appellant’s benefit, or that the home could be given

to or taken by the Appellant from the Trust without

consideration, the Fair Hearing Decision and the

agency’s new interpretation of 130 CMR

520.023(C)(1)(d) are in violation of federal Medicaid

law due to being more restrictive than federal SSI

law.

38

The Office of Medicaid has responded in the past

to this SSI issue by pointing out that SSI caseworkers

are instructed in the POMS not to make Medicaid

eligibility determinations involving trusts, but such

a response lacks merit for three reasons. First,

federal law at 42 U.S.C. § 1396a(r)(2) unambiguously

states that state Medicaid agencies cannot be more

restrictive than SSI but can be less restrictive.

Second, the State Medicaid Manual has reiterated that

although Medicaid cannot be more restrictive than SSI,

it can be less restrictive:

“[I]n determining whether and how a trust is

counted in determining eligibility, you may

apply more liberal methodologies for

resources which you may be using under

§1902(r)(2) of the Act.” State Medicaid

Manual, Section 3257.B.4.

Third, the POMS, being merely a procedures manual,

does not have the legal authority to override federal

Medicaid law at 42 U.S.C. § 1396a(r)(2) and 42 U.S.C.

§ 1396a(a)(10)(C)(i)(III), both of which require that

Medicaid eligibility methodologies not be more

restrictive than SSI.

V. THE TRIAL COURT ERRED AS A MATTER OF LAW IN FINDING THAT THE SETTLOR OF THE TRUST WAS AFFORDED ACCESS

TO TRUST PRINCIPAL, AND THE APPELLANT IS ELIGIBLE

FOR MASSHEALTH BECAUSE THE APPELLANT’S IRREVOCABLE

TRUST ALLOWS DISTRIBUTIONS TO THE APPELLANT OF

INCOME ONLY

39

The Trial Court made an error of law in

determining that the availability of income to the

settlor rendered the principal to be also available.

RA193.

There is no dispute that the net accounting

income (if any) of the Trust should be treated as

countable income for MassHealth purposes, but "income"

and "principal" are inherently different property

interests and are treated wholly differently under

federal Medicaid and Massachusetts MassHealth rules,

including for eligibility purposes. See, e.g. 42

U.S.C. § 1396p(d)(3)(B)(i); 20 C.F.R. § 416.1207; 130

CMR 520.009(E) and 130 CMR 520.023(C)(1)(a) & (b);

also, compare 130 CMR 520.007 to 130 CMR 520.009. The

real estate deeded to the Trust by the settlor is

principal, not income, in part because the

Massachusetts Principal and Income Act (“MPIA”)

requires that a Trustee allocate to principal “assets

received from a transferor during the transferor's

lifetime.” M.G.L. c. 203D, § 13(1).12

12 See also Restatement (Third) of Trusts §233, comment p (a trustee has no power to deviate from generally

accepted practices of fiduciary accounting when

determining what is chargeable to income versus to

principal).

40

A. The Trial Court Made an Error of Law in Analyzing

the Property Relationship Between the Trust and

the Reserved Life Estate in the Deed

When establishing the Trust, the Appellant and

his wife had deeded their residence into it, but had

reserved life estates for themselves in the deed.

Thus, under Massachusetts law the Trust would not have

the entire fee in the residence until both life

tenants die.13 The life tenants have had the present

interest and, accordingly, the benefits and burdens of

ownership. The Trustee of the Trust has no power or

authority to exclude the life tenants from living in

the residence or to choose to let them live there.

A life estate is a defined term in the MassHealth

regulations:

“[A] life estate is established when all of

the remainder legal interest in a property

is transferred to another, while the legal

interest for life rights to use, occupy, or

obtain income or profits from the property

is retained.” 130 CMR 515.001.

The Trial Court invalidly analyzed the reserved life

estate in the deed under MassHealth trust regulations,

and concluded that because the Appellant reserved a

13 See Hershman-Tcherepnin v. Tcherepnin, 452 Mass. 77, 88 n. 20 (2008) (“The owner of a possessory life

estate . . . has a right to the exclusive possession

of the land” and “during the existence of the life

estate the remainderman is not entitled to possession

until the death of the life tenant.”).

41

life estate, the assets of the Trust were countable

(see RA193.), yet the life estate should not have been

analyzed under the trust regulations, because the life

estate is a property interest, not a trust asset.

Under 130 CMR 520.019(I), if the residence had been

sold, the value of the life estates would have been

calculated by actuarial tables and not paid to the

Trust, but rather to the life tenants.

B. The Trial Court Made an Error of Law in

Interpreting the Holding in Doherty v. Director

of the Office of Medicaid, and by Not Basing Its

Decision upon a Review of the Trust Instrument as

a Whole

The Trial Court appears to have misread federal

law and to have misinterpreted the holding by the

Massachusetts Appeals Court in Doherty, which has

since that time been clarified by the Massachusetts

Appeals Court in Heyn. A direct path of the principal

of the trust back to the settlor was found in

Doherty.14

There is no such path from the Trust to the

settlor in this case. Article FIRST(A) of the

14 “Art. XXII of the trust expressly authorized the trustee "in its sole discretion" and notwithstanding

"anything contained in this Trust Agreement" to the

contrary, to "pay over and distribute the entire

principal of [the] Trust fund to the beneficiaries

thereof [including the Medicaid applicant], free of

all trusts."” Heyn at 319.

42

Appellant’s Trust prohibits distribution of principal,

and does not allow any type of principal to be

characterized as income:

“So long as either of the Donors are living,

the Trustee shall pay to either Donor so

much of the net income of the Trust as

either Donor shall request in a writing

delivered to the Trustee. For purposes of

this Trust, “net income” is defined as

investment interest and dividends … but not

including appreciated value of Trust assets

or capital gain from the sale of Trust

assets. The Trustee shall have no authority

or discretion to distribute principal of the

Trust to or for the benefit of either

Donor.” (emphasis found in original)

Further, under Article FIFTH(A)(14) the Trustee must

make allocations between principal and income “in

accordance with reasonable accounting practices,”

which under M.G.L. c. 203D, § 3(a)(4) presumes

allocations of receipts to principal; further, under

Article FIFTH(A)(4) the Trustee cannot make any loans

to the Appellant, and under Article SIXTH(D) the

Appellant cannot even serve as a Trustee. Thus,

unlike in Doherty, the Appellant’s Trust makes clear

that principal is not meant to be available for

distribution to or for the settlor under any

circumstances. Under Massachusetts law, the entire

43

trust must be read as a whole,15 and the Office of

Medicaid urged that very point in Doherty: “[A]s

MassHealth strongly presses upon us, this clause may

not be read in isolation; rather, it must be construed

and qualified in light of the trust instrument as a

whole.” Doherty at 441.

C. The Trial Court’s Holding Against the Trust on

the Basis of the Power to Substitute Assets Is

Incorrect as a Matter of Law and Was Effectively

Overruled by the Later-Decided Case of Heyn v.

Director of the Office of Medicaid

In ruling against the Appellant’s Trust, the

Trial Court pointed to a Trust provision later found

acceptable by the Massachusetts Appeals Court in the

Heyn case. See RA193 – RA194. The Appellant’s ability

“to reacquire the principal of this Trust by

substituting property of equivalent value,” i.e., a

fair market value purchase option, was found in Heyn

not to constitute prohibited access to principal:

15 “Trust instruments must be construed to give effect to the intention of the settlor as ascertained from

the language of the whole instrument considered in the

light of the attendant circumstances. Groden v.

Kelley, 382 Mass. 333, 335 (1981).” Harrison v.

Marcus, 396 Mass. 424, 429 (1985). “One or two

expressions in the trust deed must not be so construed

as to impair or destroy the whole scheme of the trust,

when another and more reasonable construction is

possible.” Shirk v. Walker, 298 Mass. 251, 261

(1937).

44

“Such an exchange would be equivalent to a

sale of trust assets, with the grantor in

the role of purchaser and the proceeds of

the sale nonetheless retained by the trust

as principal. Such a transfer would not

effect any distribution or diminution of

trust principal, any more than a sale of

trust assets to unrelated third parties,

followed by a reinvestment of sale proceeds

by the trust.” Heyn at 319.

There have been several fair hearing decisions where

appellants received MassHealth approval because such a

power did not cause the trust to be deemed countable.16

Further, under M.G.L. c. 203E, s. 808(c), such a power

does not allow the settlor to benefit by engaging in

self-dealing:

“A person who holds a power to direct is

presumptively a fiduciary who is required to

act in good faith with regard to the

purposes of the trust and the interests of

the beneficiaries.”

According to Black’s Law Dictionary, Fifth

Edition, the verb “substitute” means “exchange,” and

the verb “exchange” means “[t]o part with … or

16 See, e.g., Fair Hearing Decision 1602421, Finding of

Fact 6b; Fair Hearing Decision 1509625, Finding of

Fact 23; Fair Hearing Decision 1507042, Finding of

Fact 6; Fair Hearing Decision 1503755; Fair Hearing

Decision 1411682, Finding of Fact 12; Fair Hearing

Decision 1409399, Finding of Fact 12; Fair Hearing

Decision 1401798, footnote 2, paragraph 6.5; Fair

Hearing Decision 1402145, Finding of Fact 10; Fair

Hearing Decision 1215864, Finding of Fact 8B; Fair

Hearing Decision 1405851; and Fair Hearing Decision

1603430, Finding of Fact 10.

45

transfer for an equivalent,” and the adjective

“equivalent” means “[e]qual in value, force, measure,

volume, power, and effect or having equal or

corresponding import, meaning or significance.”

Nowhere in these definitions is there even any hint

that one side in a transaction can end up with more

than the other. Thus, the Appellant’s right in

Article EIGHTH to “reacquire” any asset in the Trust

“by substituting property of an equivalent value” is

actually an option to buy it back for its fair market

value, and where transfers for fair market value are

not prohibited under Medicaid law, such a power should

pose no problem in the Medicaid trust context. If

such a transaction were to occur, the result would be

a net receipt by the Appellant of nothing in value.

D. In Determining Whether the Principal of an

Irrevocable Trust Is Countable, Grantor Trust

Treatment for Tax Purposes Is Not a Relevant

Issue

In determining whether the principal of an

irrevocable trust can be withdrawn by the settlor or

given to the settlor by the trustee, or is in any way

available to the settlor for Medicaid or SSI purposes,

the fact that the settlor may reserve some rights or

powers over the trust is not a relevant factor. When

46

passing the Internal Revenue Code of 1954, Congress

dealt with control by settlors in the trust taxation

area with the so-called grantor trust rules, 26 U.S.C.

671-679, Internal Revenue Code sections 671-679. These

tax rules are very detailed, and indicate that

Congress was aware decades before passing federal

Medicaid trust laws that there are many varieties of

trust provisions where settlors can reserve varying

degrees of control over trusts, and that a trust can

be irrevocable yet have the taxation of its income

revert to the settlor.

If Congress had desired that the taxability of

the trust’s income affect whether the principal of the

trust is a countable asset, it would have specifically

stated so in federal Medicaid and SSI trust laws, yet

Congress did not do so. Thus, the payment of the tax

on the income of the Trust is an issue of federal and

state tax law, not Medicaid law.

In Heyn, the trust contained a provision that

confirmed it to be a grantor trust for tax purposes,

which caused all taxable income of the trust to revert

to the settlor’s income tax returns, and the trust was

47

approved by the Court.17 In the Appellant’s case, the

hearing officer had mentioned (but not ruled on) a

tax-reimbursement provision in the Trust, but that

provision merely reiterated Massachusetts law, M.G.L.

§ 203E, s. 505(a)(2), wherein any tax caused by the

Trust on the settlor’s personal income tax returns

would be reimbursable as a matter of Massachusetts law

without affecting the validity of the Trust:

“Trust property shall not be considered

distributable to or for the settlor's

benefit solely because the trustee has the

discretion under the terms of the trust to

reimburse the settlor for any tax on trust

income or capital gain that is payable by

the settlor under the law imposing such tax;

no creditor or assignee of the settlor of an

irrevocable trust shall be entitled to reach

any trust property based on the

discretionary authority described in this

sentence.”

Thus, where a creditor could not reach the principal

of the Trust under Massachusetts law due to income tax

reimbursement, and where Cohen found that Congress was

authorizing implementation of state debtor-creditor

law, such a trust income tax reimbursement provision

17 Several fair hearing decisions of the agency have also found that grantor trust treatment did not

provide access to principal. See, e.g., Fair Hearing

Decisions 1401170, 1402188, 1409508, 1404746,

1501183/1501994 and 1603821, issued June 21, 2016.

48

does not create access to principal by the Appellant,

who is merely made whole by the reimbursement.

The MassHealth regulation at 130 CMR

520.023(C)(1) informatively states “Portion Payable”

and therefore contemplates only to what extent

a payment could be made from the Trust, and even if,

in violation of M.G.L. c. 203E, § 505(a)(2), a tax

payment were to be treated as a payment of principal,

there is no income tax rate anywhere near 100%, so any

tax reimbursement could not possibly be a payment of

the entire trust. Accordingly, the Trial Court should

not have ruled against the Trust on this issue, and as

a procedural issue, the Trial Court should not have

even ruled on an issue that had not been ruled upon by

the hearing officer below.18

VI. Because of Its Unexplained Inconsistency, the

Office of Medicaid Is Not Entitled to Deference

As chronicled by William J. Brisk and Rebecca M.

Flewelling in “Trusts Used in Medicaid Planning:

18 “While we can conduct a meaningful review of "a

decision of less than ideal clarity if the agency's

path may reasonably be discerned," we will not "supply

a reasoned basis for the agency's action that the

agency itself has not given." Bowman Transp., Inc. v.

Arkansas-Best Freight Sys., 419 U.S. 281, 285-286

(1974).” Costello v. Department of Public Utilities,

391 Mass. 527, 535-536 (1984).

49

The Doherty Challenge to Irrevocable Income Only

Trusts and its Aftermath,” 96 Mass. Law Review 4 (Aug.

2015), ADD 386-389, wherein the authors analyzed 55

conflicting fair hearing decisions that cited Doherty

from 2011 through July of 2014, the Office of Medicaid

has issued final agency decisions on similar trusts

and trust provisions, fails to explain similarities

and reconcile differences among its final agency

decisions, and fails thereby to engage in

administrative consistency. In this case, the Office

of Medicaid did not bring any inconsistent fair

hearing decisions or eligibility determinations to the

attention of the tribunals below, and after making its

eligibility determination and its arguments at the

fair hearing, the agency in Superior Court even began

a new line of attack against the Appellant’s Trust,

making a newly-minted argument about Section 3259.1

A.6 of the State Medicaid Manual. The agency is

therefore not entitled to any deference due to its

unexplained inconsistency.19

19 “When an agency does not consistently interpret its

regulations, its interpretation is entitled to no

weight. Morin v. Commissioner of Pub. Welfare, 16

Mass. App. Ct. 20, 24-25 (1983)(deference destroyed

when an agency decided the case at issue differently

than a case it heard months earlier, which had

50

VII. Conclusion and Rule 16(k) Certification

For the reasons set forth above, the order

denying the Appellant's Motion for Judgment on the

Pleadings entered by the Worcester Superior Court on

December 28, 2015 should be reversed; or, in the

alternative, the matter should be remanded for a

rehearing by the Trial Court or the hearing officer.

Appellant’s counsel certify that this brief

complies with the rules of court that pertain to the

filing of briefs, including Mass. R.A.P. 16(a)(6),

16(e), 16(f), 16(h), 18 and 20.

virtually identical facts); Boston Police Superior

Officers Fed’n v. Boston, 414 Mass. 458 (in affirming

agency decision, court found significant that it was

consistent with agency’s prior decisions).” Ruby

Anagnoston v. Kristin Thorn, Director of the Office of

Medicaid, Norfolk Superior Court docket no.

1482CV01293 (2016), p. 8. “It is usually the initial

not the changed interpretation of a statute that earns

the kind of deference the Commonwealth would need

here. See Barnett v. Weinberger, 818 F.2d 953, 960-961

n.74 (D.C. Cir. 1987), and cases cited (deference

depends on consistency of interpretation).” Cohen at

411, note 18. “Inconsistency suggests an arbitrary or

unsure interpreter upon whom the regulated cannot

rely.” Richard W. Murphy, “Judicial Deference, Agency

Commitment, and Force of Law,” 66 Ohio State Law

Journal 1013, 1015 (2005). See ADD 390.

51

Respectfully submitted,

Nicholas G. Kaltsas, Esq. Brian E. Barreira, Esq.

BBO # 549898 BBO# 544433

255 Park Avenue 118 Long Pond Road

Suite 410 Suite 206

Worcester, MA 01609 Plymouth, MA 02360

(508) 755-6525 (508) 747-8282

[email protected] office@

southshoreelderlaw.com

CERTIFICATE OF SERVICE

I, Nicholas G. Kaltsas, Esq., hereby certify that on

the 4th day of October, 2016, I served a copy of the foregoing BRIEF OF PLAINTIFF-APPELLANT, via first class

Mail, postage prepaid, upon the following counsel of

record:

Julie E. Green, Esq.

Office of the Attorney General

One Ashburton Place

Boston, Massachusetts 02108

Sharon C. Boyle, Esq.

Office of Health & Human Service

One Ashburton Place


Charles J. Sheehan, Esq.

One Ashburton Place, Room 1109


Nicholas G. Kaltsas, Esq.

s/Nicholas G. Kaltsas s/Brian E. Barreira

s/Nicholas G. Kaltsas

mailto:[email protected]

ADDENDUM

Table of Contents

1. Worcester Superior Court Ruling .............001-008

2. 11 U.S.C. § 541(c)(2) ...........................009

3. 26 U.S.C. §§ 671-679 ........................010-019

4. 42 U.S.C. § 1396a(a)(10)(C)(i)(III) .............020

5. 42 U.S.C. § 1396a(a)(17) ....................021-022

6. 42 U.S.C. § 1396a(r)(2) .....................023-024

7. 42 U.S.C. § 1396p(d) ........................025-027

8. M.G.L. c. 30A, § 14 .........................028-030

9. M.G.L. c. 118E, § 48 ........................031-032

10. M.G.L. c. 203D, § 3(a)(4) .......................033

11. M.G.L. c. 203D, § 13(1) .........................034

12. M.G.L. c. 203E, § 505(a)(2) .....................035

13. M.G.L. c. 203E, § 803 ...........................036

14. M.G.L. c. 203E, § 808 ...........................037

15. 20 C.F.R. § 416.1201(a)(1) ......................038

16. 20 C.F.R. § 416.1207 ............................039

17. 42 C.F.R. § 435.601 .........................040-041

18. 42 C.F.R. § 435.901 .............................042

19. 42 C.F.R. § 483.12(a)(2) ........................043

20. 130 CMR 515(1999-2014) ......................044-054

21. 130 CMR 520.007 .............................055-061

22. 130 CMR 520.009 .............................062-063

23. 130 CMR 520.019(G) ..............................064

24. 130 CMR 520.019(I) ..............................065

25. 130 CMR 520.021 .................................066

26. 130 CMR 520.023(C) ..........................067-068

27. 940 CMR 4.09 ................................069-082

28. Social Security Administration, Program Operating Manual System

("POMS") § S01120.200(D) ........................083

29. Fair Hearing Decision 1102569 ...............084-092












41. Fair Hearing Decision 1501183/1501994 .......221-228













54. HCFA Transmittal 64, Section 3259.6 D .......377-379

55. April 29, 1992, entitled “Transfer and Trust Issues Reconciliation of Department

Policy” .....................................380-384

56. Manual for Conducting Administrative Adjudicatory Proceedings, Office of the Attorney General

of the Commonwealth of Massachusetts

(Robert L. Quinan, Jr., Editor),p. 64 (2012) ....385

57. Brisk, William J. and Flewelling, Rebecca M., “Trusts Used in Medicaid Planning: The Doherty

Challenge to Irrevocable Income Only Trusts and

its Aftermath,” 96 Mass. Law Review 4,110-113

(Aug. 2015) .................................386-389

58. Richard W. Murphy, “Judicial Deference, Agency Commitment, and Force of Law,”

66 Ohio State Law Journal 1013,

1015 (2005) .....................................390

ADD001

ADD002

ADD003

ADD004

ADD005

ADD006

ADD007

ADD008

Paragraph (4) shall not be construed to exclude from the estate any consideration the debtor retains,receives, or is entitled to receive for transferring an interest in liquid or gaseous hydrocarbons pursuantto a farmout agreement.

(c)

(1) Except as provided in paragraph (2) of this subsection, an interest of the debtor in property becomesproperty of the estate under subsection (a)(1), (a)(2), or (a)(5) of this section notwithstanding anyprovision in an agreement, transfer instrument, or applicable nonbankruptcy law—

(A) that restricts or conditions transfer of such interest by the debtor; or

(B) that is conditioned on the insolvency or financial condition of the debtor, on the commencementof a case under this title, or on the appointment of or taking possession by a trustee in a caseunder this title or a custodian before such commencement, and that effects or gives an option toeffect a forfeiture, modification, or termination of the debtor’s interest in property.

(2) A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable underapplicable nonbankruptcy law is enforceable in a case under this title.

(d) Property in which the debtor holds, as of the commencement of the case, only legal title and not anequitable interest, such as a mortgage secured by real property, or an interest in such a mortgage, sold bythe debtor but as to which the debtor retains legal title to service or supervise the servicing of such mortgageor interest, becomes property of the estate under subsection (a)(1) or (2) of this section only to the extent ofthe debtor’s legal title to such property, but not to the extent of any equitable interest in such property thatthe debtor does not hold.

(e) In determining whether any of the relationships specified in paragraph (5)(A) or (6)(A) of subsection (b)exists, a legally adopted child of an individual (and a child who is a member of an individual’s household, ifplaced with such individual by an authorized placement agency for legal adoption by such individual), or afoster child of an individual (if such child has as the child’s principal place of abode the home of the debtorand is a member of the debtor’s household) shall be treated as a child of such individual by blood.

(f) Notwithstanding any other provision of this title, property that is held by a debtor that is a corporationdescribed in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax under section501(a) of such Code may be transferred to an entity that is not such a corporation, but only under the sameconditions as would apply if the debtor had not filed a case under this title.

(Pub. L. 95–598 (http://thomas.loc.gov/cgi-bin/bdquery/L?d095:./list/bd/d095pl.lst:598(Public_Laws)), Nov. 6,1978, 92 Stat. 2594 (http://uscode.house.gov/statviewer.htm?volume=92&page=2594); Pub. L. 98–353, title III(http://thomas.loc.gov/cgi-bin/bdquery/L?d098:./list/bd/d098pl.lst:353(Public_Laws)), §§ 363(a), 456, July 10,1984, 98 Stat. 363 (http://uscode.house.gov/statviewer.htm?volume=98&page=363), 376; Pub. L. 101–508, title III,§ 3007(a)(2) (http://thomas.loc.gov/cgi-bin/bdquery/L?d101:./list/bd/d101pl.lst:508(Public_Laws)), Nov. 5, 1990,104 Stat. 1388–28 (http://uscode.house.gov/statviewer.htm?volume=104&page=1388-28); Pub. L. 102–486, titleXXX, § 3017(b) (http://thomas.loc.gov/cgi-bin/bdquery/L?d102:./list/bd/d102pl.lst:486(Public_Laws)), Oct. 24, 1992,106 Stat. 3130 (http://uscode.house.gov/statviewer.htm?volume=106&page=3130); Pub. L. 103–394, title II(http://thomas.loc.gov/cgi-bin/bdquery/L?d103:./list/bd/d103pl.lst:394(Public_Laws)), §§ 208(b), 223, Oct. 22,1994, 108 Stat. 4124 (http://uscode.house.gov/statviewer.htm?volume=108&page=4124), 4129; Pub. L. 109–8,title II, § 225(a) (http://www.gpo.gov/fdsys/pkg/PLAW-109publ8/html/PLAW-109publ8.htm), title III, § 323, title XII,§§ 1212, 1221(c), 1230, Apr. 20, 2005, 119 Stat. 65 (http://uscode.house.gov/statviewer.htm?volume=119&page=65), 97, 194, 196, 201; Pub. L. 111–327, § 2(a)(22) (http://www.gpo.gov/fdsys/pkg/PLAW-

ADD009

http://thomas.loc.gov/cgi-bin/bdquery/L?d095:./list/bd/d095pl.lst:598(Public_Laws)

http://uscode.house.gov/statviewer.htm?volume=92&page=2594




http://uscode.house.gov/statviewer.htm?volume=104&page=1388-28





http://www.gpo.gov/fdsys/pkg/PLAW-109publ8/html/PLAW-109publ8.htm


http://www.gpo.gov/fdsys/pkg/PLAW-111publ327/html/PLAW-111publ327.htm

TITLE 26—INTERNAL REVENUE CODE [§ 669

EFFECTIVE DATE

Section 1014(d) of Pub. L. 94–455 provided that: ‘‘The amendments made by this section [enacting this sec-tion and amending section 667 of this title] shall apply to taxable years beginning after December 31, 1976.’’

SAVINGS PROVISION

For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liabil-ity for tax for periods ending after Nov. 5, 1990, see sec-tion 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.

[§ 669. Repealed. Pub. L. 94–455, title VII, § 701(d)(1), Oct. 4, 1976, 90 Stat. 1578]

Section, acts Oct. 16, 1962, Pub. L. 87–834, § 7(e), 76 Stat. 986; Dec. 30, 1969, Pub. L. 91–172, title III, § 331(a), 83 Stat. 596, related to the treatment of capital gain deemed distributed in preceding years.

EFFECTIVE DATE OF REPEAL

Repeal applicable to distributions made in taxable years beginning after Dec. 31, 1975, see section 701(h) of Pub. L. 94–455, set out as an Effective Date of 1976 Amendment note under section 667 of this title.

SUBPART E—GRANTORS AND OTHERS TREATED AS SUBSTANTIAL OWNERS

Sec.

671. Trust income, deductions, and credits attrib-utable to grantors and others as substantial owners.

672. Definitions and rules. 673. Reversionary interests. 674. Power to control beneficial enjoyment. 675. Administrative powers. 676. Power to revoke. 677. Income for benefit of grantor. 678. Person other than grantor treated as substan-

tial owner. 679. Foreign trusts having one or more United

States beneficiaries.

AMENDMENTS

1976—Pub. L. 94–455, title X, § 1013(e)(1), Oct. 4, 1976, 90 Stat. 1616, added item 679.

§ 671. Trust income, deductions, and credits at-tributable to grantors and others as substan-tial owners

Where it is specified in this subpart that the grantor or another person shall be treated as the owner of any portion of a trust, there shall then be included in computing the taxable income and credits of the grantor or the other person those items of income, deductions, and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under this chapter in computing taxable income or credits against the tax of an individual. Any re-maining portion of the trust shall be subject to subparts A through D. No items of a trust shall be included in computing the taxable income and credits of the grantor or of any other person solely on the grounds of his dominion and con-trol over the trust under section 61 (relating to definition of gross income) or any other provi-sion of this title, except as specified in this sub-part.

(Aug. 16, 1954, ch. 736, 68A Stat. 226.)

CERTAIN ENTITIES NOT TREATED AS CORPORATIONS

Pub. L. 99–514, title VI, § 646, Oct. 22, 1986, 100 Stat. 2292, as amended by Pub. L. 100–647, title I, § 1006(k), Nov. 10, 1988, 102 Stat. 3411, provided that:

‘‘(a) GENERAL RULE.—For purposes of the Internal Revenue Code of 1986, if the entity described in sub-section (b) makes an election under subsection (c), such entity shall be treated as a trust to which subpart E of part 1 of subchapter J of chapter 1 of such Code applies.

‘‘(b) ENTITY.—An entity is described in this sub-section if—

‘‘(1) such entity was created in 1906 as a common law trust and is governed by the trust laws of the State of Minnesota,

‘‘(2) such entity is exclusively engaged in the leas-ing of mineral property and activities incidental thereto, and

‘‘(3) income interests in such entity are publicly traded as of October 22, 1986, on a national stock ex-change. ‘‘(c) ELECTION.—

‘‘(1) IN GENERAL.—An election under this subsection to have the provisions of this section apply—

‘‘(A) shall be made by the board of trustees of the entity before January 1, 1991, and

‘‘(B) shall not be valid unless accompanied by an agreement described in paragraph (2). ‘‘(2) AGREEMENT.—

‘‘(A) IN GENERAL.—The agreement described in this paragraph is a written agreement signed by the board of trustees of the entity which provides that the entity will not acquire any additional property other than property described in subparagraph (B).

‘‘(B) PERMISSIBLE ACQUISITIONS.—Property is de-scribed in this paragraph if it is—

‘‘(i) surface rights to property the acquisition of which—

‘‘(I) is necessary to mine mineral rights held on October 22, 1986, and

‘‘(II) is required by a written binding agree-ment between the entity and an unrelated per-son entered into on or before October 22, 1986, ‘‘(ii) surface rights to property which are not

described in clause (i) and which— ‘‘(I) are acquired in an exchange to which sec-

tion 1031 [probably means section 1031 of this title] applies, and

‘‘(II) are necessary to mine mineral rights held on October 22, 1986, ‘‘(iii) tangible personal property incidental to

the leasing of mineral property and activities in-cidental thereto, or

‘‘(iv) part of any required reserves of the entity. ‘‘(3) BEGINNING OF PERIOD FOR WHICH ELECTION IS IN

EFFECT.—The period during which an election is in ef-fect under this subsection shall begin on the 1st day of the 1st taxable year beginning after the date of the enactment of this Act [Oct. 22, 1986] and following the taxable year in which the election is made.

‘‘(4) MANNER OF ELECTION.—Any election under this subsection shall be made in such manner as the Sec-retary of the Treasury or his delegate may prescribe. ‘‘(d) SPECIAL RULES FOR TAXATION OF TRUST.—

‘‘(1) ELECTION TREATED AS A LIQUIDATION.—If an election is made under subsection (c) with respect to any entity—

‘‘(A) such entity shall be treated as having been liquidated into a trust immediately before the pe-riod described in subsection (c)(3) in a liquidation to which section 333 of the Internal Revenue Code of 1954 (as in effect before the amendments made by this Act) applies, and

‘‘(B) for purposes of section 333 of such Code (as so in effect)—

‘‘(i) any person holding an income interest in such entity as of such time shall be treated as a qualified electing shareholder, and

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TITLE 26—INTERNAL REVENUE CODE § 672

‘‘(ii) the earnings and profits, and the value of money or stock or securities, of such entity shall be apportioned ratably among persons described in clause (i).

The amendments made by subtitle D of this title [subtitle D (§§ 631–634) of title VI of Pub. L. 99–514, see Tables for classification] and section 1804 of this Act [see Tables for classification] shall not apply to any liquidation under this paragraph.

‘‘(2) TERMINATION OF ELECTION.—If an entity ceases to be described in subsection (b) or violates any term of the agreement described in subsection (c)(2), the entity shall, for purposes of the Internal Revenue Code of 1986, be treated as a corporation for the tax-able year in which such cessation or violation occurs and for all subsequent taxable years.

‘‘(3) TRUST CEASING TO EXIST.—Paragraph (2) shall not apply if the trust ceases to be described in sub-section (b) or violates the agreement in subsection (c)(2) because the trust ceases to exist. ‘‘(e) SPECIAL RULE FOR PERSONS HOLDING INCOME IN-

TERESTS.—In applying subpart E of part I of subchapter J of chapter 1 of the Internal Revenue Code of 1986 to any entity to which this section applies—

‘‘(1) a reversionary interest shall not be taken into account until it comes into possession, and

‘‘(2) all items of income, gain, loss, deduction, and credit shall be allocated to persons holding income interests for the period of the allocation.’’

§ 672. Definitions and rules

(a) Adverse party

For purposes of this subpart, the term ‘‘ad-verse party’’ means any person having a sub-stantial beneficial interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses re-specting the trust. A person having a general power of appointment over the trust property shall be deemed to have a beneficial interest in the trust.

(b) Nonadverse party

For purposes of this subpart, the term ‘‘non-adverse party’’ means any person who is not an adverse party.

(c) Related or subordinate party

For purposes of this subpart, the term ‘‘relat-ed or subordinate party’’ means any nonadverse party who is—

(1) the grantor’s spouse if living with the grantor;

(2) any one of the following: The grantor’s father, mother, issue, brother or sister; an em-ployee of the grantor; a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are sig-nificant from the viewpoint of voting control; a subordinate employee of a corporation in which the grantor is an executive.

For purposes of subsection (f) and sections 674 and 675, a related or subordinate party shall be presumed to be subservient to the grantor in re-spect of the exercise or nonexercise of the pow-ers conferred on him unless such party is shown not to be subservient by a preponderance of the evidence.

(d) Rule where power is subject to condition precedent

A person shall be considered to have a power described in this subpart even though the exer-cise of the power is subject to a precedent giving

of notice or takes effect only on the expiration of a certain period after the exercise of the power.

(e) Grantor treated as holding any power or in-terest of grantor’s spouse

(1) In general

For purposes of this subpart, a grantor shall be treated as holding any power or interest held by—

(A) any individual who was the spouse of the grantor at the time of the creation of such power or interest, or

(B) any individual who became the spouse of the grantor after the creation of such power or interest, but only with respect to periods after such individual became the spouse of the grantor.

(2) Marital status

For purposes of paragraph (1)(A), an individ-ual legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married.

(f) Subpart not to result in foreign ownership

(1) In general

Notwithstanding any other provision of this subpart, this subpart shall apply only to the extent such application results in an amount (if any) being currently taken into account (directly or through 1 or more entities) under this chapter in computing the income of a citi-zen or resident of the United States or a do-mestic corporation.

(2) Exceptions

(A) Certain revocable and irrevocable trusts

Paragraph (1) shall not apply to any por-tion of a trust if—

(i) the power to revest absolutely in the grantor title to the trust property to which such portion is attributable is exer-cisable solely by the grantor without the approval or consent of any other person or with the consent of a related or subordi-nate party who is subservient to the grant-or, or

(ii) the only amounts distributable from such portion (whether income or corpus) during the lifetime of the grantor are amounts distributable to the grantor or the spouse of the grantor.

(B) Compensatory trusts

Except as provided in regulations, para-graph (1) shall not apply to any portion of a trust distributions from which are taxable as compensation for services rendered.

(3) Special rules

Except as otherwise provided in regulations prescribed by the Secretary—

(A) a controlled foreign corporation (as de-fined in section 957) shall be treated as a do-mestic corporation for purposes of paragraph (1), and

(B) paragraph (1) shall not apply for pur-poses of applying section 1297.

(4) Recharacterization of purported gifts

In the case of any transfer directly or indi-rectly from a partnership or foreign corpora-

ADD011


tion which the transferee treats as a gift or be-quest, the Secretary may recharacterize such transfer in such circumstances as the Sec-retary determines to be appropriate to prevent the avoidance of the purposes of this sub-section.

(5) Special rule where grantor is foreign per-son

If— (A) but for this subsection, a foreign per-

son would be treated as the owner of any portion of a trust, and

(B) such trust has a beneficiary who is a United States person,

such beneficiary shall be treated as the grant-or of such portion to the extent such bene-ficiary has made (directly or indirectly) trans-fers of property (other than in a sale for full and adequate consideration) to such foreign person. For purposes of the preceding sen-tence, any gift shall not be taken into account to the extent such gift would be excluded from taxable gifts under section 2503(b).

(6) Regulations

The Secretary shall prescribe such regula-tions as may be necessary or appropriate to carry out the purposes of this subsection, in-cluding regulations providing that paragraph (1) shall not apply in appropriate cases.

(Aug. 16, 1954, ch. 736, 68A Stat. 226; Pub. L. 99–514, title XIV, § 1401(a), Oct. 22, 1986, 100 Stat. 2711; Pub. L. 100–647, title I, § 1014(a)(1), Nov. 10, 1988, 102 Stat. 3559; Pub. L. 101–508, title XI, § 11343(a), Nov. 5, 1990, 104 Stat. 1388–472; Pub. L. 104–188, title I, § 1904(a), Aug. 20, 1996, 110 Stat. 1910; Pub. L. 105–206, title VI, § 6011(c)(1), July 22, 1998, 112 Stat. 818.)

AMENDMENTS

1998—Subsec. (f)(3)(B). Pub. L. 105–206 substituted ‘‘section 1297’’ for ‘‘section 1296’’.

1996—Subsec. (c). Pub. L. 104–188, § 1904(a)(2), inserted ‘‘subsection (f) and’’ before ‘‘sections 674’’ in closing provisions.

Subsec. (f). Pub. L. 104–188, § 1904(a)(1), amended sub-sec. (f) generally. Prior to amendment, subsec. (f) read as follows: ‘‘SPECIAL RULE WHERE GRANTOR IS FOREIGN PERSON.—

‘‘(1) IN GENERAL.—If— ‘‘(A) but for this subsection, a foreign person

would be treated as the owner of any portion of a trust, and

‘‘(B) such trust has a beneficiary who is a United States person,

such beneficiary shall be treated as the grantor of such portion to the extent such beneficiary has made transfers of property by gift (directly or indirectly) to such foreign person. For purposes of the preceding sentence, any gift shall not be taken into account to the extent such gift would be excluded from taxable gifts under section 2503(b).

‘‘(2) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection.’’ 1990—Subsec. (f). Pub. L. 101–508 added subsec. (f). 1988—Subsec. (e). Pub. L. 100–647 amended subsec. (e)

generally. Prior to amendment, subsec. (e) read as fol-lows: ‘‘For purposes of this subpart, if a grantor’s spouse is living with the grantor at the time of the cre-ation of any power or interest held by such spouse, the grantor shall be treated as holding such power or inter-est.’’

1986—Subsec. (e). Pub. L. 99–514 added subsec. (e).

EFFECTIVE DATE OF 1998 AMENDMENT

Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.


Amendment by Pub. L. 104–188 effective Aug. 20, 1996, with exception for certain trusts, see section 1904(d) of Pub. L. 104–188, set out as a note under section 643 of this title.


Section 11343(b) of Pub. L. 101–508 provided that: ‘‘The amendments made by this section [amending this sec-tion] shall apply to—

‘‘(1) any trust created after the date of the enact-ment of this Act [Nov. 5, 1990], and

‘‘(2) any portion of a trust created on or before such date which is attributable to amounts contributed to the trust after such date.’’


Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.


Section 1401(b) of Pub. L. 99–514 provided that: ‘‘The amendment made by this section [amending this sec-tion] shall apply with respect to transfers in trust made after March 1, 1986.’’

§ 673. Reversionary interests

(a) General rule

The grantor shall be treated as the owner of any portion of a trust in which he has a rever-sionary interest in either the corpus or the in-come therefrom, if, as of the inception of that portion of the trust, the value of such interest exceeds 5 percent of the value of such portion.

(b) Reversionary interest taking effect at death of minor lineal descendant beneficiary

In the case of any beneficiary who— (1) is a lineal descendant of the grantor, and (2) holds all of the present interests in any

portion of a trust,

the grantor shall not be treated under sub-section (a) as the owner of such portion solely by reason of a reversionary interest in such por-tion which takes effect upon the death of such beneficiary before such beneficiary attains age 21.

(c) Special rule for determining value of rever-sionary interest

For purposes of subsection (a), the value of the grantor’s reversionary interest shall be deter-mined by assuming the maximum exercise of discretion in favor of the grantor.

(d) Postponement of date specified for reacquisi-tion

Any postponement of the date specified for the reacquisition of possession or enjoyment of the reversionary interest shall be treated as a new transfer in trust commencing with the date on which the postponement is effective and termi-

ADD012


nating with the date prescribed by the postpone-ment. However, income for any period shall not be included in the income of the grantor by rea-son of the preceding sentence if such income would not be so includible in the absence of such postponement.

(Aug. 16, 1954, ch. 736, 68A Stat. 227; Pub. L. 91–172, title II, § 201(c), Dec. 30, 1969, 83 Stat. 560; Pub. L. 99–514, title XIV, § 1402(a), Oct. 22, 1986, 100 Stat. 2711; Pub. L. 100–647, title I, § 1014(b), Nov. 10, 1988, 102 Stat. 3559.)

AMENDMENTS

1988—Subsecs. (c), (d). Pub. L. 100–647 added subsecs. (c) and (d).

1986—Pub. L. 99–514 amended section generally, sub-stituting ‘‘the value of such interest exceeds 5 percent of the value of such portion’’ for ‘‘the interest will or may reasonably be expected to take effect in possession or enjoyment within 10 years commencing with the date of the transfer of that portion of the trust’’ in sub-sec. (a), adding subsec. (b), striking out subsec. (c) which provided that the grantor not be treated under subsec. (a) as the owner of any portion of a trust where his reversionary interest in such portion was not to take effect in possession or enjoyment until the death of the persons to whom the income therefrom was pay-able, and subsec. (d) which provided that any postpone-ment of the date specified for the reacquisition of pos-session or enjoyment of the reversionary interest be treated as a new transfer in trust commencing with the date on which the postponement was effected and ter-minating with the date prescribed by the postpone-ment.

1969—Subsec. (b). Pub. L. 91–172 struck out provisions relating to trusts where the income was payable to a charitable beneficiary for at least a two-year period.




Section 1402(c) of Pub. L. 99–514 provided that: ‘‘(1) IN GENERAL.—Except as provided in paragraph (2),

the amendments made by this section [amending this section and sections 674, 676, and 677 of this title] shall apply with respect to transfers in trust made after March 1, 1986.

‘‘(2) TRANSFERS PURSUANT TO PROPERTY SETTLEMENT AGREEMENT.—The amendments made by this section shall not apply to any transfer in trust made after March 1, 1986, pursuant to a binding property settle-ment agreement entered into on or before March 1, 1986, which required the taxpayer to establish a grantor trust and for the transfer of a specified sum of money or property to the trust by the taxpayer. This para-graph shall apply only to the extent of the amount re-quired to be transferred under the agreement described in the preceding sentence.’’


Amendment by Pub. L. 91–172 applicable to transfers in trust made after April 22, 1969, see section 201(g)(3) of Pub. L. 91–172, set out as a note under section 170 of this title.

§ 674. Power to control beneficial enjoyment

(a) General rule

The grantor shall be treated as the owner of any portion of a trust in respect of which the beneficial enjoyment of the corpus or the in-

come therefrom is subject to a power of disposi-tion, exercisable by the grantor or a nonadverse party, or both, without the approval or consent of any adverse party.

(b) Exceptions for certain powers

Subsection (a) shall not apply to the following powers regardless of by whom held:

(1) Power to apply income to support of a de-pendent

A power described in section 677(b) to the ex-tent that the grantor would not be subject to tax under that section.

(2) Power affecting beneficial enjoyment only after occurrence of event

A power, the exercise of which can only af-fect the beneficial enjoyment of the income for a period commencing after the occurrence of an event such that a grantor would not be treated as the owner under section 673 if the power were a reversionary interest; but the grantor may be treated as the owner after the occurrence of the event unless the power is re-linquished.

(3) Power exercisable only by will

A power exercisable only by will, other than a power in the grantor to appoint by will the income of the trust where the income is accu-mulated for such disposition by the grantor or may be so accumulated in the discretion of the grantor or a nonadverse party, or both, with-out the approval or consent of any adverse party.

(4) Power to allocate among charitable bene-ficiaries

A power to determine the beneficial enjoy-ment of the corpus or the income therefrom if the corpus or income is irrevocably payable for a purpose specified in section 170(c) (relat-ing to definition of charitable contributions) or to an employee stock ownership plan (as de-fined in section 4975(e)(7)) in a qualified gratu-itous transfer (as defined in section 664(g)(1)).

(5) Power to distribute corpus

A power to distribute corpus either— (A) to or for a beneficiary or beneficiaries

or to or for a class of beneficiaries (whether or not income beneficiaries) provided that the power is limited by a reasonably definite standard which is set forth in the trust in-strument; or

(B) to or for any current income bene-ficiary, provided that the distribution of cor-pus must be chargeable against the propor-tionate share of corpus held in trust for the payment of income to the beneficiary as if the corpus constituted a separate trust.

A power does not fall within the powers de-scribed in this paragraph if any person has a power to add to the beneficiary or bene-ficiaries or to a class of beneficiaries des-ignated to receive the income or corpus, ex-cept where such action is to provide for after- born or after-adopted children.

(6) Power to withhold income temporarily

A power to distribute or apply income to or for any current income beneficiary or to accu-

ADD013


mulate the income for him, provided that any accumulated income must ultimately be pay-able—

(A) to the beneficiary from whom distribu-tion or application is withheld, to his estate, or to his appointees (or persons named as al-ternate takers in default of appointment) provided that such beneficiary possesses a power of appointment which does not ex-clude from the class of possible appointees any person other than the beneficiary, his estate, his creditors, or the creditors of his estate, or

(B) on termination of the trust, or in con-junction with a distribution of corpus which is augmented by such accumulated income, to the current income beneficiaries in shares which have been irrevocably specified in the trust instrument.

Accumulated income shall be considered so payable although it is provided that if any beneficiary does not survive a date of distribu-tion which could reasonably have been ex-pected to occur within the beneficiary’s life-time, the share of the deceased beneficiary is to be paid to his appointees or to one or more designated alternate takers (other than the grantor or the grantor’s estate) whose shares have been irrevocably specified. A power does not fall within the powers described in this paragraph if any person has a power to add to the beneficiary or beneficiaries or to a class of beneficiaries designated to receive the income or corpus except where such action is to pro-vide for after-born or after-adopted children.

(7) Power to withhold income during disability of a beneficiary

A power exercisable only during— (A) the existence of a legal disability of

any current income beneficiary, or (B) the period during which any income

beneficiary shall be under the age of 21 years,

to distribute or apply income to or for such beneficiary or to accumulate and add the in-come to corpus. A power does not fall within the powers described in this paragraph if any person has a power to add to the beneficiary or beneficiaries or to a class of beneficiaries des-ignated to receive the income or corpus, ex-cept where such action is to provide for after- born or after-adopted children.

(8) Power to allocate between corpus and in-come

A power to allocate receipts and disburse-ments as between corpus and income, even though expressed in broad language.

(c) Exception for certain powers of independent trustees

Subsection (a) shall not apply to a power sole-ly exercisable (without the approval or consent of any other person) by a trustee or trustees, none of whom is the grantor, and no more than half of whom are related or subordinate parties who are subservient to the wishes of the grant-or—

(1) to distribute, apportion, or accumulate income to or for a beneficiary or beneficiaries, or to, for, or within a class of beneficiaries; or

(2) to pay out corpus to or for a beneficiary or beneficiaries or to or for a class of bene-ficiaries (whether or not income beneficiaries).

A power does not fall within the powers de-scribed in this subsection if any person has a power to add to the beneficiary or beneficiaries or to a class of beneficiaries designated to re-ceive the income or corpus, except where such action is to provide for after-born or after- adopted children. For periods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this subsection to the grantor shall be treated as including a reference to such individual.

(d) Power to allocate income if limited by a standard

Subsection (a) shall not apply to a power sole-ly exercisable (without the approval or consent of any other person) by a trustee or trustees, none of whom is the grantor or spouse living with the grantor, to distribute, apportion, or ac-cumulate income to or for a beneficiary or bene-ficiaries, or to, for, or within a class of bene-ficiaries, whether or not the conditions of para-graph (6) or (7) of subsection (b) are satisfied, if such power is limited by a reasonably definite external standard which is set forth in the trust instrument. A power does not fall within the powers described in this subsection if any person has a power to add to the beneficiary or bene-ficiaries or to a class of beneficiaries designated to receive the income or corpus except where such action is to provide for after-born or after- adopted children.

(Aug. 16, 1954, ch. 736, 68A Stat. 227; Pub. L. 99–514, title XIV, § 1402(b)(1), Oct. 22, 1986, 100 Stat. 2712; Pub. L. 100–647, title I, § 1014(a)(3), Nov. 10, 1988, 102 Stat. 3559; Pub. L. 105–34, title XV, § 1530(c)(6), Aug. 5, 1997, 111 Stat. 1078.)

AMENDMENTS

1997—Subsec. (b)(4). Pub. L. 105–34 inserted before pe-riod ‘‘or to an employee stock ownership plan (as de-fined in section 4975(e)(7)) in a qualified gratuitous transfer (as defined in section 664(g)(1))’’.

1988—Subsec. (c). Pub. L. 100–647 inserted at end ‘‘For periods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this subsection to the grantor shall be treated as including a reference to such individual.’’

1986—Subsec. (b)(2). Pub. L. 99–514 substituted ‘‘occur-rence of event’’ for ‘‘expiration of 10-year period’’ in heading and in text substituted ‘‘the occurrence of an event’’ for ‘‘the expiration of a period’’ and ‘‘the occur-rence of the event’’ for ‘‘the expiration of the period’’.


Amendment by Pub. L. 105–34 applicable to transfers made by trusts to, or for the use of, an employee stock ownership plan after Aug. 5, 1997, see section 1530(d) of Pub. L. 105–34, set out as a note under section 401 of this title.




Amendment by Pub. L. 99–514 applicable with respect to transfers in trust made after Mar. 1, 1986, except for

ADD014


transfers pursuant to a certain binding property settle-ment agreement, see section 1402(c) of Pub. L. 99–514, set out as a note under section 673 of this title.

§ 675. Administrative powers

The grantor shall be treated as the owner of any portion of a trust in respect of which—

(1) Power to deal for less than adequate and full consideration

A power exercisable by the grantor or a non-adverse party, or both, without the approval or consent of any adverse party enables the grantor or any person to purchase, exchange, or otherwise deal with or dispose of the corpus or the income therefrom for less than an ade-quate consideration in money or money’s worth.

(2) Power to borrow without adequate interest or security

A power exercisable by the grantor or a non-adverse party, or both, enables the grantor to borrow the corpus or income, directly or indi-rectly, without adequate interest or without adequate security except where a trustee (other than the grantor) is authorized under a general lending power to make loans to any person without regard to interest or security.

(3) Borrowing of the trust funds

The grantor has directly or indirectly bor-rowed the corpus or income and has not com-pletely repaid the loan, including any interest, before the beginning of the taxable year. The preceding sentence shall not apply to a loan which provides for adequate interest and ade-quate security, if such loan is made by a trust-ee other than the grantor and other than a re-lated or subordinate trustee subservient to the grantor. For periods during which an individ-ual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this paragraph to the grantor shall be treated as including a reference to such individual.

(4) General powers of administration

A power of administration is exercisable in a nonfiduciary capacity by any person without the approval or consent of any person in a fi-duciary capacity. For purposes of this para-graph, the term ‘‘power of administration’’ means any one or more of the following pow-ers: (A) a power to vote or direct the voting of stock or other securities of a corporation in which the holdings of the grantor and the trust are significant from the viewpoint of voting control; (B) a power to control the in-vestment of the trust funds either by directing investments or reinvestments, or by vetoing proposed investments or reinvestments, to the extent that the trust funds consist of stocks or securities of corporations in which the hold-ings of the grantor and the trust are signifi-cant from the viewpoint of voting control; or (C) a power to reacquire the trust corpus by substituting other property of an equivalent value.

(Aug. 16, 1954, ch. 736, 68A Stat. 229; Pub. L. 100–647, title I, § 1014(a)(2), Nov. 10, 1988, 102 Stat. 3559.)

AMENDMENTS

1988—Par. (3). Pub. L. 100–647 inserted at end ‘‘For pe-riods during which an individual is the spouse of the grantor (within the meaning of section 672(e)(2)), any reference in this paragraph to the grantor shall be treated as including a reference to such individual.’’



§ 676. Power to revoke

(a) General rule

The grantor shall be treated as the owner of any portion of a trust, whether or not he is treated as such owner under any other provision of this part, where at any time the power to revest in the grantor title to such portion is ex-ercisable by the grantor or a non-adverse party, or both.

(b) Power affecting beneficial enjoyment only after occurrence of event

Subsection (a) shall not apply to a power the exercise of which can only affect the beneficial enjoyment of the income for a period commenc-ing after the occurrence of an event such that a grantor would not be treated as the owner under section 673 if the power were a reversionary in-terest. But the grantor may be treated as the owner after the occurrence of such event unless the power is relinquished.

(Aug. 16, 1954, ch. 736, 68A Stat. 230; Pub. L. 99–514, title XIV, § 1402(b)(2), Oct. 22, 1986, 100 Stat. 2712.)

AMENDMENTS

1986—Subsec. (b)(2). Pub. L. 99–514 substituted ‘‘occur-rence of event’’ for ‘‘expiration of 10-year period’’ in heading and in text substituted ‘‘the occurrence of an event’’ for ‘‘the expiration of a period’’ and ‘‘the occur-rence of such event’’ for ‘‘the expiration of such pe-riod’’.


Amendment by Pub. L. 99–514 applicable with respect to transfers in trust made after Mar. 1, 1986, except for transfers pursuant to a certain binding property settle-ment agreement, see section 1402(c) of Pub. L. 99–514, set out as a note under section 673 of this title.

§ 677. Income for benefit of grantor

(a) General rule

The grantor shall be treated as the owner of any portion of a trust, whether or not he is treated as such owner under section 674, whose income without the approval or consent of any adverse party is, or, in the discretion of the grantor or a nonadverse party, or both, may be—

(1) distributed to the grantor or the grant-or’s spouse;

(2) held or accumulated for future distribu-tion to the grantor or the grantor’s spouse; or

(3) applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor’s spouse (except policies of in-surance irrevocably payable for a purpose specified in section 170(c) (relating to defini-tion of charitable contributions)).

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This subsection shall not apply to a power the exercise of which can only affect the beneficial enjoyment of the income for a period commenc-ing after the occurrence of an event such that the grantor would not be treated as the owner under section 673 if the power were a reversion-ary interest; but the grantor may be treated as the owner after the occurrence of the event un-less the power is relinquished.

(b) Obligations of support

Income of a trust shall not be considered tax-able to the grantor under subsection (a) or any other provision of this chapter merely because such income in the discretion of another person, the trustee, or the grantor acting as trustee or co-trustee, may be applied or distributed for the support or maintenance of a beneficiary (other than the grantor’s spouse) whom the grantor is legally obligated to support or maintain, except to the extent that such income is so applied or distributed. In cases where the amounts so ap-plied or distributed are paid out of corpus or out of other than income for the taxable year, such amounts shall be considered to be an amount paid or credited within the meaning of para-graph (2) of section 661(a) and shall be taxed to the grantor under section 662.

(Aug. 16, 1954, ch. 736, 68A Stat. 230; Pub. L. 91–172, title III, § 332(a), Dec. 30, 1969, 83 Stat. 599; Pub. L. 99–514, title XIV, § 1402(b)(3), Oct. 22, 1986, 100 Stat. 2712.)

AMENDMENTS

1986—Subsec. (a). Pub. L. 99–514 substituted ‘‘the oc-currence of an event’’ for ‘‘the expiration of a period’’ and ‘‘the occurrence of the event’’ for ‘‘the expiration of the period’’ in last sentence.

1969—Subsec. (a)(1) to (3). Pub. L. 91–172, § 332(a)(1), in-serted ‘‘or the grantor’s spouse’’ after ‘‘the grantor’’ in pars. (1), (2), and (3).

Subsec. (b). Pub. L. 91–172, § 332(a)(2), inserted ‘‘(other than the grantor’s spouse)’’ after ‘‘beneficiary’’.


Amendment by Pub. L. 99–514 applicable with respect to transfers in trust made after Mar. 1, 1986, except for transfers pursuant to a certain binding property settle-ment agreement, see section 1402(c) of Pub. L. 99–514, set out as a note under section 673 of this title.


Section 332(b) of Pub. L. 91–172 provided that: ‘‘The amendments made by subsection (a) [amending this section] shall apply in respect of property transferred in trust after October 9, 1969.’’

§ 678. Person other than grantor treated as sub-stantial owner

(a) General rule

A person other than the grantor shall be treat-ed as the owner of any portion of a trust with re-spect to which:

(1) such person has a power exercisable sole-ly by himself to vest the corpus or the income therefrom in himself, or

(2) such person has previously partially re-leased or otherwise modified such a power and after the release or modification retains such control as would, within the principles of sec-tions 671 to 677, inclusive, subject to grantor of a trust to treatment as the owner thereof.

(b) Exception where grantor is taxable

Subsection (a) shall not apply with respect to a power over income, as originally granted or thereafter modified, if the grantor of the trust or a transferor (to whom section 679 applies) is otherwise treated as the owner under the provi-sions of this subpart other than this section.

(c) Obligations of support

Subsection (a) shall not apply to a power which enables such person, in the capacity of trustee or cotrustee, merely to apply the income of the trust to the support or maintenance of a person whom the holder of the power is obli-gated to support or maintain except to the ex-tent that such income is so applied. In cases where the amounts so applied or distributed are paid out of corpus or out of other than income of the taxable year, such amounts shall be con-sidered to be an amount paid or credited within the meaning of paragraph (2) of section 661(a) and shall be taxed to the holder of the power under section 662.

(d) Effect of renunciation or disclaimer

Subsection (a) shall not apply with respect to a power which has been renounced or disclaimed within a reasonable time after the holder of the power first became aware of its existence.

(e) Cross reference

For provision under which beneficiary of trust is treated as owner of the portion of the trust which consists of stock in an S corporation, see section 1361(d).

(Aug. 16, 1954, ch. 736, 68A Stat. 231; Pub. L. 94–455, title X, § 1013(b), Oct. 4, 1976, 90 Stat. 1615; Pub. L. 97–448, title I, § 102(i)(2), Jan. 12, 1983, 96 Stat. 2373; Pub. L. 106–554, § 1(a)(7) [title III, § 319(8)(A)], Dec. 21, 2000, 114 Stat. 2763, 2763A–646.)

AMENDMENTS

2000—Subsec. (e). Pub. L. 106–554 substituted ‘‘an S corporation’’ for ‘‘an electing small business corpora-tion’’.

1983—Subsec. (e). Pub. L. 97–448 added subsec. (e). 1976—Subsec. (b). Pub. L. 94–455 substituted ‘‘if the

grantor of the trust or a transferor (to whom section 679 applies) is otherwise treated as the owner under the provisions of this subpart other than this section’’ for ‘‘if the grantor of the trust is otherwise treated as the owner under sections 671 to 677, inclusive’’.


Amendment by Pub. L. 97–448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 of Pub. L. 97–448, set out as a note under sec-tion 1 of this title.


For effective date of amendment by Pub. L. 94–455, see section 1013(f)(1) of Pub. L. 94–455, set out as an Ef-fective Date note under section 679 of this title.

§ 679. Foreign trusts having one or more United States beneficiaries

(a) Transferor treated as owner

(1) In general

A United States person who directly or indi-rectly transfers property to a foreign trust

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(other than a trust described in section 6048(a)(3)(B)(ii)) shall be treated as the owner for his taxable year of the portion of such trust attributable to such property if for such year there is a United States beneficiary of any portion of such trust.

(2) Exceptions

Paragraph (1) shall not apply—

(A) Transfers by reason of death

To any transfer by reason of the death of the transferor.

(B) Transfers at fair market value

To any transfer of property to a trust in exchange for consideration of at least the fair market value of the transferred prop-erty. For purposes of the preceding sentence, consideration other than cash shall be taken into account at its fair market value.

(3) Certain obligations not taken into account under fair market value exception

(A) In general

In determining whether paragraph (2)(B) applies to any transfer by a person described in clause (ii) or (iii) of subparagraph (C), there shall not be taken into account—

(i) except as provided in regulations, any obligation of a person described in sub-paragraph (C), and

(ii) to the extent provided in regulations, any obligation which is guaranteed by a person described in subparagraph (C).

(B) Treatment of principal payments on obli-gation

Principal payments by the trust on any obligation referred to in subparagraph (A) shall be taken into account on and after the date of the payment in determining the por-tion of the trust attributable to the property transferred.

(C) Persons described

The persons described in this subparagraph are—

(i) the trust, (ii) any grantor, owner, or beneficiary of

the trust, and (iii) any person who is related (within

the meaning of section 643(i)(2)(B)) to any grantor, owner, or beneficiary of the trust.

(4) Special rules applicable to foreign grantor who later becomes a United States person

(A) In general

If a nonresident alien individual has a resi-dency starting date within 5 years after di-rectly or indirectly transferring property to a foreign trust, this section and section 6048 shall be applied as if such individual trans-ferred to such trust on the residency start-ing date an amount equal to the portion of such trust attributable to the property transferred by such individual to such trust in such transfer.

(B) Treatment of undistributed income

For purposes of this section, undistributed net income for periods before such individ-ual’s residency starting date shall be taken

into account in determining the portion of the trust which is attributable to property transferred by such individual to such trust but shall not otherwise be taken into ac-count.

(C) Residency starting date

For purposes of this paragraph, an individ-ual’s residency starting date is the residency starting date determined under section 7701(b)(2)(A).

(5) Outbound trust migrations

If— (A) an individual who is a citizen or resi-

dent of the United States transferred prop-erty to a trust which was not a foreign trust, and

(B) such trust becomes a foreign trust while such individual is alive,

then this section and section 6048 shall be ap-plied as if such individual transferred to such trust on the date such trust becomes a foreign trust an amount equal to the portion of such trust attributable to the property previously transferred by such individual to such trust. A rule similar to the rule of paragraph (4)(B) shall apply for purposes of this paragraph.

(b) Trusts acquiring United States beneficiaries

If— (1) subsection (a) applies to a trust for the

transferor’s taxable year, and (2) subsection (a) would have applied to the

trust for his immediately preceding taxable year but for the fact that for such preceding taxable year there was no United States bene-ficiary for any portion of the trust,

then, for purposes of this subtitle, the transferor shall be treated as having income for the tax-able year (in addition to his other income for such year) equal to the undistributed net in-come (at the close of such immediately preced-ing taxable year) attributable to the portion of the trust referred to in subsection (a).

(c) Trusts treated as having a United States ben-eficiary

(1) In general

For purposes of this section, a trust shall be treated as having a United States beneficiary for the taxable year unless—

(A) under the terms of the trust, no part of the income or corpus of the trust may be paid or accumulated during the taxable year to or for the benefit of a United States per-son, and

(B) if the trust were terminated at any time during the taxable year, no part of the income or corpus of such trust could be paid to or for the benefit of a United States per-son.

For purposes of subparagraph (A), an amount shall be treated as accumulated for the benefit of a United States person even if the United States person’s interest in the trust is contin-gent on a future event.

(2) Attribution of ownership

For purposes of paragraph (1), an amount shall be treated as paid or accumulated to or

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for the benefit of a United States person if such amount is paid to or accumulated for a foreign corporation, foreign partnership, or foreign trust or estate, and—

(A) in the case of a foreign corporation, such corporation is a controlled foreign cor-poration (as defined in section 957(a)),

(B) in the case of a foreign partnership, a United States person is a partner of such partnership, or

(C) in the case of a foreign trust or estate, such trust or estate has a United States ben-eficiary (within the meaning of paragraph (1)).

(3) Certain United States beneficiaries dis-regarded

A beneficiary shall not be treated as a United States person in applying this section with respect to any transfer of property to for-eign trust if such beneficiary first became a United States person more than 5 years after the date of such transfer.

(4) Special rule in case of discretion to identify beneficiaries

For purposes of paragraph (1)(A), if any per-son has the discretion (by authority given in the trust agreement, by power of appointment, or otherwise) of making a distribution from the trust to, or for the benefit of, any person, such trust shall be treated as having a bene-ficiary who is a United States person unless—

(A) the terms of the trust specifically iden-tify the class of persons to whom such dis-tributions may be made, and

(B) none of those persons are United States persons during the taxable year.

(5) Certain agreements and understandings treated as terms of the trust

For purposes of paragraph (1)(A), if any United States person who directly or indi-rectly transfers property to the trust is di-rectly or indirectly involved in any agreement or understanding (whether written, oral, or otherwise) that may result in the income or corpus of the trust being paid or accumulated to or for the benefit of a United States person, such agreement or understanding shall be treated as a term of the trust.

(6) Uncompensated use of trust property treat-ed as a payment

For purposes of this subsection, a loan of cash or marketable securities (or the use of any other trust property) directly or indi-rectly to or by any United States person (whether or not a beneficiary under the terms of the trust) shall be treated as paid or accu-mulated for the benefit of a United States per-son. The preceding sentence shall not apply to the extent that the United States person re-pays the loan at a market rate of interest (or pays the fair market value of the use of such property) within a reasonable period of time.

(d) Presumption that foreign trust has United States beneficiary

If a United States person directly or indirectly transfers property to a foreign trust (other than a trust described in section 6048(a)(3)(B)(ii)), the Secretary may treat such trust as having a

United States beneficiary for purposes of apply-ing this section to such transfer unless such per-son—

(1) submits such information to the Sec-retary as the Secretary may require with re-spect to such transfer, and

(2) demonstrates to the satisfaction of the Secretary that such trust satisfies the require-ments of subparagraphs (A) and (B) of sub-section (c)(1).

(e) Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.

(Added Pub. L. 94–455, title X, § 1013(a), Oct. 4, 1976, 90 Stat. 1614; amended Pub. L. 96–603, § 2(b), Dec. 28, 1980, 94 Stat. 3509; Pub. L. 104–188, title I, § 1903(a)–(f), Aug. 20, 1996, 110 Stat. 1909, 1910; Pub. L. 105–34, title XVI, § 1601(i)(2), Aug. 5, 1997, 111 Stat. 1093; Pub. L. 105–206, title VI, § 6018(g), July 22, 1998, 112 Stat. 823; Pub. L. 111–147, title V, §§ 531, 532(a), 533(c), Mar. 18, 2010, 124 Stat. 113, 114.)

AMENDMENTS

2010—Subsec. (c)(1). Pub. L. 111–147, § 531(a), inserted concluding provisions.

Subsec. (c)(4), (5). Pub. L. 111–147, § 531(b), (c), added pars. (4) and (5).

Subsec. (c)(6). Pub. L. 111–147, § 533(c), added par. (6). Subsecs. (d), (e). Pub. L. 111–147, § 532(a), added subsec.

(d) and redesignated former subsec. (d) as (e). 1998—Subsec. (a)(1). Pub. L. 105–206 provided that the

amendment made by section 1903(b) of Pub. L. 104–188 shall be applied as if ‘‘or’’ in the material proposed to be stricken were capitalized. See 1996 Amendment note below.

1997—Subsec. (a)(3)(C)(ii), (iii). Pub. L. 105–34 inserted ‘‘, owner,’’ after ‘‘grantor’’.

1996—Subsec. (a)(1). Pub. L. 104–188, § 1903(b), which di-rected that subsec. (a) of this section be amended by substituting ‘‘section 6048(a)(3)(B)(ii)’’ for ‘‘section 404(a)(4) or 404A’’, was executed to par. (1) by making the substitution for ‘‘section 404(a)(4) Or section 404A’’ to reflect the probable intent of Congress. See 1998 Amendment note above.

Subsec. (a)(2)(B). Pub. L. 104–188, § 1903(a)(1), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: ‘‘TRANSFERS WHERE GAIN IS RECOGNIZED TO TRANSFEROR.—To any sale or exchange of the prop-erty at its fair market value in a transaction in which all of the gain to the transferor is realized at the time of the transfer and is recognized either at such time or is returned as provided in section 453.’’

Subsec. (a)(3). Pub. L. 104–188, § 1903(a)(2), added par. (3).

Subsec. (a)(4), (5). Pub. L. 104–188, § 1903(c), added pars. (4) and (5).

Subsec. (c)(2)(A). Pub. L. 104–188, § 1903(e), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: ‘‘in the case of a foreign corporation, more than 50 percent of the total combined voting power of all classes of stock entitled to vote of such corporation is owned (within the meaning of section 958(a)) or is considered to be owned (within the meaning of section 958(b)) by United States shareholders (as de-fined in section 951(b)),’’.

Subsec. (c)(3). Pub. L. 104–188, § 1903(d), added par. (3). Subsec. (d). Pub. L. 104–188, § 1903(f), added subsec. (d). 1980—Subsec. (a)(1). Pub. L. 96–603 inserted ‘‘Or sec-

tion 404A’’ after ‘‘section 404(a)(4)’’.


Pub. L. 111–147, title V, § 532(b), Mar. 18, 2010, 124 Stat. 114, provided that: ‘‘The amendments made by this sec-

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tion [amending this section] shall apply to transfers of property after the date of the enactment of this Act [Mar. 18, 2010].’’

Amendment by section 533(c) of Pub. L. 111–147 appli-cable to loans made, and uses of property, after Mar. 18, 2010, see section 533(e) of Pub. L. 111–147, set out as a note under section 643 of this title.


Amendment by section 6018 of Pub. L. 105–206 effec-tive as if included in the provisions of the Small Busi-ness Job Protection Act of 1996, Pub. L. 104–188, to which such amendment relates, see section 6018(h) of Pub. L. 105–206, set out as a note under section 23 of this title.


Amendment by Pub. L. 105–34 effective as if included in the provisions of the Small Business Job Protection Act of 1996, Pub. L. 104–188, to which it relates, see sec-tion 1601(j) of Pub. L. 105–34, set out as a note under section 23 of this title.


Section 1903(g) of Pub. L. 104–188 provided that: ‘‘The amendments made by this section [amending this sec-tion] shall apply to transfers of property after Feb-ruary 6, 1995.’’


Amendment by Pub. L. 96–603 applicable with respect to employer contributions or accruals for taxable years beginning after Dec. 31, 1979, election to apply amend-ments retroactively with respect to foreign subsidi-aries, allowance or prior deductions in case of certain funded branch plans, and time and manner for making elections, see section 2(e) of Pub. L. 96–603, set out as an Effective Date note under section 404A of this title.

EFFECTIVE DATE

Section 1013(f)(1) of Pub. L. 94–455 provided that: ‘‘The amendments made by this section (other than sub-section (c)) [enacting this section and amending sec-tions 643, 678, 6048, and 6678 of this title] shall apply to taxable years ending after December 31, 1975, but only in the case of—

‘‘(A) foreign trusts created after May 21, 1974, and ‘‘(B) transfers of property to foreign trusts after

May 21, 1974.’’

SUBPART F—MISCELLANEOUS

Sec.

681. Limitation on charitable deduction. 682. Income of an estate or trust in case of di-

vorce, etc. 683. Use of trust as an exchange fund. 684. Recognition of gain on certain transfers to

certain foreign trusts and estates. 685. Treatment of funeral trusts.

AMENDMENT OF ANALYSIS

For termination of amendment by section 304

of Pub. L. 111–312, see Effective and Termi-

nation Dates of 2010 Amendment note set out

under section 121 of this title.

For termination of amendment by section 901

of Pub. L. 107–16, see Effective and Termination

Dates of 2001 Amendment note set out under

section 1 of this title.

AMENDMENTS

2010—Pub. L. 111–312, title III, §§ 301(a), 304, Dec. 17, 2010, 124 Stat. 3300, 3304, temporarily amended analysis to read as if amendment by Pub. L. 107–16, § 542(e)(1)(D), had never been enacted. See 2001 Amendment note below.

2001—Pub. L. 107–16, title V, § 542(e)(1)(D), title IX, § 901, June 7, 2001, 115 Stat. 85, 150, temporarily inserted ‘‘and nonresident aliens’’ after ‘‘estates’’ in item 684.

1997—Pub. L. 105–34, title XI, § 1131(c)(6), title XIII, § 1309(b), Aug. 5, 1997, 111 Stat. 980, 1043, added items 684 and 685.

1976—Pub. L. 94–455, title XXI, § 2131(e)(2), Oct. 4, 1976, 90 Stat. 1924, substituted ‘‘Use of trust as an exchange fund’’ for ‘‘Applicability of provisions’’ in item 683.

§ 681. Limitation on charitable deduction

(a) Trade or business income

In computing the deduction allowable under section 642(c) to a trust, no amount otherwise allowable under section 642(c) as a deduction shall be allowed as a deduction with respect to income of the taxable year which is allocable to its unrelated business income for such year. For purposes of the preceding sentence, the term ‘‘unrelated business income’’ means an amount equal to the amount which, if such trust were exempt from tax under section 501(a) by reason of section 501(c)(3), would be computed as its un-related business taxable income under section 512 (relating to income derived from certain business activities and from certain property ac-quired with borrowed funds).

(b) Cross reference

For disallowance of certain charitable, etc., deduc-tions otherwise allowable under section 642(c), see sections 508(d) and 4948(c)(4).

(Aug. 16, 1954, ch. 736, 68A Stat. 232; Pub. L. 90–630, § 6(b), Oct. 22, 1968, 82 Stat. 1330; Pub. L. 91–172, title I, §§ 101(j)(18), (19), 121(d)(2)(B), Dec. 30, 1969, 83 Stat. 528, 547.)

AMENDMENTS

1969—Subsec. (a). Pub. L. 91–172, § 121(d)(2)(B), sub-stituted reference to certain property acquired with borrowed funds for reference to certain leases.

Subsec. (b). Pub. L. 91–172, § 101(j)(18), (19), redesig-nated subsec. (d) as (b) and substituted ‘‘sections 518(d) and 4948(c)(4)’’ for ‘‘section 503(e)’’. Former subsec. (b), dealing generally with the operation of trusts, was struck out.

Subsec. (c). Pub. L. 91–172, § 101(j)(18), struck out sub-sec. (c) dealing with accumulated income.

Subsec. (d). Pub. L. 91–172, § 101(j)(19), redesignated subsec. (d) as (b).

1968—Subsec. (c). Pub. L. 90–630 inserted provision that par. (1) does not apply to income attributable to property transferred to a trust before January 1, 1951, by the creator thereof if the trust was irrevocable on such date and if the income is required to be accumu-lated pursuant to the mandatory terms of the instru-ment creating the trust.


Amendment by section 101(j)(18), (19) of Pub. L. 91–172 effective Jan. 1, 1970, see section 101(k)(1) of Pub. L. 91–172, set out as an Effective Date note under section 4940 of this title.

Amendment by section 121(d)(2)(B) of Pub. L. 91–172 applicable to taxable years beginning after Dec. 31, 1969, see section 121(g) of Pub. L. 91–172, set out as a note under section 511 of this title.


Section 6(c) of Pub. L. 90–630 provided that: ‘‘The amendments made by subsection (a) [amending section 504 of this title] and (b) [amending this section] shall apply with respect to taxable years beginning after De-cember 31, 1953, and ending after August 16, 1954. For purposes of sections 3814 and 162(g)(4) of the Internal

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(XIX) who are disabled children described in subsection (cc)(1); 2

(XX) beginning January 1, 2014, who are under 65 years of age and are not described in orenrolled under a previous subclause of this clause, and whose income (as determined undersubsection (e)(14)) exceeds 133 percent of the poverty line (as defined in section 1397jj(c)(5) ofthis title (/uscode/text/42/lii:usc:t:42:s:1397jj:c:5)) applicable to a family of the size involved butdoes not exceed the highest income eligibility level established under the State plan or under awaiver of the plan, subject to subsection (hh); 2

(XXI) who are described in subsection (ii) (relating to individuals who meet certain incomestandards); 2or

(XXII) who are eligible for home and community-based services under needs-based criteriaestablished under paragraph (1)(A) of section 1396n(i) of this title(/uscode/text/42/lii:usc:t:42:s:1396n:i), or who are eligible for home and community-basedservices under paragraph (6) of such section, and who will receive home and community-basedservices pursuant to a State plan amendment under such subsection;

(B) that the medical assistance made available to any individual described in subparagraph (A)—

(i) shall not be less in amount, duration, or scope than the medical assistance made available to anyother such individual, and

(ii) shall not be less in amount, duration, or scope than the medical assistance made available toindividuals not described in subparagraph (A);

(C) that if medical assistance is included for any group of individuals described in section 1396d(a) of thistitle (/uscode/text/42/lii:usc:t:42:s:1396d:a) who are not described in subparagraph (A) or (E), then—

(i) the plan must include a description of (I) the criteria for determining eligibility of individuals in thegroup for such medical assistance, (II) the amount, duration, and scope of medical assistance madeavailable to individuals in the group, and (III) the single standard to be employed in determiningincome and resource eligibility for all such groups, and the methodology to be employed indetermining such eligibility, which shall be no more restrictive than the methodology which would beemployed under the supplemental security income program in the case of groups consisting of aged,blind, or disabled individuals in a State in which such program is in effect, and which shall be no morerestrictive than the methodology which would be employed under the appropriate State plan(described in subparagraph (A)(i)) to which such group is most closely categorically related in thecase of other groups;

(i i) the plan must make available medical assistance—

(I) to individuals under the age of 18 who (but for income and resources) would be eligible formedical assistance as an individual described in subparagraph (A)(i), and

(II) to pregnant women, during the course of their pregnancy, who (but for income and resources)would be eligible for medical assistance as an individual described in subparagraph (A);

(i i i) such medical assistance must include (I) with respect to children under 18 and individualsentitled to institutional services, ambulatory services, and (II) with respect to pregnant women,

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(iv) in the case of hospitals, such rates take into account (in a manner consistent with section1396r–4 of this title (/uscode/text/42/lii:usc:t:42:s:1396r-4)) the situation of hospitals which serve adisproportionate number of low-income patients with special needs;

(B) for payment for hospice care in amounts no lower than the amounts, using the same methodology,used under part A of subchapter XVIII of this chapter and for payment of amounts under section 1396d(o)(3) of this title; except that in the case of hospice care which is furnished to an individual who is a residentof a nursing facility or intermediate care facility for the mentally retarded, and who would be eligible underthe plan for nursing facility services or services in an intermediate care facility for the mentally retarded ifhe had not elected to receive hospice care, there shall be paid an additional amount, to take into accountthe room and board furnished by the facility, equal to at least 95 percent of the rate that would have beenpaid by the State under the plan for facility services in that facility for that individual; and

(C) payment for primary care services (as defined in subsection (jj)) furnished in 2013 and 2014 by aphysician with a primary specialty designation of family medicine, general internal medicine, or pediatricmedicine at a rate not less than 100 percent of the payment rate that applies to such services andphysician under part B of subchapter XVIII (or, if greater, the payment rate that would be applicable undersuch part if the conversion factor under section 1395w–4(d) of this title(/uscode/text/42/lii:usc:t:42:s:1395w-4:d) for the year involved were the conversion factor under suchsection for 2009);

(14) provide that enrollment fees, premiums, or similar charges, and deductions, cost sharing, or similarcharges, may be imposed only as provided in section 1396o of this title;

(15) provide for payment for services described in clause (B) or (C) of section 1396d(a)(2) of this title(/uscode/text/42/lii:usc:t:42:s:1396d:a:2) under the plan in accordance with subsection (bb) of this section;

(16) provide for inclusion, to the extent required by regulations prescribed by the Secretary, of provisions(conforming to such regulations) with respect to the furnishing of medical assistance under the plan toindividuals who are residents of the State but are absent therefrom;

(17) except as provided in subsections (e)(14), (e)(14),[6] (l)(3), (m)(3), and (m)(4) of this section, includereasonable standards (which shall be comparable for all groups and may, in accordance with standardsprescribed by the Secretary, differ with respect to income levels, but only in the case of applicants orrecipients of assistance under the plan who are not receiving aid or assistance under any plan of the Stateapproved under subchapter I, X, XIV, or XVI, or part A of subchapter IV of this chapter, and with respect towhom supplemental security income benefits are not being paid under subchapter XVI of this chapter, basedon the variations between shelter costs in urban areas and in rural areas) for determining eligibility for and theextent of medical assistance under the plan which (A) are consistent with the objectives of this subchapter, (B)provide for taking into account only such income and resources as are, as determined in accordance withstandards prescribed by the Secretary, available to the applicant or recipient and (in the case of any applicantor recipient who would, except for income and resources, be eligible for aid or assistance in the form of moneypayments under any plan of the State approved under subchapter I, X, XIV, or XVI, or part A of subchapter IV,or to have paid with respect to him supplemental security income benefits under subchapter XVI of thischapter) as would not be disregarded (or set aside for future needs) in determining his eligibility for such aid,assistance, or benefits, (C) provide for reasonable evaluation of any such income or resources, and (D) do nottake into account the financial responsibility of any individual for any applicant or recipient of assistance underthe plan unless such applicant or recipient is such individual’s spouse or such individual’s child who is underage 21 or (with respect to States eligible to participate in the State program established under subchapter XVIof this chapter), is blind or permanently and totally disabled, or is blind or disabled as defined in section 1382cof this title (/uscode/text/42/1382c) (with respect to States which are not eligible to participate in suchprogram); and provide for flexibility in the application of such standards with respect to income by taking into

ADD021

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1396r-4

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1395w-4:d

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1396d:a:2

https://www.law.cornell.edu/uscode/text/42/1382c

account, except to the extent prescribed by the Secretary, the costs (whether in the form of insurancepremiums, payments made to the State under section 1396b(f)(2)(B) of this title(/uscode/text/42/lii:usc:t:42:s:1396b:f:2:B), or otherwise and regardless of whether such costs are reimbursedunder another public program of the State or political subdivision thereof) incurred for medical care or for anyother type of remedial care recognized under State law;

(18) comply with the provisions of section 1396p of this title (/uscode/text/42/1396p) with respect to liens,adjustments and recoveries of medical assistance correctly paid,,[7] transfers of assets, and treatment ofcertain trusts;

(19) provide such safeguards as may be necessary to assure that eligibility for care and services under theplan will be determined, and such care and services will be provided, in a manner consistent with simplicity ofadministration and the best interests of the recipients;

(20) if the State plan includes medical assistance in behalf of individuals 65 years of age or older who arepatients in institutions for mental diseases—

(A) provide for having in effect such agreements or other arrangements with State authorities concernedwith mental diseases, and, where appropriate, with such institutions, as may be necessary for carryingout the State plan, including arrangements for joint planning and for development of alternate methods ofcare, arrangements providing assurance of immediate readmittance to institutions where needed forindividuals under alternate plans of care, and arrangements providing for access to patients and facilities,for furnishing information, and for making reports;

(B) provide for an individual plan for each such patient to assure that the institutional care provided to himis in his best interests, including, to that end, assurances that there will be initial and periodic review ofhis medical and other needs, that he will be given appropriate medical treatment within the institution, andthat there will be a periodic determination of his need for continued treatment in the institution; and

(C) provide for the development of alternate plans of care, making maximum utilization of availableresources, for recipients 65 years of age or older who would otherwise need care in such institutions,including appropriate medical treatment and other aid or assistance; for services referred to in section303(a)(4)(A)(i) and (ii) 1or section 1383(a)(4)(A)(i) and (ii) 1of this title which are appropriate for such recipients and for such patients; and for methods ofadministration necessary to assure that the responsibilities of the State agency under the State plan withrespect to such recipients and such patients will be effectively carried out;

(21) if the State plan includes medical assistance in behalf of individuals 65 years of age or older who arepatients in public institutions for mental diseases, show that the State is making satisfactory progress towarddeveloping and implementing a comprehensive mental health program, including provision for utilization ofcommunity mental health centers, nursing facilities, and other alternatives to care in public institutions formental diseases;

(22) include descriptions of (A) the kinds and numbers of professional medical personnel and supporting staffthat will be used in the administration of the plan and of the responsibilities they will have, (B) the standards,for private or public institutions in which recipients of medical assistance under the plan may receive care orservices, that will be utilized by the State authority or authorities responsible for establishing and maintainingsuch standards, (C) the cooperative arrangements with State health agencies and State vocationalrehabilitation agencies entered into with a view to maximum utilization of and coordination of the provision ofmedical assistance with the services administered or supervised by such agencies, and (D) other standards

ADD022

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1396b:f:2:B

https://www.law.cornell.edu/uscode/text/42/1396p

(2) The minimum monthly personal needs allowance described in this paragraph [18] is $30 for aninstitutionalized individual and $60 for an institutionalized couple (if both are aged, blind, or disabled, and theirincomes are considered available to each other in determining eligibility).

(r) DISREGARDING PAYMENTS FOR CERTAIN MEDICAL EXPENSES BY INSTITUTIONALIZED INDIVIDUALS

(1)

(A) For purposes of sections 1396a(a)(17) and 1396r–5(d)(1)(D) of this title and for purposes of a waiverunder section 1396n of this title (/uscode/text/42/1396n), with respect to the post-eligibility treatment ofincome of individuals who are institutionalized or receiving home or community-based services undersuch a waiver, the treatment described in subparagraph (B) shall apply, there shall be disregardedreparation payments made by the Federal Republic of Germany, and there shall be taken into accountamounts for incurred expenses for medical or remedial care that are not subject to payment by a thirdparty, including—

(i) medicare and other health insurance premiums, deductibles, or coinsurance, and

(ii) necessary medical or remedial care recognized under State law but not covered under the Stateplan under this subchapter, subject to reasonable limits the State may establish on the amount ofthese expenses.

(B)

(i) In the case of a veteran who does not have a spouse or a child, if the veteran—

(I) receives, after the veteran has been determined to be eligible for medical assistance underthe State plan under this subchapter, a veteran’s pension in excess of $90 per month, and

(II) resides in a State veterans home with respect to which the Secretary of Veterans Affairsmakes per diem payments for nursing home care pursuant to section 1741(a) of title 38(/uscode/text/38/lii:usc:t:38:s:1741:a),

any such pension payment, including any payment made due to the need for aid andattendance, or for unreimbursed medical expenses, that is in excess of $90 per month shallbe counted as income only for the purpose of applying such excess payment to the Stateveterans home’s cost of providing nursing home care to the veteran.

(i i) The provisions of clause (i) shall apply with respect to a surviving spouse of a veteran who doesnot have a child in the same manner as they apply to a veteran described in such clause.

(2)

(A) The methodology to be employed in determining income and resource eligibility for individuals undersubsection (a)(10)(A)(i)(III), (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), (a)(10)(A)(ii), (a)(10)(C)(i)(III),or (f) of this section or under section 1396d(p) of this title (/uscode/text/42/lii:usc:t:42:s:1396d:p) may beless restrictive, and shall be no more restrictive, than the methodology—

(i) in the case of groups consisting of aged, blind, or disabled individuals, under the supplementalsecurity income program under subchapter XVI of this chapter, or

(ii) in the case of other groups, under the State plan most closely categorically related.

ADD023

https://www.law.cornell.edu/uscode/text/42/1396n

https://www.law.cornell.edu/uscode/text/38/lii:usc:t:38:s:1741:a

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1396d:p

(B) For purposes of this subsection and subsection (a)(10) of this section, methodology is considered tobe “no more restrictive” if, using the methodology, additional individuals may be eligible for medicalassistance and no individuals who are otherwise eligible are made ineligible for such assistance.

(s) ADJUSTMENT IN PAYMENT FOR HOSPITAL SERVICES FURNISHED TO LOW-INCOME CHILDREN UNDER AGE OF 6 YEARS In order tomeet the requirements of subsection (a)(55) [19] of this section, the State plan must provide that payments tohospitals under the plan for inpatient hospital services furnished to infants who have not attained the age of 1 year,and to children who have not attained the age of 6 years and who receive such services in a disproportionate sharehospital described in section 1396r–4(b)(1) of this title (/uscode/text/42/lii:usc:t:42:s:1396r-4:b:1), shall—

(1) if made on a prospective basis (whether per diem, per case, or otherwise) provide for an outlier adjustmentin payment amounts for medically necessary inpatient hospital services involving exceptionally high costs orexceptionally long lengths of stay,

(2) not be limited by the imposition of day limits with respect to the delivery of such services to suchindividuals, and

(3) not be limited by the imposition of dollar limits (other than such limits resulting from prospective paymentsas adjusted pursuant to paragraph (1)) with respect to the delivery of such services to any such individual whohas not attained their first birthday (or in the case of such an individual who is an inpatient on his first birthdayuntil such individual is discharged).

(t) LIMITATION ON PAYMENTS TO STATES FOR EXPENDITURES ATTRIBUTABLE TO TAXES

Nothing in this subchapter (including sections 1396b(a) (/uscode/text/42/lii:usc:t:42:s:1396b:a) and 1396d(a)(/uscode/text/42/lii:usc:t:42:s:1396d:a) of this title) shall be construed as authorizing the Secretary to deny or limitpayments to a State for expenditures, for medical assistance for items or services, attributable to taxes of generalapplicability imposed with respect to the provision of such items or services.

(u) QUALIFIED COBRA CONTINUATION BENEFICIARIES

(1) Individuals described in this paragraph are individuals—

(A) who are entitled to elect COBRA continuation coverage (as defined in paragraph (3)),

(B) whose income (as determined under section 1382a of this title (/uscode/text/42/1382a) for purposesof the supplemental security income program) does not exceed 100 percent of the official poverty line (asdefined by the Office of Management and Budget, and revised annually in accordance with section9902(2) of this title (/uscode/text/42/lii:usc:t:42:s:9902:2)) applicable to a family of the size involved,

(C) whose resources (as determined under section 1382b of this title (/uscode/text/42/1382b) forpurposes of the supplemental security income program) do not exceed twice the maximum amount ofresources that an individual may have and obtain benefits under that program, and

(D) with respect to whose enrollment for COBRA continuation coverage the State has determined that thesavings in expenditures under this subchapter resulting from such enrollment is likely to exceed theamount of payments for COBRA premiums made.

(2) For purposes of subsection (a)(10)(F) of this section and this subsection, the term “COBRA premiums”means the applicable premium imposed with respect to COBRA continuation coverage.

(3) In this subsection, the term “COBRA continuation coverage” means coverage under a group health planprovided by an employer with 75 or more employees provided pursuant to title XXII of the Public Health ServiceAct [42 U.S.C. 300bb–1 (/uscode/text/42/lii:usc:t:42:s:300bb-1) et seq.], section 4980B of the InternalRevenue Code of 1986, or title VI 

ADD024

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1396r-4:b:1

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1396b:a

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1396d:a

https://www.law.cornell.edu/uscode/text/42/1382a

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:9902:2

https://www.law.cornell.edu/uscode/text/42/1382b

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:300bb-1

(i i i) were transferred to, or to a trust (including a trust described in subsection (d)(4) of thissection) established solely for the benefit of, the individual’s child described in subparagraph(A)(ii)(II), or

(iv) were transferred to a trust (including a trust described in subsection (d)(4) of this section)established solely for the benefit of an individual under 65 years of age who is disabled (asdefined in section 1382c(a)(3) of this title (/uscode/text/42/lii:usc:t:42:s:1382c:a:3));

(C) a satisfactory showing is made to the State (in accordance with regulations promulgated by theSecretary) that (i) the individual intended to dispose of the assets either at fair market value, or forother valuable consideration, (ii) the assets were transferred exclusively for a purpose other than toqualify for medical assistance, or (iii) all assets transferred for less than fair market value have beenreturned to the individual; or

(D) the State determines, under procedures established by the State (in accordance with standardsspecified by the Secretary), that the denial of eligibility would work an undue hardship asdetermined on the basis of criteria established by the Secretary.

The procedures established under subparagraph (D) shall permit the facility in which theinstitutionalized individual is residing to file an undue hardship waiver application on behalf of theindividual with the consent of the individual or the personal representative of the individual. Whilean application for an undue hardship waiver is pending under subparagraph (D) in the case of anindividual who is a resident of a nursing facility, if the application meets such criteria as theSecretary specifies, the State may provide for payments for nursing facility services in order tohold the bed for the individual at the facility, but not in excess of payments for 30 days.

(3) For purposes of this subsection, in the case of an asset held by an individual in common withanother person or persons in a joint tenancy, tenancy in common, or similar arrangement, the asset (orthe affected portion of such asset) shall be considered to be transferred by such individual when anyaction is taken, either by such individual or by any other person, that reduces or eliminates suchindividual’s ownership or control of such asset.

(4) A State (including a State which has elected treatment under section 1396a(f) of this title(/uscode/text/42/lii:usc:t:42:s:1396a:f)) may not provide for any period of ineligibility for an individual dueto transfer of resources for less than fair market value except in accordance with this subsection. In thecase of a transfer by the spouse of an individual which results in a period of ineligibility for medicalassistance under a State plan for such individual, a State shall, using a reasonable methodology (asspecified by the Secretary), apportion such period of ineligibility (or any portion of such period) amongthe individual and the individual’s spouse if the spouse otherwise becomes eligible for medicalassistance under the State plan.

(5) In this subsection, the term “resources” has the meaning given such term in section 1382b of thistitle (/uscode/text/42/1382b), without regard to the exclusion described in subsection (a)(1) thereof.

(d) TREATMENT OF TRUST AMOUNTS

(1) For purposes of determining an individual’s eligibility for, or amount of, benefits under a State planunder this subchapter, subject to paragraph (4), the rules specified in paragraph (3) shall apply to a trustestablished by such individual.

(2)ADD025

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1382c:a:3

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1396a:f

https://www.law.cornell.edu/uscode/text/42/1382b

(A) For purposes of this subsection, an individual shall be considered to have established a trust ifassets of the individual were used to form all or part of the corpus of the trust and if any of thefollowing individuals established such trust other than by will:

(i) The individual.

(i i) The individual’s spouse.

(i i i) A person, including a court or administrative body, with legal authority to act in place of oron behalf of the individual or the individual’s spouse.

(iv) A person, including any court or administrative body, acting at the direction or upon therequest of the individual or the individual’s spouse.

(B) In the case of a trust the corpus of which includes assets of an individual (as determined undersubparagraph (A)) and assets of any other person or persons, the provisions of this subsectionshall apply to the portion of the trust attributable to the assets of the individual.

(C) Subject to paragraph (4), this subsection shall apply without regard to—

(i) the purposes for which a trust is established,

(i i) whether the trustees have or exercise any discretion under the trust,

(i i i) any restrictions on when or whether distributions may be made from the trust, or

(iv) any restrictions on the use of distributions from the trust.

(3)

(A) In the case of a revocable trust—

(i) the corpus of the trust shall be considered resources available to the individual,

(i i) payments from the trust to or for the benefit of the individual shall be considered income ofthe individual, and

(ii i) any other payments from the trust shall be considered assets disposed of by the individualfor purposes of subsection (c) of this section.

(B) In the case of an irrevocable trust—

(i) if there are any circumstances under which payment from the trust could be made to or forthe benefit of the individual, the portion of the corpus from which, or the income on the corpusfrom which, payment to the individual could be made shall be considered resources availableto the individual, and payments from that portion of the corpus or income—

(I) to or for the benefit of the individual, shall be considered income of the individual, and

(II) for any other purpose, shall be considered a transfer of assets by the individual subjectto subsection (c) of this section; and

ADD026

(i i) any portion of the trust from which, or any income on the corpus from which, no paymentcould under any circumstances be made to the individual shall be considered, as of the date ofestablishment of the trust (or, if later, the date on which payment to the individual wasforeclosed) to be assets disposed by the individual for purposes of subsection (c) of thissection, and the value of the trust shall be determined for purposes of such subsection byincluding the amount of any payments made from such portion of the trust after such date.

(4) This subsection shall not apply to any of the following trusts:

(A) A trust containing the assets of an individual under age 65 who is disabled (as defined in section1382c(a)(3) of this title (/uscode/text/42/lii:usc:t:42:s:1382c:a:3)) and which is established for thebenefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if theState will receive all amounts remaining in the trust upon the death of such individual up to anamount equal to the total medical assistance paid on behalf of the individual under a State planunder this subchapter.

(B) A trust established in a State for the benefit of an individual if—

(i) the trust is composed only of pension, Social Security, and other income to the individual(and accumulated income in the trust),

(i i) the State will receive all amounts remaining in the trust upon the death of such individual upto an amount equal to the total medical assistance paid on behalf of the individual under aState plan under this subchapter; and

(ii i) the State makes medical assistance available to individuals described in section 1396a(a)(10)(A)(ii)(V) of this title (/uscode/text/42/lii:usc:t:42:s:1396a:a:10:A:ii:V), but does not makesuch assistance available to individuals for nursing facility services under section 1396a(a)(10)(C) of this title (/uscode/text/42/lii:usc:t:42:s:1396a:a:10:C).

(C) A trust containing the assets of an individual who is disabled (as defined in section 1382c(a)(3)of this title (/uscode/text/42/lii:usc:t:42:s:1382c:a:3)) that meets the following conditions:

(i) The trust is established and managed by a non-profit association.

(i i) A separate account is maintained for each beneficiary of the trust, but, for purposes ofinvestment and management of funds, the trust pools these accounts.

(i i i) Accounts in the trust are established solely for the benefit of individuals who are disabled(as defined in section 1382c(a)(3) of this title (/uscode/text/42/lii:usc:t:42:s:1382c:a:3)) by theparent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.

(iv) To the extent that amounts remaining in the beneficiary’s account upon the death of thebeneficiary are not retained by the trust, the trust pays to the State from such remainingamounts in the account an amount equal to the total amount of medical assistance paid onbehalf of the beneficiary under the State plan under this subchapter.

(5) The State agency shall establish procedures (in accordance with standards specified by theSecretary) under which the agency waives the application of this subsection with respect to an individualif the individual establishes that such application would work an undue hardship on the individual asdetermined on the basis of criteria established by the Secretary.

ADD027


https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1396a:a:10:A:ii:V

https://www.law.cornell.edu/uscode/text/42/lii:usc:t:42:s:1396a:a:10:C



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Section 14. Except so far as any provision of law expressly precludes judicial review, any person orappointing authority aggrieved by a final decision of any agency in an adjudicatory proceeding,whether such decision is affirmative or negative in form, shall be entitled to a judicial review thereof, asfollows:--

Where a statutory form of judicial review or appeal is provided such statutory form shall govern in allrespects, except as to standards for review. The standards for review shall be those set forth inparagraph (7) of this section, except so far as statutes provide for review by trial de novo. Insofar asthe statutory form of judicial review or appeal is silent as to procedures provided in this section, theprovisions of this section shall govern such procedures.

Where no statutory form of judicial review or appeal is provided, judicial review shall be obtained bymeans of a civil action, as follows:

(1) Proceedings for judicial review of an agency decision shall be instituted in the superior court forthe county (a) where the plaintiffs or any of them reside or have their principal place of business withinthe commonwealth, or (b) where the agency has its principal office, or (c) of Suffolk. The court maygrant a change of venue upon good cause shown. The action shall, except as otherwise provided bylaw, be commenced in the court within thirty days after receipt of notice of the final decision of theagency or if a petition for rehearing has been timely filed with the agency, within thirty days after receiptof notice of agency denial of such petition for rehearing. Upon application made within the thirtydayperiod or any extension thereof, the court may for good cause shown extend the time.

(2) Service shall be made upon the agency and each party to the agency proceeding in accordancewith the Massachusetts Rules of Civil Procedure governing service of process. For the purpose of suchservice the agency upon request shall certify to the plaintiff the names and addresses of all suchparties as disclosed by its records, and service upon parties so certified shall be sufficient. All parties tothe proceeding before the agency shall have the right to intervene in the proceeding for review. Thecourt may in its discretion permit other interested persons to intervene.

[Paragraph (3) of the second paragraph following the introductory paragraph effective until October 27,2015. For text effective October 27, 2015, see below.]

(3) The commencement of an action shall not operate as a stay of enforcement of the agencydecision, but the agency may stay enforcement, and the reviewing court may order a stay upon suchterms as it considers proper.

PART I

TITLE I I I

CHAPTER 30A

Section 14

ADMINISTRATION OF THE GOVERNMENT

LAWS RELATING TO STATE OFFICERS

STATE ADMINISTRATIVE PROCEDURE

Judic ial rev iew

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[Paragraph (3) of the second paragraph following the introductory paragraph as amended by 2015,108, effective October 27, 2015. For text effective until October 27, 2015, see above.]

(3) The commencement of an action shall not operate as a stay of enforcement of the agencydecision, but the agency may stay enforcement, and the reviewing court may order a stay upon suchterms as it considers proper. Notwithstanding the foregoing, if the sex offender registry board issues astay of a final classification in a sex offender registry board proceeding, then such stay shall be for notmore than 60 days but if a court issues a stay of a final classification in a court appeal held pursuant tosection 178M of chapter 6, then such hearing shall be expedited and such stay shall be for not morethan 60 days, without written findings and good cause shown.

(4) The agency shall, by way of answer, file in the court the original or a certified copy of the record ofthe proceeding under review. The record shall consist of (a) the entire proceedings, or (b) suchportions thereof as the agency and the parties may stipulate, or (c) a statement of the case agreed toby the agency and the parties. The expense of preparing the record may be assessed as part of thecosts in the case, and the court may, regardless of the outcome of the case, assess any oneunreasonably refusing to stipulate to limit the record, for the additional expenses of preparation causedby such refusal. The court may require or permit subsequent corrections or additions to the recordwhen deemed desirable.

(5) The review shall be conducted by the court without a jury and shall be confined to the record,except that in cases of alleged irregularities in procedure before the agency, not shown in the record,testimony thereon may be taken in the court.

(6) If application is made to the court for leave to present additional evidence, and it is shown to thesatisfaction of the court that the additional evidence is material to the issues in the case, and that therewas good reason for failure to present it in the proceeding before the agency, the court may order thatthe additional evidence be taken before the agency upon such conditions as the court deems proper.The agency may modify its findings and decision by reason of such additional evidence and shall filewith the reviewing court, to become part of the record, the additional evidence, together with anymodified or new findings or decision.

(7) The court may affirm the decision of the agency, or remand the matter for further proceedingsbefore the agency; or the court may set aside or modify the decision, or compel any action unlawfullywithheld or unreasonably delayed, if it determines that the substantial rights of any party may havebeen prejudiced because the agency decision is

(a) In violation of constitutional provisions; or

(b) In excess of the statutory authority or jurisdiction of the agency; or

(c) Based upon an error of law; or

(d) Made upon unlawful procedure; or

ADD029

(e) Unsupported by substantial evidence; or

(f) Unwarranted by facts found by the court on the record as submitted or as amplified underparagraph (6) of this section, in those instances where the court is constitutionally required to makeindependent findings of fact; or

(g) Arbitrary or capricious, an abuse of discretion, or otherwise not in accordance with law.

The court shall make the foregoing determinations upon consideration of the entire record, or suchportions of the record as may be cited by the parties. The court shall give due weight to theexperience, technical competence, and specialized knowledge of the agency, as well as to thediscretionary authority conferred upon it.

If the court finds that the action of the appointing authority in discharging, removing, suspending,laying off, lowering in rank or compensation or abolishing his position, or the action of the commissionconfirming the action taken by the appointing authority, was not justified, the employee shall bereinstated in his office or position without loss of compensation and the court shall assess reasonablecosts against the employer.

ADD030

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Section 48. There shall be within the division a board of hearings for the purpose of holding thehearings referred to herein and rendering decisions. Said board shall be under the supervision of adirector appointed by the commissioner and shall be independent of all other subdivisions andpersonnel of the division.

Any person aggrieved by the failure of the division to render adequate medical assistance under anyprogram of medical assistance administered by the division or to approve or reject an application formedical assistance thereunder within fortyfive days after receiving such application, or aggrieved bythe withdrawal of such assistance, or by coercive or otherwise improper conduct on the part of his orher social worker, shall have a right to a hearing, after due notice, upon appeal to the commissioner.

A hearing held pursuant to this section shall be conducted by a referee designated by the director at alocation convenient to the person appealing and shall be conducted as an adjudicatory proceedingunder chapter thirty A. The director of the board of hearings shall be responsible for the fair andefficient operation of the board in conformity with state and federal laws and regulations and for thetraining of referees, scheduling of hearings and the compilation of decisions. Neither the director norany other employee of the division shall review, interfere with, change or attempt to influence anyhearing decision by a referee. A referee may subpoena witnesses, administer oaths, take testimonyand secure the production of such books, papers, records and documents as may be relevant to suchhearing. The person appealing shall have the opportunity to confront and crossexamine all adversewitnesses and to question or refute any testimony, evidence, materials, or legal arguments. Thereferee shall base his or her decision solely on the testimony, evidence, materials and legal rulesadduced at the hearing. The referee may reopen a hearing for the purpose of considering furthertestimony, evidence, materials or legal rules before rendering his or her decision and shall, if he or shereopens the hearing, send seven days' written notice to all parties of the reopening and the reasonstherefor, including the date, time and place of the resumed hearing, which shall be held at a locationconvenient to the person appealing. The decision of the referee shall be the decision of the division.

A referee shall render and issue a decision within ninety days after the date of the filing of theaggrieved person's appeal, except that when an aggrieved person appeals the rejection of his or herapplication for medical assistance, or the failure to act on said application, or the failure of the divisionto render emergency medical assistance, the referee shall render and issue a decision within fortyfivedays after the date of filing of said appeal. The decision of the division shall be subject to review inaccordance with the provisions of chapter thirty A.

PART I

TITLE XVI I

CHAPTER 118E

Section 48

ADMINISTRATION OF THE GOVERNMENT

PUBLIC WELFARE

DIVISION OF MEDICAL ASSISTANCE

Board of hear ings

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When a hearing is requested because of termination or reduction of assistance, involving an issue offact, or of judgment relating to the individual case, between the agency and the appellant, assistancewill be continued during the period of the appeal and through the end of the month in which the finaldecision on the hearing is reached. If assistance has been terminated prior to timely request for fairhearing, assistance will be reinstated.

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Section 3. (a) In allocating receipts and disbursements to or between principal and income, and withrespect to any matter within the scope of this chapter, a fiduciary:

(1) shall administer a trust or estate in accordance with the terms of the trust or the will, even if there isa different provision in this chapter;

(2) may administer a trust or estate by the exercise of a discretionary power of administration given tothe fiduciary by the terms of the trust or the will, even if the exercise of the power produces a resultdifferent from a result required or permitted by this chapter;

(3) shall administer a trust or estate in accordance with this chapter if the terms of the trust or the willdo not contain a different provision or do not give the fiduciary a discretionary power of administration;and

(4) shall add a receipt or charge a disbursement to principal if the terms of the trust and this chapter donot provide a rule for allocating the receipt or disbursement to or between principal and income.

(b) In exercising the power to adjust under subsection (a) of section 4 or a discretionary power ofadministration regarding a matter within the scope of this chapter, whether granted by the terms of atrust, a will, or this chapter, a fiduciary shall administer a trust or estate impartially, based on what is fairand reasonable to all of the beneficiaries, except to the extent that the terms of the trust or the willclearly manifest an intention that the fiduciary shall or may favor 1 or more of the beneficiaries. Adetermination in accordance with this chapter is presumed to be fair and reasonable to all of thebeneficiaries.

PART I I

TITLE I I

CHAPTER 203D

Section 3

REAL AND PERSONAL PROPERTY AND DOMESTIC RELATIONS

DESCENT AND DISTRIBUTION, WILLS, ESTATES OF DECEASED PERSONS AND ABSENTEES,GUARDIANSHIP, CONSERVATORSHIP AND TRUSTS

PRINCIPAL AND INCOME

Fiduc iary duties ; general pr inc iples

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Section 13. If not allocated to income, a trustee shall allocate to principal:

(1) to the extent not allocated to income under this chapter, assets received from a transferor duringthe transferor's lifetime, a decedent's estate, a trust with a terminating income interest or a payer undera contract naming the trust or its trustee as beneficiary;

(2) money or other property received from the sale, exchange, liquidation or change in form of aprincipal asset, including realized profit;

(3) amounts recovered from third parties to reimburse the trust because of disbursements described inclause (7) of subsection (a) of section 26 or for other reasons to the extent not based on the loss ofincome;

(4) proceeds of property taken by eminent domain, but a separate award made for the loss of incomewith respect to an accounting period during which a current income beneficiary had a mandatoryincome interest is income;

(5) net income received in an accounting period during which there is no beneficiary to whom a trusteemay or must distribute income; and

(6) other receipts.

PART I I

TITLE I I

CHAPTER 203D

Section 13



PRINCIPAL AND INCOME

Pr inc ipal receipts

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[Text of section applicable as provided by 2012, 140, Sec. 66.]

Section 505. Creditor's claim against settlor

(a) Whether or not a trust contains a spendthrift provision, the following rules shall apply:

(1) During the lifetime of the settlor, the property of a revocable trust shall be subject to claims of thesettlor's creditors.

(2) With respect to an irrevocable trust, a creditor or assignee of the settlor may reach the maximumamount that can be distributed to or for the settlor's benefit and, if a trust has more than 1 settlor, theamount the creditor or assignee of a particular settlor may reach may not exceed the settlor's interestin the portion of the trust attributable to that settlor's contribution. Trust property shall not be considereddistributable to or for the settlor's benefit solely because the trustee has the discretion under the termsof the trust to reimburse the settlor for any tax on trust income or capital gain that is payable by thesettlor under the law imposing such tax; no creditor or assignee of the settlor of an irrevocable trustshall be entitled to reach any trust property based on the discretionary authority described in thissentence.

(3) After the death of a settlor, and subject to the settlor's right to direct the source from which liabilitieswill be paid, the property of a trust that was revocable at the settlor's death shall be subject to claims ofthe settlor's creditors, the expenses of the settlor's funeral and disposal of remains and statutoryallowances to a surviving spouse and children to the extent the settlor's probate estate is inadequate tosatisfy those claims, expenses and allowances.

[There is no subsection (b).]

PART I I

TITLE I I

CHAPTER 203E

ARTICLE 5

Section 505



MASSACHUSETTS UNIFORM TRUST CODE

CREDITOR'S CLAIMS; SPENDTHRIFT AND DISCRETIONARY TRUSTS

Creditor 's c laim agains t sett lor

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Section 803. Impartiality

If a trust has 2 or more beneficiaries, the trustee shall act impartially in investing, managing and distributingthe trust property, giving due regard to the beneficiaries' respective interests.

PART II

TITLE II

CHAPTER 203E

ARTICLE 8

Section 803

REA L A ND PERSONA L PROPERTY A ND DOMESTIC RELATIONS

DESCENT A ND DISTRIBUTION, WILLS, ESTATES OF DECEA SED PERSONS A ND A BSENTEES, GUA RDIA NSHIP,CONSERVATORSHIP A ND TRUSTS

MA SSA CHUSETTS UNIFORM TRUST CODE

DUTIES A ND POWERS OF TRUSTEE

Impar tiality

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Section 808. Powers to direct

(a) While a trust is revocable, the trustee may follow a direction of the settlor that is contrary to theterms of the trust.

(b) If the terms of a trust confer upon a person, other than the settlor of a revocable trust, power todirect certain actions of the trustee, the trustee shall act in accordance with an exercise of the power,unless the attempted exercise is manifestly contrary to the terms of the trust or the trustee knows theattempted exercise would constitute a serious breach of a fiduciary duty that the person holding thepower owes to the beneficiaries of the trust.

(c) A person who holds a power to direct is presumptively a fiduciary who is required to act in goodfaith with regard to the purposes of the trust and the interests of the beneficiaries. The holder of apower to direct shall be liable for any loss that results from a breach of a fiduciary duty.

PART I I

TITLE I I

CHAPTER 203E

ARTICLE 8

Section 808



MASSACHUSETTS UNIFORM TRUST CODE

DUTIES AND POWERS OF TRUSTEE

Powers to direc t

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Subpart L—Resources And Exc lusions

AUTHORITY: Secs. 702(a)(5), 1602, 1611, 1612, 1613, 1614(f), 1621, 1631, and1633 of the Social Security Act (42 U.S.C. 902(a)(5), 1381a, 1382, 1382a,1382b, 1382c(f), 1382j, 1383, and 1383b); sec. 211, Pub. L. 93-66, 87 Stat. 154(42 U.S.C. 1382 note).

SOURCE: 40 FR 48915, Oct. 20, 1975, unless otherwise noted.

§ 416.1201. Resources; general.(a) Resources; defined. For purposes of this subpart L, resources means cash

or other liquid assets or any real or personal property that an individual (orspouse, if any) owns and could convert to cash to be used for his or her supportand maintenance.(1) If the individual has the right, authority or power to liquidate the property

or his or her share of the property, it is considered a resource. If a propertyright cannot be liquidated, the property will not be considered a resource of theindividual (or spouse).(2) Support and maintenance assistance not counted as income under §

416.1157(c) will not be considered a resource.(3) Except for cash reimbursement of medical or social services expenses

already paid for by the individual, cash received for medical or social servicesthat is not income under § 416.1103 (a) or (b), or a retroactive cash paymentwhich is income that is excluded from deeming under § 416.1161(a)(16), is nota resource for the calendar month following the month of its receipt. However,cash retained until the first moment of the second calendar month following itsreceipt is a resource at that time.(i) For purposes of this provision, a retroactive cash payment is one that is

paid after the month in which it was due.(ii) This provision applies only to the unspent portion of those cash payments

identified in this paragraph (a)(3). Once the cash from such payments is spent,this provision does not apply to items purchased with the money, even if theperiod described above has not expired.(iii) Unspent money from those cash payments identified in this paragraph (a)

(3) must be identifiable from other resources for this provision to apply. Themoney may be commingled with other funds, but if this is done in such afashion that an amount from such payments can no longer be separatelyidentified, that amount will count toward the resource limit described in § 416.1205.(4) Death benefits, including gifts and inheritances, received by an individual,

to the extent that they are not income in accordance with paragraphs (e) and(g) of § 416.1121 because they are to be spent on costs resulting from the lastillness and burial of the deceased, are not resources for the calendar monthfollowing the month of receipt. However, such death benefits retained until thefirst moment of the second calendar month following their receipt are resourcesat that time.(b) Liquid resources. Liquid resources are cash or other property which can be

converted to cash within 20 days, excluding certain nonwork days as explainedin § 416.120(d). Examples of resources that are ordinarily liquid are stocks,bonds, mutual fund shares, promissory notes, mortgages, life insurancepolicies, financial institution accounts (including savings, checking, and timedeposits, also known as certificates of deposit) and similar items. Liquidresources, other than cash, are evaluated according to the individual's equity inthe resources. (See § 416.1208 for the treatment of funds held in individual andADD038

(c) Effective January 1, 1985 and later. The resources limits and effective dates for January 1, 1985 and later are asfollows:

Effective date Individual Individual and spouseJan. 1, 1985 $1,600 $2,400Jan. 1, 1986 1,700 $2,550Jan. 1, 1987 1,800 $2,700Jan. 1, 1988 1,900 $2,850Jan. 1, 1989 2,000 $3,000

[50 FR 38982, Sept. 26, 1985]

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§416.1207 Resources determinations.

(a) General. Resources determinations are made as of the first moment of the month. A resource determination isbased on what assets an individual has, what their values are, and whether or not they are excluded as of the first momentof the month.

(b) Increase in value of resources. If, during a month, a resource increases in value or an individual acquires anadditional resource or replaces an excluded resource with one that is not excluded, the increase in the value of theresources is counted as of the first moment of the next month

(c) Decrease in value of resources. If, during a month, a resource decreases in value or an individual spends aresource or replaces a resource that is not excluded with one that is excluded, the decrease in the value of the resourcesis counted as of the first moment of the next month.

(d) Treatment of items under income and resource counting rules. Items received in cash or in kind during a monthare evaluated first under the income counting rules and, if retained until the first moment of the following month, aresubject to the rules for counting resources at that time.

(e) Receipts from the sale, exchange, or replacement of a resource. If an individual sells, exchanges or replaces aresource, the receipts are not income. They are still considered to be a resource. This rule includes resources that havenever been counted as such because they were sold, exchanged or replaced in the month in which they were received.See §416.1246 for the rule on resources disposed of for less than fair market value (including those disposed of during themonth of receipt).

Example: Miss L., a disabled individual, receives a $350 unemployment insurance benefit on January 10, 1986. The benefit isunearned income to Miss L. when she receives it. On January 14, Miss L. uses the $350 payment to purchase shares of stock. MissL. has exchanged one item (cash) for another item (stock). The $350 payment is never counted as a resource to Miss L. becauseshe exchanged it in the same month she received it. The stock is not income; it is a different form of a resource exchanged for thecash. Since a resource is not countable until the first moment of the month following its receipt, the stock is not a countable resourceto Miss L. until February 1.

[52 FR 4283, Feb. 11, 1987]

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§416.1208 How funds held in financial institution accounts are counted.

(a) General. Funds held in a financial institution account (including savings, checking, and time deposits, also knownas certificates of deposit) are an individual's resource if the individual owns the account and can use the funds for his orher support and maintenance. We determine whether an individual owns the account and can use the funds for his or hersupport and maintenance by looking at how the individual holds the account. This is reflected in the way the account istitled.

(b) Individuallyheld account. If an individual is designated as sole owner by the account title and can withdraw fundsand use them for his or her support and maintenance, all of the funds, regardless of their source, are that individual'sresource. For as long as these conditions are met, we presume that the individual owns 100 percent of the funds in theaccount. This presumption is nonrebuttable.

(c) Jointlyheld account—(1) Account holders include one or more SSI claimants or recipients. If there is only one SSIclaimant or recipient account holder on a jointly held account, we presume that all of the funds in the account belong tothat individual. If there is more than one claimant or recipient account holder, we presume that all the funds in the accountbelong to those individuals in equal shares.

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42 CFR 435.601 Application of financial eligibilitymethodologies.

(a) Definitions. For purposes of this section, cash assistance financial methodologies refers to the income andresources methodologies of the AFDC, SSI, or State supplement programs, or, for aged, blind, and disabledindividuals in States that use more restrictive criteria than SSI, the methodologies established in accordancewith the requirements of §§ 435.121 and 435.230.

(b) Basic rule for use of cash assistance methodologies. Except as specified in paragraphs (c) and (d) of thissection or in § 435.121 in determining financial eligibility of individuals as categorically and medically needy, theagency must apply the financial methodologies and requirements of the cash assistance program that is mostclosely categorically related to the individual's status.

(c) Financial responsibility of relatives. The agency must use the requirements for financial responsibility ofrelatives specified in § 435.602.

(d) Use of less restrictive methodologies than those under cash assistance programs.

(1) At State option, and subject to the conditions of paragraphs (d)(2) through (d)(5) of this section, the agencymay apply income and resource methodologies that are less restrictive than the cash assistance methodologiesin determining eligibility of the following groups:

(i) Qualified pregnant women and children under the mandatory categorically needy group under § 435.116;

(ii) Low-income pregnant women, infants, and children specified in section 1902(a)(10)(i)(IV), 1902(a)(10)(A)(i)(VI), and 1902(a)(10)(A)(i)(VII) of the Act;

(iii) Qualified Medicare beneficiaries specified in sections 1902(a)(10)(E) and 1905(p) of the Act;

(iv) Optional categorically needy individuals under groups established under subpart C of this part and section1902(a)(10)(A)(ii) of the Act;

(v) Medically needy individuals under groups established under subpart D of this part and section 1902(a)(10)(C)(i)(III) of the Act; and

(vi) Aged, blind, and disabled individuals in States using more restrictive eligibility requirements than SSI undergroups established under §§ 435.121 and 435.230.

(2) The income and resource methodologies that an agency elects to apply to groups of individuals described inparagraph (d)(1) of this section may be less restrictive, but no more restrictive (except in States using morerestrictive requirements than SSI), than:

(i) For groups of aged, blind, and disabled individuals, the SSI methodologies; or

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(ii) For all other groups, the methodologies under the State plan most closely categorically related to theindividual's status.

(3) A financial methodology is considered to be no more restrictive if, by using the methodology, additionalindividuals may be eligible for Medicaid and no individuals who are otherwise eligible are by use of thatmethodology made ineligible for Medicaid.

(4) The less restrictive methodology applied under this section must be comparable for all persons within eachcategory of assistance (aged, or blind, or disabled, or AFDC related) within an eligibility group. For example, ifthe agency chooses to apply less restrictive income or resource methodology to an eligibility group of agedindividuals, it must apply that methodology to all aged individuals within the selected group.

(5) The application of the less restrictive income and resource methodologies permitted under this section mustbe consistent with the limitations and conditions on FFP specified in subpart K of this part.

(e) [Reserved]

(f) State plan requirements.

(1) The State plan must specify that, except to the extent precluded in § 435.602, in determining financialeligibility of individuals, the agency will apply the cash assistance financial methodologies and requirements,unless the agency chooses to apply less restrictive income and resource methodologies in accordance withparagraph (d) of this section.

(2) If the agency chooses to apply less restrictive income and resource methodologies, the State plan mustspecify:

(i) The less restrictive methodologies that will be used; and

(ii) The eligibility group or groups to which the less restrictive methodologies will be applied.

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42 CFR 435.901 Consistency with objectives and statutes.

§ 435.901 Consistency with objectives and statutes.The Medicaid agency's standards and methods for determining eligibility must be consistent with the objectivesof the program and with the rights of individuals under the United States Constitution, the Social Security Act,title VI of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act of 1973, and all other relevantprovisions of Federal and State laws.

[44 FR 17937, Mar. 23, 1979. Redesignated at 59 FR 48809, Sept. 23, 1994]

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42 CFR 483.12 Admission, transfer and discharge rights.

§ 483.12 Admission, transfer and discharge rights.(a) Transfer and discharge -

(1) Definition: Transfer and discharge includes movement of a resident to a bed outside of the certified facilitywhether that bed is in the same physical plant or not. Transfer and discharge does not refer to movement of aresident to a bed within the same certified facility.

(2) Transfer and discharge requirements. The facility must permit each resident to remain in the facility, and nottransfer or discharge the resident from the facility unless -

(i) The transfer or discharge is necessary for the resident's welfare and the resident's needs cannot be met inthe facility;

(ii) The transfer or discharge is appropriate because the resident's health has improved sufficiently so theresident no longer needs the services provided by the facility;

(iii) The safety of individuals in the facility is endangered;

(iv) The health of individuals in the facility would otherwise be endangered;

(v) The resident has failed, after reasonable and appropriate notice, to pay for (or to have paid under Medicareor Medicaid) a stay at the facility. For a resident who becomes eligible for Medicaid after admission to a facility,the facility may charge a resident only allowable charges under Medicaid; or

(vi) The facility ceases to operate.

(3) Documentation. When the facility transfers or discharges a resident under any of the circumstancesspecified in paragraphs (a)(2)(i) through (v) of this section, the resident's clinical record must be documented.The documentation must be made by -

(i) The resident's physician when transfer or discharge is necessary under paragraph (a)(2)(i) or paragraph (a)(2)(ii) of this section; and

(ii) A physician when transfer or discharge is necessary under paragraph (a)(2)(iv) of this section.

(4) Notice before transfer. Before a facility transfers or discharges a resident, the facility must -

(i) Notify the resident and, if known, a family member or legal representative of the resident of the transfer ordischarge and the reasons for the move in writing and in a language and manner they understand.

(ii) Record the reasons in the resident's clinical record; and

(iii) Include in the notice the items described in paragraph (a)(6) of this section.

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130 CMR: DIVISION OF MEDICAL ASSISTANCE

520.005: continued

(f) why the applicant or member is listed on the account; (4) certification of ownership; (5) financial-institution records indicating the establishment of an account that accurately reflect the ownership interest of funds from the joint account; (6) other documentation that indicates ownership, asset value, and restrictions on access; (7) a notarized affidavit, sworn to under penalty of perjury, signed by all owners of the asset, and attesting to the distribution of ownership; or (8) the self-declaration of the individual who is applying solely for MassHealth Buy-in, as described at 130 CMR 519.011(B): MassHealth Buy-in for Qualifying Individuals. The MassHealth agency may, at its discretion, request additional verification.

520.006: Inaccessible Assets

(A) Definition. An inaccessible asset is an asset to which the applicant or member has no legal access. The MassHealth agency does not count an inaccessible asset when determining eligibility for MassHealth for the period that it is inaccessible or is deemed to be inaccessible under 130 CMR 520.006.

(B) Examples of Inaccessible Assets. Inaccessible assets include, but are not limited to (1) property, the ownership of which is the subject of legal proceedings (for example, probate and divorce suits); and (2) the cash-surrender value of life-insurance policies when the policy has been assigned to the issuing company for adjustment.

(C) Date of Accessibility. The MassHealth agency considers accessible to the applicant or member all assets to which the applicant or member is legally entitled

(1) from the date of application or acquisition, whichever is later, if the applicant or member does not meet the conditions of 130 CMR 520.006(C)(2)(a) or (b); or (2) from the period beginning six months after the date of application or acquisition, whichever is later, if

(a) the applicant or member cannot competently represent his or her interests, has no guardian or conservator capable of representing his or her interests, and the authorized representative (which may include a provider) of such applicant or member is making a good-faith effort to secure the appointment of a competent guardian or conservator; or (b) the sole trustee of a Medicaid Qualifying Trust, under 130 CMR 520.022(B), is one whose whereabouts are unknown or who is incapable of competently fulfilling his or her fiduciary duties, and the applicant or member, directly or through an authorized representative (which may include a provider), is making a good-faith effort to contact the missing trustee or to secure the appointment of a competent trustee.

520.007: Countable Assets

Countable assets are all assets that must be included in the determination of eligibility. Countable assets include assets to which the applicant or member or the spouse would be entitled whether or not these assets are actually received when failure to receive such assets results from the action or inaction of the applicant, member, spouse, or person acting on his or her behalf. In determining whether or not failure to receive such assets is reasonably considered to result from such action or inaction, the MassHealth agency considers the specific circumstances involved. The applicant or member and the spouse must verify the total value of countable assets. However, if he or she is applying solely for MassHealth Buy-in, as described at 130 CMR 519.011(B): MassHealth Buy-in for Qualifying Individuals, verification is required only upon request by the MassHealth agency. 130 CMR 520.007 also contains the verification requirements for certain assets. The assets the MassHealth agency considers include, but are not limited to, the following.

(A) Cash. (1) Definition. Cash is defined as currency, checks, and bank drafts in the possession of or available to the applicant, member, or spouse. (2) Verification. The applicant's or member's declaration on the application or redetermination form stating the amount of cash available to him or her is sufficient verification.

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(B) Bank Accounts. (1) Definition. Bank accounts are defined as deposits in a bank, savings and loan institution, credit union, or other financial institution. Bank accounts may be in the form of savings, checking, or trust accounts, term certificates, or other types of accounts. (2) Determination of Ownership and Accessibility. The MassHealth agency considers funds in a bank account available only to the extent that the applicant or member has both ownership of and access to such funds. The MassHealth agency determines the ownership of and access to the funds in accordance with 130 CMR 520.005 and 520.006. (3) Verification of Account Balances. The MassHealth agency requires verification of the current balance of each account at application, during eligibility review, and at times of reported change.

(a) Noninstitutionalized individuals excluding the individuals described at 130 CMR 519.007(B): Home- and Community-based Services Waiver Frail Elder must verify the amount on deposit by bank books or bank statements that show the bank balance within 45 days of the date of application or the date that the eligibility review is received in a MassHealth Enrollment Center or outreach site. (b) Nursing-facility residents as described at 130 CMR 515.001: Definition of Terms must verify the amount on deposit by bank books or bank statements that show the current balance and account activity during the look-back period. (c) If during an eligibility review the member states either orally or in writing that an account other than a checking account contains a balance of $25 or less, the MassHealth agency does not require verification provided that, in combination with other countable assets, it would not affect continued eligibility. (d) If lack of either access to or ownership of funds in an account is verified, the MassHealth agency will not consider the funds a countable asset.

(C) Individual Retirement Accounts, Keogh Plans and Pension Funds. (1) Individual Retirement Accounts. An Individual Retirement Account (IRA) is a tax-deductible savings account that sets aside money for retirement. Funds in an IRA are counted as an asset in their entirety less the amount of penalty for early withdrawal. (2) Keogh Plans. A Keogh Plan is a retirement plan established by a self-employed individual. A Keogh Plan may be established for the self-employed individual alone or for the self-employed individual and his or her employees. If the Keogh Plan was established for the self-employed individual alone, the funds in the Plan are counted as an asset in their entirety less the amount of penalty for early withdrawal. If the Keogh Plan was established for employees other than the spouse of the applicant or member, the MassHealth agency does not count the funds as an asset. (3) Pension Funds. A pension fund is a retirement plan established by an employer to provide benefit payments to employees upon retirement or disability. Pension funds that are being set aside by an individual's current employer are not countable as an asset. Pension funds from an individual's former employer are countable in their entirety less any penalties for withdrawal provided such funds are accessible. (See 130 CMR 520.006.)

(D) Securities. Securities include, but are not limited to, stocks, bonds, options, futures contracts, debentures, mutual funds including money-market mutual funds, and other financial instruments. Tradable securities are valued at the most recent closing-bid price, and nontradable securities are valued at current equity value. A security for which there is no market value or that is inaccessible in accordance with 130 CMR 520.006 is noncountable.

(E) Cash-surrender Value of Life-insurance Policies. (1) The cash-surrender value of a life-insurance policy is the amount of money, if any, that the issuing company has agreed to pay the owner of the policy upon its cancellation. An individual may adjust the cash-surrender value of life insurance to meet the asset limit. The MassHealth agency will consider the cash-surrender-value amount an inaccessible asset during the adjustment period. (2) If the total face value of all countable life-insurance policies owned by the applicant, member, or spouse exceeds $1,500, the total cash-surrender value of all policies held by that individual is countable. The MassHealth agency does not count the face value of burial insurance and the face value of life-insurance policies not having cash-surrender value (for instance, term insurance) in determining the total face value of life-insurance policies. Burial insurance is insurance whose terms specifically provide that the proceeds can be used only to pay the burial expenses, funeral expenses, or both of the insured.

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(F) Vehicles as Countable Assets. (1) Requirements. In determining the assets of an individual (and the spouse, if any), the countability of a vehicle is determined as follows.

(a) One vehicle per household is noncountable regardless of its value if it is for the use of the eligible individual or couple or a member of the eligible individual’s or couple’s household. (b) The equity value of all other vehicles is a countable asset.

(2) Exemption. (a) Three-month Exemption. The MassHealth agency does not count the value of nonexempt vehicles exceeding the asset limit for three calendar months provided the applicant or member signs an agreement with the MassHealth agency to dispose of the vehicles at fair-market value. (b) Additional Exemption for Good Cause. The MassHealth agency may grant an additional three-month extension if the disposition was prevented by an event beyond the control of the individual who was making a good-faith effort to dispose of the property during the initial three-month period. (c) Proceeds. The proceeds from the sale of the vehicle after payment of loans or other encumbrances and expenses of sale such as taxes, fees, and advertising costs are a countable asset in the month received and in subsequent months. The equity value of a vehicle that has not been sold three calendar months after the date of the written agreement (or six calendar months after the date of the written agreement if an extension has been granted) is a countable asset. (d) Equity Value. Equity value is determined by subtracting the balance of any loans, liens, encumbrances, and expenses of sale, such as taxes, fees, and advertising costs, from the fair-market value of the vehicle. (e) Fair-market Value. Fair-market value is the price for which the vehicle will sell on the open market. (f) Verification. The applicant or member must verify the fair-market value and equity value of all vehicles. Verification must be a written document providing reasonable evidence of value. Acceptable verification includes, but is not limited to, the following:

1. the wholesale value (for cars and trucks) and finance value (for recreational vehicles) tables in the most recent vehicle valuation book that is used by the MassHealth agency; 2. the low value in an older car valuation book (for cars and trucks). If the car or truck is too old to be listed in an older car valuation book, the MassHealth agency will assign a value of $250; 3. the written appraisal of a licensed automobile dealer who deals with classic, custom-made, or antique vehicles, if the vehicle is considered a classic, custom-made, or antique; or 4. for recreational vehicles, the projected loan value as quoted by a bank or other lending institution; documents showing the value of the vehicle for insurance purposes; or a written estimate of the cash value of the vehicle from a licensed recreational vehicle dealer.

(g) Specially Equipped Vehicles. Special equipment for the handicapped, other optional equipment, or low mileage do not increase the value of the vehicle.

(G) Real Estate. (1) Real Estate As a Countable Asset. All real estate owned by the individual and the spouse, with the exception of the principal place of residence as described in 130 CMR 520.008(A), is a countable asset. The principal place of residence is subject to allowable limits as described in 130 CMR 520.007(G)(3). Business or nonbusiness property as described in 130 CMR 520.008(D) is a noncountable asset. (2) Nine-month Exemption. The value of such real estate is exempt for nine calendar months after the date of notice by the MassHealth agency, provided that the individual signs an agreement with the MassHealth agency within 30 days after the date of notice to dispose of the property at fair-market value. The MassHealth agency will extend the nine-month period as long as the individual or the spouse continues to make a good-faith effort to sell, as verified in accordance with 130 CMR 520.007(G)(4).


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(3) Fair-market Value and Equity Value. The fair-market value and equity value of all countable real estate owned by the individual and the spouse must be verified at the time of application and when it affects or may affect eligibility. For applications received on or after January 1, 2006, equity interest in the principal place of residence exceeding $750,000 renders an individual ineligible for payment of nursing facility and other long-term-care services, unless the spouse of such individual or the individual’s child who is younger than 21 years old or who is blind or permanently and totally disabled resides in the individual’s home. The allowable equity interest amount will be adjusted annually, beginning in January 2011. The adjustment will be based year-to-year on the percentage increase in the Consumer Price Index.

(a) The applicant or member must verify the fair-market value by a copy of the most recent tax bill or the property tax assessment that was most recently issued by the taxing jurisdiction, provided that this assessment is not one of the following:

1. a special purpose assessment; 2. based on a fixed-rate-per-acre method; or 3. based on an assessment ration or providing only a range.

(b) In the event that a current property-tax assessment is not available or the applicant or member wishes to rebut the fair-market value determined by the MassHealth agency, a comparable market analysis or a written appraisal of the value of the property from a knowledgeable source will establish the fair-market value. A knowledgeable source is a licensed real-estate agent or broker, a real-estate appraiser, an official of a bank, a savings-and-loan association, or a similar lending organization, or an official of the local real-estate tax jurisdiction. (c) A copy of the loan instruments or other binding documents that show evidence of the payment schedule and the outstanding balance of the loan will verify the equity value of the property. (d) The MassHealth agency may waive the period of ineligibility due to excess equity value in real estate if the individual meets the conditions described at 130 CMR 520.007(G)(13).

(4) Good-faith Effort to Sell Real Estate. The individual or the spouse must verify his or her good-faith effort to dispose of countable real estate by evidence such as advertisements or documentation of the listing of the real estate with licensed real-estate agents or brokers, including a report of any offer from prospective buyers. The MassHealth agency will terminate eligibility if, at any time, the individual rejects a reasonable offer to buy the real estate. An offer to buy real estate is considered reasonable if it is at least two-thirds of the fair-market value, unless the individual proves otherwise to the MassHealth agency’s satisfaction. (5) Proceeds from the Sale of Real Estate. The proceeds from the sale of the real estate, after the payment of loans, liens, or other encumbrances, and expenses of sale such as taxes, fees, and advertising costs, are a countable asset in the month received and in subsequent months. (6) Right to Recovery. If a member fails to report the acquisition of real estate within ten days after taking title to the real estate and the equity value of the real estate, when added to all other countable assets, exceeds the MassHealth asset standard, the MassHealth agency has the right to recover overpayment in accordance with 130 CMR 515.010: Recovery of Overpayment of Medical Benefits and to initiate any and all other legal remedies available. (7) Former Home of a Community-based Individual. If an applicant or member (or spouse, if any) moves out of his or her home for reasons other than institutionalization without the intent to return, the home, whether or not held in trust, becomes a countable asset because it is no longer used as the individual's principal place of residence. The former home is subject to the requirements described in 130 CMR 520.007(G)(2). (8) Former Home of an Institutionalized Individual. If an applicant or member moves out of his or her home to enter a medical institution, the MassHealth agency considers the former home a countable asset that is subject to 130 CMR 520.007(G)(2), provided all of the following conditions are met. If the former home of a nursing-facility resident as defined in 130 CMR 515.001: Definition of Terms is placed in a trust, the MassHealth agency will apply the trust rules in accordance with 130 CMR 520.021 through 520.024.

(a) The individual is institutionalized as defined in 130 CMR 515.001: Definition of Terms. (b) None of the following relatives of the individual is living in the property:


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1. a spouse; 2. a child who is younger than 21 years old or who is blind or permanently and totally disabled; 3. a sibling who has a legal interest in the home and who was living there for a period of at least one year immediately before the applicant's or member's admission to the medical institution; 4. a son or daughter who was living in the applicant's or member's home for a period of at least two years immediately before the date of the applicant's or member's admission to the medical institution, and who establishes to the satisfaction of the MassHealth agency that he or she provided care to the applicant or member that permitted him or her to live in the home rather than in a medical institution; or 5. a dependent relative. A dependent relative is any of the following who has any kind of medical, financial, or other dependency: a child, stepchild, or grandchild; a parent, stepparent, or grandparent; an aunt, uncle, niece, or nephew; a brother, sister, stepbrother, or stepsister; a half brother or half sister; a cousin; or an in-law.

(c) The applicant or member (and spouse, if any) moves out of his or her home without the intent to return. (d) The applicant or member does not own long-term-care insurance with coverage that meets the requirements of 130 CMR 515.014: Long-term-care Insurance Minimum Coverage Requirements for MassHealth Exemptions and the Division of Insurance regulations at 211 CMR 65.09(1)(e)2.

(9) Verification of Dependency and Residence of Relative Living in the Former Home. (a) Relationship. The institutionalized individual must verify his or her relationship to the relative living in the former home by birth certificates, marriage licenses, or any other documents necessary to establish the relationship. (b) Dependency. The institutionalized individual must verify the relative’s dependency on the institutionalized individual by a signed statement from the relative attesting to the existence and duration of the dependency. The MassHealth agency may require additional evidence if the relative's claim of dependency is questionable or self-contradictory. (c) Residence. The institutionalized individual must verify the relative's residence in his or her former home only if there is conflicting or contradictory evidence regarding the relative's residence.

(10) Option to Liquidate to Pay for Medical Care. Instead of selling the countable former home, the individual may liquidate its equity value to pay for his or her medical care. If the individual chooses this option, the home will be noncountable until the equity value is liquidated, but not longer than nine calendar months after the date of the MassHealth agency’s notice. (11) Undue Hardship: Jointly Owned Assets.

(a) The MassHealth agency will continue to exclude otherwise countable property, including a former home, when it is jointly owned and the sale of the property by an individual would cause the other owners to lose housing. (b) Loss of housing would result when the property serves as the principal place of residence for one (or more) of the other owners, and sale of the property would result in loss of that residence, and no other housing would be readily available for the displaced other owner. If undue hardship as defined in 130 CMR 520.007(G)(11) ceases to exist, the property becomes a countable asset.

(12) Lien. The MassHealth agency will place a lien before the death of a member against any real estate in which the member has a legal interest. This lien will be placed only if all of the conditions of 130 CMR 515.012: Real Estate Liens are met. (13) Waiver of the Period of Ineligibility Due to Excess Equity Value in the Principal Place of Residence Causing Undue Hardship.

(a) The MassHealth agency may waive the denial of payment of long-term-care services for excess equity value in the principal place of residence if ineligibility would cause the individual undue hardship when the following conditions exist:

1. the denial of long-term-care services would deprive the nursing-facility resident of medical care such that his or her health or life would be endangered, or the nursing-facility resident would be deprived of food, shelter, clothing, or other necessities such that he or she would be at risk of serious deprivation; and

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2. the institution has notified the nursing-facility resident of its intent to initiate discharge the resident because the resident has not paid for his or her institutionalization; and 3. there is no less costly noninstitutional alternative available to meet the nursing-facility resident’s needs.

(b) Undue hardship does not exist when imposition of the period of ineligibility would merely inconvenience or restrict the nursing-facility resident without putting the nursing-facility resident at risk of serious deprivation. (c) Where the MassHealth agency has issued a denial notice based on the equity value in the principal place of residence, the individual may request a hardship waiver.

1. The individual must submit a written request for consideration of undue hardship and supporting documentation to the MassHealth Enrollment Center listed on the notice of denial within 15 days after the date on the notice. 2. Within 30 days after the date of the request, the MassHealth agency informs the individual in writing of the decision and of the right to a fair hearing. The MassHealth agency extends this 30-day period if the MassHealth agency requests additional documentation or if extenuating circumstances, as determined by the MassHealth agency, require additional time.

(d) The nursing-facility resident may appeal the MassHealth agency undue-hardship decision and denial of payment of long-term-care services by submitting a request for a fair hearing to the Office of Medicaid Board of Hearings within 30 days after the receipt of the MassHealth agency written undue-hardship notice, in accordance with 130 CMR 610.000: MassHealth: Fair Hearing Rules. If the denial occurs pursuant to 130 CMR 520.007(G)(13)(c)1., the nursing-facility resident may instead appeal the denial of eligibility for long-term-care services by submitting a request for a fair hearing to the Off ice of Medicaid Board of Hearings, in accordance with 130 CMR 610.000: MassHealth: Fair Hearing Rules, while the resident also submits a written request for consideration of undue hardship. If the request for the hardship waiver is later denied, the nursing-facility resident may appeal the MassHealth agency’s undue hardship decision by submitting a request for a fair hearing to the Office of Medicaid Board of Hearings within 30 days after the receipt of the MassHealth agency wri t ten undue hardship decis ion not ice, in accordance with 130 CMR 610.000: MassHealth: Fair Hearing Rules.

(H) Retroactive SSI and RSDI Benefit Payments. (1) Requirements. Retroactive SSI and RSDI benefit payments are noncountable in the month of receipt and for six months after the month of receipt. Such payments must be readily identifiable as retroactive SSI or RSDI payments, and should be deposited in a separately identifiable account. If commingled with other funds, and not separately identifiable according to the MassHealth agency, the MassHealth agency considers the total amount on deposit a countable asset. Any amount of the benefit payment still retained on the first day following the excluded periods described in 130 CMR 520.007(H)(1) is a countable asset. (2) Verification. The applicant or member must verify the amount of the benefit and the date of receipt. The preferred source of verification is the notification letter from the Social Security Administration. The amount on deposit may be verified by a bank book or bank statement that shows that the benefit payment is not commingled with other funds.

(I) Trusts. The MassHealth agency counts the value of the principal and income of a revocable or irrevocable trust in accordance with 130 CMR 520.021 through 520.024.

(J) Annuities, Promissory Notes, Loans, Mortgages, and Similar Transactions. (1) Treatment of Annuities Established Before February 8, 2006. Payments from an annuity are countable income in accordance with 130 CMR 520.009. If the annuity can be converted to a lump sum, the lump sum, less any penalties or costs of converting to a lump sum, is a countable asset. Purchase of an annuity is a disqualifying transfer of assets for nursing-facility residents as defined at 130 CMR 515.001: Definition of Terms in the following situations:

(a) when the beneficiary is other than the applicant, member, or spouse;

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(b) when the beneficiary is the applicant, member, or spouse and when the total present value of projected payments from the annuity is less than the value of the transferred asset (purchase price). In this case, the MassHealth agency determines the amount of the disqualifying transfer based on the actuarial value of the annuity compared to the beneficiary's life expectancy using the life-expectancy tables as determined by the MassHealth agency, giving due weight to the life-expectancy tables of institutions in the business of providing annuities; (c) when the terms of the annuity postpone payment beyond 60 days, the MassHealth agency will treat the annuity as a disqualifying transfer of assets until the payment start date; or (d) when the terms of the annuity provide for unequal payments, the MassHealth agency may treat the annuity as a disqualifying transfer of assets. Commercial annuity payments that vary solely as a result of a variable rate of interest are not considered unequal payments under 130 CMR 520.007(J)(1)(d).

(2) Treatment of Annuities Established on or after February 8, 2006. In addition to the requirements in 130 CMR 520.007(J)(1), the following conditions must be met.

(a) The purchase of an annuity will be considered a disqualifying transfer of assets unless

1. the Commonwealth of Massachusetts is named as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the institutionalized individual; 2. the Commonwealth of Massachusetts is named as such a remainder beneficiary in the second position after the community spouse, or minor or disabled children; or 3. the Commonwealth of Massachusetts is named as such a remainder beneficiary in the first position if the community spouse or the representative of any minor or disabled children in 130 CMR 520.007(J)(2)(a)2. disposes of any such remainder for less than fair-market value.

(b) The purchase of an annuity is considered a disqualifying transfer of assets unless the annuity satisfies 130 CMR 520.007(J)(1) and (2)(a) and is irrevocable and nonassignable, or unless the annuity satisfies 130 CMR 520.007(J)(2)(c). (c) The purchase of an annuity is considered a disqualifying transfer of assets unless the annuity satisfies 130 CMR 520.007(J)(2)(b), or unless the annuity names the Commonwealth of Massachusetts as a beneficiary as required under 130 CMR 520.007(J)(2)(a) and the annuity is

1. described in section 408(b) or (q) of the Internal Revenue Code of 1986; 2. purchased with the proceeds from an account or trust described in section 408(a), (c), or (p) of the Internal Revenue Code of 1986; 3. purchased with the proceeds from a simplified employee pension described in section 408(k) of the Internal Revenue Code of 1986; or 4. purchased with the proceeds from a Roth IRA described in section 408A of the Internal Revenue Code of 1986.

(3) Promissory Notes, Loans, or Mortgages. The value of any outstanding balance due on a promissory note, loan, or mortgage is considered a disqualifying transfer of assets, unless all of the following conditions are met:

(a) the repayment terms of the promissory note, loan, or mortgage are actuarially sound, based on actuarial tables as determined by the MassHealth agency; (b) the promissory note, loan, or mortgage provides for equal payment amounts during the life of the loan, with no deferral and no balloon payments; and (c) the promissory note, loan, or mortgage prohibits cancellation of the balance upon the death of the lender.

(4) Transactions Involving Future Performance. Any transaction that involves a promise to provide future payments or services to an applicant, member, or spouse, including but not limited to transactions purporting to be annuities, promissory notes, contracts, loans, or mortgages, is considered to be a disqualifying transfer of assets to the extent that the transaction does not have an ascertainable fair-market value or if the transaction is not embodied in a valid contract that is legally and reasonably enforceable by the applicant, member, or spouse. This provision applies to all future performance whether or not some payments have been made or services performed. (5) Additional Regulations About Transfers of Assets. Transfers of assets are further governed by 130 CMR 520.018 and 520.019.

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(H) Special-needs Trust. A special-needs trust in accordance with the trust rules at 130 CMR 520.021 through 520.024 is considered a noncountable asset.

(I) Pooled Trust. A pooled trust in accordance with the trust rules at 130 CMR 520.021 through 520.024 is considered a noncountable asset.

(J) ICF/MR Trust. A trust established before April 7, 1986, solely for the benefit of a resident of an intermediate-care facility for the mentally retarded (ICF/MR) is considered a noncountable asset.

(K) Other Assets. Any other assets considered noncountable for Title XIX eligibility purposes is considered a noncountable asset.

520.009: Countable-income Amount

(A) Overview. (1) An individual’s and the spouse's gross earned and unearned income less certain business expenses and standard income deductions is referred to as the countable-income amount. In determining gross monthly income, the MassHealth agency multiplies the average weekly income by 4.333 unless the income is monthly. (2) For community residents, the countable-income amount is compared to the applicable income standard to determine the individual's financial eligibility. (3) For institutionalized individuals, specific deductions described in 130 CMR 520.026 are applied against the individual's countable-income amount to determine the patient-paid amount. (4) The types of income that are considered in the determination of eligibility are described in 130 CMR 520.009, 520.018, 520.019, and 520.021 through 520.024. These include income to which the applicant, member, or spouse would be entitled whether or not actually received when failure to receive such income results from the action or inaction of the applicant, member, spouse, or person acting on his or her behalf. In determining whether or not failure to receive such income is reasonably considered to result from such action or inaction, the MassHealth agency will consider the specific circumstances involved.

(B) MassHealth Income Standards. Generally, financial eligibility is based on a percentage of the federal poverty level. The monthly federal poverty level standards are determined according to annual standards published in the Federal Register. The MassHealth agency adjusts these standards annually using the following formula.

(1) Divide the annual federal poverty level income standard as it appears in the Federal Register by 12. (2) Multiply the unrounded monthly income standard by the applicable federal poverty level percentage. (3) Round up to the next whole dollar to arrive at the monthly-income standards.

(C) Types of Earned Income. Earned income is the total amount of compensation received for work or services performed. Earned income includes wages, self-employment income, and payment from roomers and boarders.

(1) Self-employment Income. Gross income for the self-employed is the total amount of income listed on the most recent tax return before adjustments to income are made. A real-estate dealer, if engaged in the business of selling real estate to customers for profit, is considered to have self-employment earned income. Income from property that is owned by an individual who is not a real-estate dealer or is owned by the individual's spouse is considered unearned income. (2) Income from Roomers and Boarders. Payment for room and meals received from anyone other than the spouse of the applicant or member is countable earned income. Gross income from roomers and boarders is the amount received for the room and board, less business expenses as described at 130 CMR 520.010(B). (3) Verification of Earned Income. The applicant or member must verify gross earned income. However, if he or she is applying solely for MassHealth Buy-in, as described at 130 CMR 519.011(B): MassHealth Buy-in for Qualifying Individuals, verification is required only upon the request of the MassHealth agency. Verifications include


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(a) two recent pay stubs; (b) a signed statement from the employer; (c) the most recent U.S. tax return or self-employment income records; (d) for room and board: a statement signed by both parties stating the amount and frequency of payments; or (e) other reliable evidence.

(D) Unearned Income. Income that does not directly result from an individual's own labor or services is unearned. Unearned income includes, but is not limited to, social security benefits, railroad retirement benefits, pensions, annuities, federal veterans' benefits, rental income, interest, and dividend income. Gross rental income is the countable rental-income amount received less business expenses as described at 130 CMR 520.010(C). The applicant or member must verify gross unearned income. However, if he or she is applying solely for MassHealth Buy-In, as described at 130 CMR 519.011(B): MassHealth Buy-in for Qualifying Individuals, verification is required only upon MassHealth agency request. Verifications include

(1) a recent check stub showing gross income; (2) a statement from the income source when matching is not available; (3) for rental income: a written statement from the tenant or a copy of the lease; or (4) other reliable evidence.

(E) Lump-sum Payments. A lump-sum payment is a one-time-only payment that represents either windfall payments such as inheritances or legacies, or the accumulation of recurring countable income such as retroactive unemployment compensation or federal veterans' retirement benefits. Generally, lump-sum payments are counted as unearned income in the calendar month received and as an asset in subsequent months, except as provided in 130 CMR 520.009(E)(1).

(1) Exceptions. The following lump-sum payments are noncountable: (a) a retroactive RSDI and/or SSI benefit payment, subject to the provisions of 130 CMR 520.007(H)(1); (b) proceeds reserved for the replacement or repair of an asset that is lost, damaged, or stolen and any interest earned on such proceeds are exempt from consideration as assets for nine calendar months after the month of receipt and may be exempt for an additional nine calendar months where good cause exists; (c) proceeds from the sale of a home used as the principal place of residence provided the proceeds are used to purchase another home to be used as the principal place of residence. Such proceeds are exempt from considerations as assets for three calendar months after the month of receipt; (d) proceeds from the sale of real estate other than a home subject to the provisions of 130 CMR 520.007(G); and (e) proceeds from the sale of nonexempt vehicles subject to the provisions of 130 CMR 520.007(F).

(2) Verifications. The applicant or member must verify a lump-sum payment. However, if he or she is applying solely for MassHealth Buy-in, as described at 130 CMR 519.011(B): MassHealth Buy-in for Qualifying Individuals, verification is required only at MassHealth agency request. Verifications include

(a) a benefit or settlement award letter; (b) a retirement-fund document indicating the amount of the lump-sum payment; (c) a written statement from the agency, company, or institution making the payment; (d) a copy of the payment document; or (e) other reliable evidence.

520.010: Business Expenses

(A) Self-employment. Allowable business expenses from self-employment are those listed on Schedule C of the U.S. Tax Return form.

(B) Room and Board. For the rental of a room only, the MassHealth agency allows 25% of the income to be deducted as business expenses. For income from both room and meals, the MassHealth agency allows 75% of the income to be deducted as business expenses. The MassHealth agency allows actual expenses only if the provider can document that they exceed these standard deductions.

ADD063


520.019: continued

(G) Period of Ineligibility Due to a Disqualifying Transfer. (1) Duration of Ineligibility. If the MassHealth agency has determined that a disqualifying transfer of resources has occurred, the MassHealth agency will calculate a period of ineligibility. The number of months in the period of ineligibility is equal to the total, cumulative, uncompensated value as defined in 130 CMR 515.001: Definition of Terms of all resources transferred by the nursing-facility resident or the spouse, divided by the average monthly cost to a private patient receiving nursing-facility services in the Commonwealth of Massachusetts at the time of application, as determined by the MassHealth agency. (2) Determination of the Period of Ineligibility in Special Circumstances. The MassHealth agency determines the periods of ineligibility in the following situations.

(a) Transfers in the Same Month. When a number of resources have been transferred in the same month, the MassHealth agency calculates the period of ineligibility by dividing the total value of the transferred resources by the average monthly cost to a private patient receiving nursing-facility services in the Commonwealth of Massachusetts at the time of application, as determined by the MassHealth agency. The period of ineligibility begins on the first day of the month in which the resources were transferred. (b) Periods of Ineligibility that Overlap. When transfers of resources result in periods of ineligibility that overlap, the MassHealth agency adds the value of all the transferred resources and divides the total by the average monthly cost to a private patient receiving nursing-facility services in the Commonwealth of Massachusetts at the time of application, as determined by the MassHealth agency. The result is a single period of ineligibility beginning on the first day of the month in which the first transfer was made. (c) Periods of Ineligibility that do not Overlap. In the case of multiple transfers where the periods of ineligibility for each transfer do not overlap, the MassHealth agency considers each transfer as a separate event with its own period of ineligibility. For non-overlapping multiple transfers occurring on or after February 8, 2006, see 130 CMR 520.019(G)(2)1. (d) Periods of Ineligibility of less than One Month. If the calculated period of ineligibility is less than one month, the MassHealth agency imposes a partial-month period of ineligibility and does not round down or disregard any fractional period of ineligibility. (e) Transfer of Lump-sum Income. When income has been transferred as a lump sum, the MassHealth agency calculates the period of ineligibility on the lump-sum value. (f) Transfer of Stream of Income. When a stream of income has been transferred, the MassHealth agency calculates the period of ineligibility for each income payment that is periodically transferred. The MassHealth agency may impose partial-month periods of ineligibility. (g) Transfer of the Right to a Stream of Income. When the right to a stream of income has been transferred, the MassHealth agency calculates the period of ineligibility based on the total amount of income expected to be transferred during the nursing-facility resident’s life, according to the life-expectancy tables as determined by the MassHealth agency. (h) Transfer by the Spouse. When a transfer by the spouse results in a period of ineligibility for the nursing-facility resident, and the spouse later becomes institutionalized and applies for MassHealth agency payment of nursing-facility services, the MassHealth agency apportions the remaining period of ineligibility equally between the spouses. If both spouses become nursing-facility residents in the same month, the MassHealth agency divides the period of ineligibility equally between them. When one spouse is no longer subject to a penalty, any remaining penalty must then be imposed on the remaining nursing-facility-resident spouse. (i) Multiple Transfers Occurring on or after February 8, 2006. For transfers occurring on or after February 8, 2006, the MassHealth agency adds the value of all the resources transferred during the look-back period and divides the total by the average monthly cost to a private patient receiving long-term-care services in the Commonwealth of Massachusetts at the time of application, as determined by the MassHealth agency. The result will be a single period of ineligibility beginning on the first day of the month in which the first transfer was made or the date on which the individual is otherwise eligible for long-term-care services, whichever is later.


ADD064


520.019: continued

(3) Begin Date. For transfers occurring before February 8, 2006, the period of ineligibility begins on the first day of the month in which resources have been transferred for less than fair-market value. For transfers occurring on or after February 8, 2006, the period of ineligibility begins on the first day of the month in which resources were transferred for less than fair-market value or the date on which the individual is otherwise eligible for Mass-Health agency payment of long-term-care services, whichever is later. For transfers involving revocable trusts, the date of transfer is the date the payment to someone other than the nursing-facility resident or the spouse is made. For transfers involving irrevocable trusts, the date of transfer is

(a) the date that the countable trust resources are transferred to someone other than the nursing-facility resident or spouse; or (b) the latest of the following:

1. the date that payment to the nursing-facility resident or the spouse was foreclosed under the terms of the trust; 2. the date that the trust was established; or 3. the date that any resource was placed in the trust.

(H) Transfers of Jointly Held Resources. The MassHealth agency will determine the amount of the nursing-facility resident’s ownership interest of jointly held resources as defined in 130 CMR 515.001: Definition of Terms in accordance with the ownership rules at 130 CMR 520.005. The MassHealth agency will consider as a transfer any action taken by any person that reduces or eliminates the nursing-facility resident’s ownership or control of the resource. The MassHealth agency then will determine whether the transfer was made at less than fair-market value in accordance with the transfer rules.

(I) Transfer of Life-estate and Remainder Interest. The rules pertaining to transfer of life-estate and remainder interest apply in instances involving remainder interest of property including life estates, annuities, wills, and trusts.

(1) The MassHealth agency considers a transfer of property with the retention of a life estate, as defined in 130 CMR 515.001: Definition of Terms, to be a transfer of resources. The difference between the fair-market value of the entire asset and the value of the life estate is called the remainder interest. The remainder interest is the amount considered to be transferred at less than fair-market value. The MassHealth agency will calculate the values of the remainder interest and the life estate in accordance with the life-estate tables, as determined by the MassHealth agency. If the language of the document creating the life estate explicitly states that the owner of the life estate has the power to sell the entire property (not simply the life estate), then the creation of this type of life estate will be treated as a trust. (2) If the nursing-facility resident’s or the spouse’s life-estate interest or property including the life-estate interest is sold or transferred, the value of the life-estate interest at the time of the sale or transfer is calculated in accordance with the life-estate tables, as determined by the MassHealth agency. The MassHealth agency will attribute the value of the life-estate interest at the time of the sale or transfer to the person selling or transferring the life estate. (3) The MassHealth agency considers the purchase of a life estate in another individual’s home made on or after April 1, 2006, a disqualifying transfer, unless the purchaser resides in the home for a period of at least one year after the date of the purchase.

(J) Home Equity Loans and Reverse Mortgages. Proceeds from a home equity loan or a reverse mortgage that are transferred in the month of receipt will be considered a disqualifying transfer of resources if transferred for less than fair-market value.

(K) Exempting Transfers from the Period of Ineligibility. (1) During the Eligibility Process. To avoid the imposition of a period of ineligibility, the nursing-facility resident may take action during the determination of eligibility before the issuance of a notice of a period of ineligibility as follows.

12/20/13 (Effective 1/1/14) 130 CMR - 818

ADD065


520.019: continued

(a) The denial of MassHealth would deprive the nursing-facility resident of medical care such that his or her health or life would be endangered, or the nursing-facility resident would be deprived of food, shelter, clothing, or other necessities such that he or she would be at risk of serious deprivation. (b) Documentaryevidence has been provided that demonstrates to the satisfaction of the MassHealth agency that all appropriate attempts to retrieve the transferred resource have been exhausted and that the resource or other adequate compensation cannot be obtained to provide payment, in whole or part, to the nursing-facility resident or the nursing facility. (c) The institution has notified the nursing-facility resident of its intent to initiate a discharge of the resident because the resident has not paid for his or her institutionalization. (d) There is no less costly noninstitutional alternative available to meet the nursing-facility resident 's needs.

(2) Undue hardship does not exist when imposition of the period of ineligibility would merely inconvenience or restrict the nursing-facility resident without putting the nursing-facility resident at risk of serious deprivation. (3) Where the MassHealth agency has issued a notice of the period of ineligibility due to a disqualifying transfer of resources, the nursing-facility resident may request a hardship waiver. For transfers occurring on or after February 8, 2006, nursing facilities may apply for a hardship waiver on behalf of a resident, with the consent of the nursing-facility resident or the resident’s authorized representative. (4) If the nursing-facility resident feels the imposition of a period of ineligibility would result in undue hardship, the nursing-facility resident must submit a written request for consideration of undue hardship and any supporting documentation to the MassHealth Enrollment Center listed on the notice of the period of ineligibility within 15 days after the date on the notice. Within 30 days after the date of the nursing-facility resident's request, the MassHealth agency will inform the nursing-facility resident in writing of the undue-hardship decision and of the right to a fair hearing. The MassHealth agency will extend this 30-day period if the MassHealth agency requests additional documentation or if extenuating circumstances as determined by the MassHealth agency require additional time. (5) The nursing-facility resident may appeal the MassHealth agency’s undue-hardship decision and the imposition of a period of ineligibility by submitting a request for a fair hearing to the Office of Medicaid Board of Hearings within 30 days after the nursing-facility resident’s receipt of the MassHealth agency’s written undue-hardship notice, in accordance with 130 CMR 610.000: MassHealth: Fair Hearing Rules. (6) The nursing-facility resident’s request for consideration of undue hardship does not limit his or her right to request a fair hearing for reasons other than undue hardship.

(M) Fraudulent Transfer or Sale. If a nursing-facility resident whose estate would be subject to a claim under 130 CMR 515.011: Estate Recovery transfers or sells any property including a home or an interest in the property for less than fair-market value, the MassHealth agency may consider the transfer or sale that does not meet the conditions of 130 CMR 520.019(D)(6) to be fraudulent under the Uniform Fraudulent Conveyance Act (M.G.L. c. 109(A)) and take appropriate legal action to set aside the transfer or sale.

(N) No Double Penalty. In the event that application of the transfer rules and the trust rules in 130 CMR 520.000 results in a nursing-facility resident being subject to a transfer penalty twice for actions involving the same resource, the trust rules will supersede the transfer rules in the determination of eligibility.

520.021: Treatment of Trusts

130 CMR 520.021 through 520.024 explains how to treat the principal of and payments from a revocable or irrevocable trust established by the individual or by the spouse. 130 CMR 520.024(A) also includes trusts established by other than the individual or spouse and trusts whether or not established by will. In the event that a portion of 130 CMR 520.021 through 520.024 conflicts with federal law, the federal law supersedes.

2/28/14 (Effective 1/1/14) - corrected 130 CMR - 818.2

ADD066


520.022: Trusts or Similar Legal Devices Created before August 11, 1993

(A) Revocable Trust. The assets and income of an individual or spouse in a revocable trust are countable. The fair-market value of the home or former home of the nursing-facility resident or spouse in a revocable trust is a countable asset. Where the home or former home is an asset of the trust, the home or former home is not subject to the exemptions of 130 CMR 520.007(G)(2) or 520.007(G)(8).

(B) Medicaid Qualifying Trust. (1) A Medicaid qualifying trust is a revocable or irrevocable trust or similar legal device, created or funded by the individual or spouse, other than by a will, under which

(a) the individual is a beneficiary of all or part of the discretionary or required payments or distributions from the trust; and (b) a trustee or trustees are permitted to exercise any discretion to make payments or distributions to the individual.

(2) The maximum amount of payments or fair-market value of property that may be permitted under the terms of the trust to be distributed to the individual assuming the full exercise of discretion by the trustee or trustees for the distribution of the maximum amount to the individual is countable in the determination of eligibility. (3) The fair-market value of the home or former home of the nursing-facility resident in a Medicaid qualifying trust is a countable asset and is not subject to the exemptions described at 130 CMR 520.007(G)(2) or 520.007(G)(8).

(C) Certain Trusts Created before April 7, 1986. A trust created before April 7, 1986, solely for the benefit of a resident in an intermediate-care facility for the mentally retarded (ICF/MR) is not considered a Medicaid qualifying trust.

520.023: Trusts or Similar Legal Devices Created on or after August 11, 1993

The trust and transfer rules at 42 U.S.C. 1396p apply to trusts or similar legal devices created on or after August 11, 1993, that are created or funded other than by a will. Generally, resources held in a trust are considered available if under any circumstances described in the terms of the trust, any of the resources can be made available to the individual.

(A) Look-back Period for Transfers into or from Trusts. (1) Look-back Period.

(a) For transfers made before February 8, 2006, the look-back period is 36 months for trusts where all or any portion of the income or principal of an irrevocable trust can be paid to or for the benefit of the nursing-facility resident, but is paid instead to someone else. (b) The look-back period is 60 months

1. for transfers made on or after February 8, 2006, subject to the phase-in described in 130 CMR 520.019(B)(2), if all or any portion of the income or principal of a trust can be paid to or for the benefit of the nursing-facility resident, but is instead paid to someone else; 2. if payments are made from a revocable trust to other than the nursing-facility resident and are not for the benefit of the nursing-facility resident; or 3. if payments are made into an irrevocable trust where all or a portion of the trust income or principal cannot under any circumstances be paid to or for the benefit of the nursing-facility resident.

(2) Period of Ineligibility Due to a Disqualifying Transfer. The MassHealth agency determines the amount of the transfer and the period of ineligibility for payment of nursing-facility services in accordance with the rules at 130 CMR 520.019(G).

(B) Revocable Trusts. (1) The entire principal in a revocable trust is a countable asset. (2) Payments from a revocable trust made to or for the benefit of the individual are countable income. (3) Payments from a revocable trust made other than to or for the benefit of the nursing-facility resident are considered transfers for less than fair-market value and are treated in accordance with the transfer rules at 130 CMR 520.019(G).

12/20/13 (Effective 1/1/14) 130 CMR - 818.3

ADD067


520.023: continued

(4) The home or former home of a nursing-facility resident or spouse held in a revocable trust is a countable asset. Where the home or former home is an asset of the trust, it is not subject to the exemptions of 130 CMR 520.007(G)(2) or (G)(8).

(C) Irrevocable Trusts. (1) Portion Payable.

(a) Any portion of the principal or income from the principal (such as interest) of an irrevocable trust that could be paid under any circumstances to or for the benefit of the individual is a countable asset. (b) Payments from the income or from the principal of an irrevocable trust made to or for the benefit of the individual are countable income. (c) Payments from the income or from the principal of an irrevocable trust made to another and not to or for the benefit of the nursing-facility resident are considered transfers of resources for less than fair-market value and are treated in accordance with the transfer rules at 130 CMR 520.019(G). (d) The home or former home of a nursing-facility resident or spouse held in an irrevocable trust that is available according to the terms of the trust is a countable asset. Where the home or former home is an asset of the trust, it is not subject to the exemptions of 130 CMR 520.007(G)(2) or (G)(8).

(2) Portion not Payable. Any portion of the principal or income from the principal (such as interest) of an irrevocable trust that could not be paid under any circumstances to or for the benefit of the nursing-facility resident will be considered a transfer for less than fair-market value and treated in accordance with the transfer rules at 130 CMR 520.019(G).

(D) Exemptions to the Trust Rules. (1) Special-needs Trusts and Pooled Trusts. Under federal trust exemption regulations at 42 U.S.C. 1396(p)(d)(4) special-needs trusts and pooled trusts as defined in 130 CMR 515.001: Definition of Terms are not subject to the income and asset countability rules at 130 CMR 520.023(B) and (C). (2) Revision of a Trust to Comply with the Criteria of a Special-needs or Pooled Trust. The MassHealth agency will not deny or terminate MassHealth due to excess assets if a trust is revised to comply with the criteria of a special-needs trust or a pooled trust in accordance with the rules at 130 CMR 520.019(J). (3) Burial Trust. A burial trust is a trust established to pay solely for various funeral and burial expenses of the individual or the spouse. An irrevocable burial trust meeting the criteria of 130 CMR 520.008(F) is not a countable asset.

520.024: General Trust Rules

130 CMR 520.024 applies to trusts whether or not established by will and whether or not established by the individual or spouse.

(A) Irrevocable Trust. (1) The assets and income held in an irrevocable trust established by the individual or spouse that the trustee is required to distribute to or for the benefit of the individual are countable. (2) Payments from the income or principal of an irrevocable trust established by the individual or spouse to or for the benefit of the individual are countable. (3) The assets and income held in an irrevocable trust established by other than the individual or spouse that the trustee is required to distribute to the individual are countable. (4) Payments from the income or the principal of an irrevocable trust established by other than the individual or spouse to the individual are countable.

(B) Home in Trust: Community-based Individuals. For an applicant or member who is not a nursing-facility resident, the principal place of residence held in a revocable or irrevocable trust is a noncountable asset. A home that is not the principal place of residence is countable and not subject to the exemptions of 130 CMR 520.007(G)(2) while an asset of the trust.

2/28/14 (Effective 1/1/14) - corrected 130 CMR - 818.4

ADD068

940 CMR: OFFICE OF THE ATTORNEY GENERAL

940 CMR 4.00: LONG TERM CARE FACILITIES

Section

4.01: Definitions 4.02: Unfair or Deceptive Acts or Practices: General 4.03: Non-Discriminatory Access to Quality Care 4.04: Admission Contracts 4.05: Charges 4.06: Privacy and Other Personal Rights 4.07: Personal Funds and Belongings 4.08: Medical Treatment and Information 4.09: Discharge and Transfers 4.10: Severability 4.11: Effective Date

The Attorney General of the Cpmmonwealth of Massachusetts promulgates 940 CMR 4.00 pursuant to authority grante<;I to him under M.G.L. c. 93A, § 2(c). 940 CMR 4.00 is designed to promote the protecti,cin, comfort, health and well-being of consumers of services provided by long-term care facilities, to be consistent with existing legal standards, and to be as responsive as possible to the constraints and administrative realities under which long term care facilities operate.

940 CMR defines certain unfair or deceptive acts or practices. However, 940 CMR is not intended to be all inclusive as to the types of activities prohibited by M.G.L. c. 93A § 2(a) and 940 CMR does not legitimize acts not specifically prohibited by 940 CMR 4.00. For example, long term care residents should be .protected against all forms of discrimination, including, but not limited to, discrimination on the basis of disability or source of payment. 940 CMR 4.00 is designed to supplement existing statutes and regulatjons; the Attorney General plans to work and cooperate with other state and federal agencies in enforcing 940 CMR 4.00 and other regulations.

· 4.01: Definitions

10/21/94

Additional Services: services provided by a long-term care facility that are not included in the basic per diem rate or are not included under Titles XVIII or XIX of the Social Security Act

Administrator: the person charged with the general administration of a nursing home, rest home, or other long-term care facility, and his/her agents or employees, as further defined in 105 CMR 150.000: Licensing of Long Term Care Facilities.

Clear- and Conspicuous Tvoe: shall mean printed typeface no smaller than 12 point print.

Emergency: a situation in which the resident's medical or psychological condition requires immediate medical attention or treatment; the existence of an emergency shall be determined by a physician, except that if a physician is not readily available, the existence of an emergency may be determined ·by the person on the premises of the long-term care facility who is in charge of the facility's medical or nursing services at the time that the situation giving rise to the emergency occurs or is about to occur.

Facilitv: a long-term care facility as defined in 940 CMR 4.01(9).

Legal Representative: shall mean, for any resident adjudged incompetent under the laws of the Commonwealth, the person dulyappeinted by-a-cowt -Of competent jurisdiction· to act on the resident's behalf, and, for any resident who has not been adjudged incompetent by a state court, any legal-surrogate designated in accordance with state law.

( .

940 CMR - 29 ADD069


4.01: continued

10/21/94

Licensee: any person, corporation, or other entity holding at least a 10% ownership interest in a facility that is licensed by the Department of Public Health as a long-term care facility and his/her or its agents or employees.

Long-Term Care Facility: any institution or distinct part of an institution, whether conducted for charity or profit, which is advertised, announced or maintained for the express or implied purpose of providing three or more individuals admitted thereto with long-term resident, nursing or convalescent care, supervision and care incident to old age for ambulatory persons, or retirement home care for elderly persons; the term long-term care facility shall include but . not be limited to residential care facilities, convalescent or rest homes, infirmaries maintained in towns, and charitable homes for the aged; an institution licensed by the Department of Public Health to provide chronic disease or rehabilitative services under M.G.L. c. 111, § 51 is not a "long term cru.:e facility" hereunder except, however, if and when any such institution provides or has provided chronic disease or rehabilitative care and services to one or more individuals for a period of 60 days .. or longer, such institution shall be deemed a long term care facility hereunder with only to such individual or individuals residing in it for 60 days or longer and only for, the purpose of affording such individual or individuals the protections set forth in 940 CMR 4.06(1), (3)(d), (4) through (6), (9), (10), (12) through (21); 4.07(1) through (3), (8), (9), (11), (12); 4.08(2) through (13), (15) through (17); and 4.09(6) through (8). ·

Private Facility: a long-term care facility that admits, or provides services to, only private or self-paying residents and does not provide services pursuant to, or have any contract with Medicare, Medicaid, SSI, Veteran's Benefit or any other public benefit program.

Private Resident: a resident of a· long-term care facility whose stay in the facility at any given time is not paid for, either in whole or in part, by public funds pursuant to the Social Security Act (Medicaid or Medicare), SSI, Veteran's Benefit, or any other public. benefit program.

Resident: any individual or patient residing or rece1vmg care in a long-term care facility;except, however, any individual or patient residing or receiving care in an institution licensed by the Department of Public Health under M.G.L..c. 111, § 51 to provide chronic disease or rehabilitative services for a period of 60 days or longer shall be deemed a "resident" and shall be entitled to the protections afforded by 940 CMR 4.06(1), (3)(d), (4) through (6), (9), (10), (12) though (21); 4.07(1) through (3), (8), (9), (11), (12); 4.08(2) through (13), (15) through (17); and 4.09(6) through (8).

Social Security Act: Titles XVIII and XIX of the Social Security Act.

Third Partv: shall mean a licensee or administrator, employee or agent of the licensee or administrator, next of kin, son, daughtei:, granddaughter, grandson, niece, nephew, social/case worker, or duly designated agent of the Department of Public Health, the Department of Mental Retardation, or the State Long-Term Care Ombudsman.

Treatment: any medication, drug, test or procedure conducted or administered for the purpose of diagnosing or treating a physical or mental illness or condition.

Written Acknowledgement: a signed statement by a resident or his/her legal representative, preserved in the resident's personal· file, stating that he/she has received a copy of thedocuments required to be tendered to him/her; if a resident is unable or unwilling to sign his/her name, the licensee or administrator-may satisfy the requirement of-wnuen acknowledgement by placing a wri''''D and dated statement in the resident's personal records which receipt o,f the docv .. •3nts and the resident's ability or unwillingness to sign his/her name; such statement mu:;, be signed by the person who tendered the required documents to the resident and by a witness thereto and must include a detailed explanation of the resident's)nability or unwillingness to sign his/her name.

940 CMR - 30 ADD070


4.01: continued

Written Authorization: a written statement, signed by the resident or his/her legal representative, in which the resident authorizes the licensee or administrator, the resident's legal representative or a third party to perform certain specified acts on behalf of the resident; the authorization shall be dated and shall include:

(a) the specific act or acts authorized by the resident; (b) the period of time that the resident authorizes the particular act or acts, if applicable; and (c) the name of the person to whom certain records or other information is authorized to be made available; if the resident is unable to sign his/her name, a licensee or administrator or a third party may satisfy the requirements of a written authorization by submitting a dated statement that contains the information required by 940 CMR 4.01(18)(a) through (c); the statement must also include the name and signature of the person to whom the resident made the oral authorization and the name and signature of · a person who has witnessed the resident's oral authorization.

Written Request: a statement signed by the resident or his/her legal representative that states that the resident requests one or more specified services for a certain period of time; such a statement must include the charge for each such service; if a legal representative is not available to sign the statement and if the resident is unable to sign his/her name, a licensee or administrator may satisfy the requirements fcir a written request by placing in the resident's

. personal records a written and dated statement, signed by both the person receiving the request for the service or services and a witness to that request, that states: ·

(a) the service or services requested by the resident; (b) the charge for such service or services, if any; ( c) the period of time for which the resident has requested such service or services; and (d) that the resident was unable to sign his/her name to request such service or services and that his/her legal representative was not available to sign the written request

4.02: Unfair or Deceptive Acts or Practices: General

10/21/94

It shall be an unfair or deceptive act or practice, in violation of M.G.L. c. 93A, § 2, for a licensee or an administrator:

(1) to fail to comply with any existing state or federal statute, rule or regulation which provides protection to or for residents or prospective residents of long-term care facilities;

(2) to fail or refuse to inform the resident, both orally and in writing, in clear and conspicuous type, in a language the resident understands, as evidenced by the resident's written acknowledgement, and to inform his/her legal representative or next of kin:

(a) that the facility has written policies, including, but not limited to, policies regarding the rights and responsibilities of residents; and (b) the subject of each such policy;

(3) to fail or refuse to furnish a copy of any policy referred to in 940 CMR 4.02(2), printed in clear and conspicuous type, to the resident and his/her legal representative or next of kin as evidenced by the resident's written acknowledgement; the disclosures required hereby shall be made no later than 30 days after the effective date of 940 CMR 4.00 for those residents then residing in the facility, and for new residents, at the time of their admission to the facility; disclosure shall also be made annually thereafter at such times as the policies are reissued or amended and upon request by the resident or his/her legal representative or next of kin at any time during the resident's stay in the facility;

940 CMR - 31 ADD071

940 CMR: OFFICE OF IBE ATTORNEY GENERAL

4.02: continued

( 4) to fail or refuse to inform the resident both orally and in wnnng, in clear and conspicuous type, in a language the resident understands, as evidenced by the resident's written acknowledgement, and his/her legal representative or next of kin that the Attorney General has promulgated regulations relating to the conduct of licensees and administrators, and to fail or refuse to furnish a copy of 940 CMR 4.00 printed in clear and conspicuous type, to any resident and his/her legal representative or next of kin, as evidenced by the resident's written acknowledgement; the disclosures required hereby in 940 CMR 4.02(3) shall be made within 30 days after the effective date of 940 CMR 4.00 for those residents then residing in the facility; for new residents, such disclosures shall be made at the time of their admission to the long-term care facility; disclosure to each resident shall also be made annually thereafter and at any time the resident makes a request for 940 CMR 4.00; in the case of a resident adjudged incompetent, the facility may satisfy the requirements of 940 CMR through (4) by making a reasonable effort to inform the resident of his/her rights under 940 CMR 4.00 and by satisfying the requirements pertaining to notification of his/her legal representative;

(5) to fail or refuse, at the time of admission and, again at the earliest date on which the · facility has reason to believe that the resident may become eligible for the Massachusetts Medical Assistance Program (hereafter "Medicaid"), if later, to inform the resident, both orally and in writing, in a language the resident understands, and inform his/her legal representatives or next of kin, of the requirements and procedures for establishing eligibility for services provided by Medicaid, including the resident's right to complete a Division of Medical Assistance assessment of spousal assets form as of the date of admission; or to fail or refuse to provide a Division of Medical Assistance Medicaid assessment form and application form upon admission and again later, if requested by the resident, his/her legal representative or next of kin;

(6) to· fail or refuse to post prominently and conspicuously a copy of 940 CMR 4.00 and · a copy of the facility's written policies relating to the rights and responsibilities of residents, in each identifiable unit in the facility as defined in 105 CMR 150.000; such regulations and policies shall be printed in clear and conspicuous type;

(7) to fail or refuse to inform the resident, both orally and in writing, in clear and conspicuous type, in a language· the resident understands, and to fail or refuse to inform his/her legal representative or next of kin upon the resident's admission and at the time of transfer, if any, of the duration of Medicaid's bed-hold policy and the facility's policy regarding medical, therapeutic and personal leaves of absence and the Medicaid requirement, in the event that any such leave exceeds the bed-hold period, that the facility readmit the resident immediately to the first available bed in a semi-private room if the resident requires the facility's services;

(8) in the case of a private facility, to fail or refuse to disclose in writing to a resident and his/her legal representative or next of kin, that the resident may be transferred or discharged if the resident ceases to be a private resident; the disclosure required hereby in 940 CMR 4.02(9) shall be made at the time of the resident's admission to the facility, annually thereafter and upon request of the. resident, his/her legal representative or next of kin;

(9) to fail or refuse to respond promptly and fully to all inquiries relating to any of the policies, regulations or procedures established by the facility which are made by a resident, his/her legal representative or next of kin at any time during the resident's stay in the facility.

4.03: Non-Discriminatorv Access to Long-Term Care

10/21/94

It shall be an unfair and deceptive act or practice, in violation of M.G.L. c. 93A, § 2, for a licensee or an administrator of a long-term care facility that is a party to a Medicaid provider agreement:

940 CMR - 32 ADD072


4.03: continued

(1) to discriminate against any Medicaid recipient or person eligible or soon-to-be-eligible to receive Medicaid benefits, who is seeking admission to the facility, on the basis of his/her current or anticipated source of payment;

(2) to require, directly or indirectly, any resident or applicant for admission to waive his/her rights to benefits under the Medicaid program. Examples of such impermissible conduct include, but are not limited to:

(a) requiring an applicant to agree to pay private rates for a specified period of time prior to applying for Medicaid benefits; (b) charging, soliciting, accepting, or receiving, in addition to any amount otherwise required to be paid pursuant to the Medicaid program, any gift, money, donation, or other consideration either as a precondition of admitting or expediting the admission of a Medicaid eligible applicant to, or as requirement for a resident's continued stay in, the· facility;' .

(3) to fail or refuse to provide an appropriate admission application form to each person, his/her legal representative or next of kin or to a third party authorized to act for the person · seeking admission to a facility, immediately upon request, or, if the request is made in writing or by telephone, to mail such application form within two business days following receipt of the request therefor; · ·

(4) to render or offer assistance in the preparation of applications or in any facet of the admission process to private pay applicants in a manner greater than that rendered or offered to Medicaid recipients;

(5) Nothing contained herein shall be construed to bar: (a) any religious .or denominational institution or organization established for charitable or educational purposes, which is operated, supervised or controlled by or in connection with a religious organization from limiting admission to or giving preference to persons of the same religion or denomination, or from making such selection as is calculated by such organization to promote the religious principles for which it was established or is maintained, provided, however, that such admissions or preferences shall not be based on any qualified applicant's status or lack of status as a recipient or prospective recipient of Medicaid; or . (b) any organization operated for charitable purposes and within the constraints of an existing corporate charter pursuant to 26 U.S.C. § 50l(c)(3), from limiting admission to or giving preference to certain qualified applicants in accordance with the provisions of said charter, provided, however, that such admissions or preferences shall not be based on any qualified applicant's status or lack of status as a recipient or prospective recipient of Medicaid.

4.04: Admission Contracts

10/21/94

It shall be an unfair or deceptive act or practice, in violation of M.G.L. c. 93A, § 2, for a licensee oi: an administrator:

(1) to require a resident or a prospective resident, his/her legal representative or next of kin, as a condition of admission, expedited admission, or continued stay in the facility, to provide a third party guarantee of payment to the facility;

(2) to require a resident or a prospective resident, his/her legal representative or next of kin, as a condition of admission, expedited admission, or continued stay in the facility, to designate a third party to be responsible for giving authorization and consent on behalf of any resident, unless such resident has been adjudged incompetent by a court of law; however, nothing in 940 CMR 4.04(1) and (2) should be construed to require that an applicant be admitted who has no source of payment;

940 CMR - 33 ADD073

940 CMR: OFFICE OF TIIE ATTORNEY GENERAL

4.04: continued

(3) to require a resident or a prospective resident, his/her legal representative or next of kin, as a condition of admission, expedited admission, or continued stay in the facility, to agree to waive or limit the facility's liability for loss of personal property or any injury suffered as a result of negligence on the part of the administrator or of the facility's employees or agents;

( 4) to require a resident or a prospective resident, his/her legal representative or next of kin, as a condition for admission, expedited admission, or continued stay in the facility, to agree to treatment by a physician chosen by the facility or otherwise to limit the resident's right to choose his/her attending physician;

(5) to require a resident or a prospective resident, his/her legal representative or next of kin, as a condition of admission, expedited admission, or continuing stay in the facility, to purchase medications at or from a pharmacy chosen by the facility, or to otherwise limit the resident's right to select a pharmacy of his/her choice, provided that the prescription complies with all relevant regulations governing pharmacy labeling;

(6) to include, as part of the facility's admission contract, any documents printed (a) in less than 12 point print, and (b) other than in a language which the prospective resident understands;

(7) to require a resident or a prospective resident, his/her legal representatlve or next of kin, to agree, as a condition of admission, expedited admission, or continued stay in the facility, to pay attorney's fees or any other costs incurred in collecting payment from the resident;

(8) to require a resident or a prospective resident, his/her legal representative or next of kin, as a condition of admission, expedited admission, or continued stay in the facility at any time after admission, to waive any benefit or right conferred by any statute or regulation intended to provide protection to or for residents of any long-term care facility;

(9) without limiting the provisions of 940 CMR 4.05(10), to require a resident or a prospective resident, his/her legal representative or next of kin, as a condition for admission, expedited admission, or continued stay in the facility, to.provide any non-refundable deposit.

4.05: Charges

10/21/94

It shall be an unfair or deceptive act or practice, in violation of M.G.L. c. 93A, § 2, for a licensee or administrator:

(1) to fail or refuse to inform a resident, both orally and in writing, in clear and conspicuous type, in a language the resident understands, and to fail or refuse to inform his/her legal representative or next of kin the time of admission to the facility, and at least every year thereafter during the resident's stay, of any of the following:

(a) services available in the facility and charges for those services, including any charges for services not covered under Medicare and Medicaid or by the facility's per diem rate; (b) the existing basic per diem rate, applicable to the resident, charged by the licensee and all the services included in that rate; (c) except in the case of private residents, the services available to the resident that are covered by the Social Security Act, but that are not included in the basic per diem rate (e.g., telephone, television, personal clothing, etc.); however, such disclosures shall be made to each private resident at the time when he/she ceases to be a private resident;

(2) to fail or refuse to inform each resident, both orally and in writing, in clear and conspicuous type, in a language the resident understands, and to fail or refuse to inform his/her legal representative or next of kin when changes are made to the items and services specified in 940 CMR 4.05(1);

(3) to impose, seek to impose, or collect a charge in addition to the basic per diem rate for services included in the basic per diem rate;

940 CMR- 34 ADD074

940 CMR: OFFICE OF THE A TIORNEY GENERAL

4.05: continued

( 4) to charge, or collect payment from, a resident, his/her legal representative or next of kin for services covered by the Social Security Act for that resident;

(5) to fail or refuse to provide all the services included in the basic per diem rate, except those services not medically required by the resident which are included in the basic per diem rate;

(6) to charge for services not actually rendered to a resident, except that a licensee or administrator may charge for medical services included in the basic per diem rate that are not medically required by the resident during a particular billing period; or to fail to return to the resident, his/her legal representative, or, when appropriate, the resident's estate, any advance payments made for services not rendered as a result of the resident's death or transfer from the facility; however, the facility may require a private resident or a third party acting on ·his/her behalf to give two days advance notice of a voluntary transfer;

(7) to provide and charge for additional services, except for medical services required in an emergency, which are not included in the per diem rate, without prior written request for those services by the resident or his/her legal representative or next of kin;

(8) to fail or refuse to permit a resident, his/her legal representative or next of kin to receive, upon request, a reasonable explanation of the charge[s] or bill[s] for the resident's

·care in the facility, regardless of the source of payment;

(9) ill the case of a private resident, to mcrease the basic per diem rate without written notification to the resident and his/her legal representative of the higher rate; such notification shall be given not less than. 60 days prior .to the effective date of the higher rate so as to insure an orderly transfer of the resident if the resident cannot afford the higher rate.

(10) to demand that any private resident pay, at or prior to his/her admission to the facility, any security deposit that is greater than the total of one month's per diem charges or to fail or refuse:

(a) to give the resident, his/her legal representative or next of kin a signed receipt indicating the amount of the security deposit, the date received, and the employee or agent of the facility who received it; (b) to place said deposit in an interest-bearing escrow account in a bank located within the Commonwealth under such terms that place such deposit beyond the claim of creditors of the facility; (c) to provide the resident, his/her legal representative or next of kin with the name of the bank and the account number where the security deposit is located; (d) to preserve the security deposit intact unless the resident fails to pay for services which he/she requested, which were provided by the facility, and which remained unpaid after having been invoiced in accordance with the facility's regular procedure for two successive months; however, a licensee or administrator may apply the security· deposit to outstanding charges for a resident who has spent down his/her assets and is otherwise eligible for Medicaid without invoicing for two successive months; (e) to return said deposit, plus accrued interest, to the resident, or his/her legal representative or estate within 30 days of said resident's discharge, transfer or death, unless deductions, duly accounted for, have been made in accordance with 940 CMR 4.05(10)(e);. (f) to return said deposit, plus accrued interest, to the resident, or his/her legal representative or estate, within 30 days of receipt of notice of the resident's eligibility for Medicaid, provided that the resident is eligible for Medicaid coverage of long term care services.

4.06: Privacy and Other Personal Rights

It shall be an unfair or deceptive act or practice, in violation of M.G.L. c. 93A, § 2, for a licensee or an administrator: , ·

10/21/94 940 CMR - 35 ADD075

940 CMR: OFFICE OF TIIE ATTORNEY GENERAL

4.06: continued

10/21/94

(1) to fail or refuse to assure a resident privacy during medical examination or treatment or during care for his/her personal needs such as bathing, dressing and toileting;

(2) to fail or refuse to permit married residents living in the same facility to share a room, if both spouses so consent;

(3) to fail or refuse to permit immediate access to a resident, subject to the resident's right to deny or withdraw consent at any time, by the following:

(a) the resident's individual physician; (b) any representative of the Secretary of the U. S. Department of Health and Human Services; (c) any duly appointed designee of the State Long ·Term Care Ombudsman; (d) any representative of a state agency responsible for maintaining the health, safety· and welfare of such residents, including but not limited to

1. the agency responsible for facility licensure or reimbursement; 2. the agency responsible for the protection and advocacy system for developmentally disabled individuals; 3. the agency responsible for the protection and advocacy system for mentally ill individuals;

(4) to fail or refuse to permit immediate access to any resident, subject to the resident's right to deny or withdraw consent at any time, by immediate family or other relatives of the resident; ·

(5) to fail or refuse to permit immediate access to any resident, subject to reasonable restrictions and the resident's right to deny or withdraw consent at any time, by others who are visiting with the consent of the resident;

(6) to fail or refuse to permit reasonable access to any resident by any entity or individual that provides health, social, legal, or other services to the resident, subject to the resident's right to deny or withdraw consent at any time;

(7) to fail or refuse to permit representatives of the State Long-Term Care Ombudsman or a representative of a community advocacy group certified by the Office of Elder Affairs, to examine a resident's clinical records with the permission of the resident or the resident's legal representative;

(8) to fail to allow a resident to communicate privately with a duly designated representative of the State Long-Term Care Ombudsman;

(9) to fail or refuse to permit a resident private and unrestricted communications with his/her spouse, physician, representative of the clergy, attorney or legal representative;

(10) to fail or refuse to assure a married resident privacy during visits by his/her spouse;

(11) to fail or refuse to provide at least 48 hours advance written notice, excluding weekends and holidays, to a resident before the resident's roommate is changed, except .in an emergency .situation;

(12) to fail or refuse to assure the resident the right to meet with or participate in activities of social, religious and community groups at his/her discretion, provided that such activities do not interfere with the rights of other residents in the facility;

(13) to fail or refuse to provide a resident with privacy in written communications, which includes:

(a) the right to send and promptly receive mail that is unopened; (b) the right to have access to stationery, postage and writing implements at the resident's own expense;

940 CMR - 36 ADD076


4.06: continued

(14) to fail or refuse to assure reasonable access to a telephone where calls can be made and received without being overheard;

(15) to fail or refuse to permit a resident to present grievances free from restraint, interference or coercion, discrimination or reprisal, on both his/her own behalf or on behalf of others, to the facility's staff, to government officials ineluding, but not limited to, a representative of the Department of Public Health or a duly appointed designee of the State Long-Term Care Ombudsman, if applicable, or to any other person;

(16) to fail to take prompt action to resolve any grievance presented by a resident or his/her legal representative, or to fail to respond promptly, to the extent possible, to all requests or inquiries made by a resident, his/her legal representative, or a duly appointed designee of the State Long Term Care Ombudsman;

(17) to fail to provide and post, in each identifiable unit, or, in the case of institutions providing chronic disease or rehabilitative services to individuals for 60 days or more, in each unit in which such individuals reside, the names, addresses and telephone numbers of all pertinent State agencies such as the Department of Public Health, Division of Medical Assistance, the State Long-Term Care Ombudsman, the Office of the Attorney General (including .both the Medicaid Fraud Control Unit and the Consumer Protecrl:on Division), and the local legal services office to which residents may direct complaints br charges of abuse, neglect and misappropriation of personal property or violation of 940 CMR 4.00 e( seq.;

(18) to require a resident to perform services for the facility that are not included for therapeutic purposes in the resident's plan of care; except that a resident may perform voluntary service or services in the.facility for reasonable consideration when:

(a) the facility has documented the need or desire for work in the plan of care; (b) the plan specifies the nature of the services performed· and whether the services are voluntary or paid; (c) if paid, compensation is at or above prevailing rates; and (d) the resident agrees to the work arrangement described in the plan of care;

(19) to fail or refuse to permit a resident to interact and join with other residents or individuals within or outside of the facility;

(20) to fail or refuse to provide a resident reasonable access to individuals or representatives of community' groups that provide health, social or other services, subject to the resident's right to deny or withdraw consent at any time.

(21) to fail or refuse to provide access to the facility at reasonable hours to individuals or representatives of community groups or other groups who seek to provide legal services to residents without charge to the residents.

4.07: Residents' Personal Funds and Belongings

10/21/94

It shall be an unfair or deceptive act or practice, in violation of M.G.L. c. 93A, §'2, for a licensee or an administrator:

(1) to require any resident to deposit his/her personal funds with the facility;

(2) to fail or refuse to permit a resident to manage his/her personal financial affairs;

(3) to fail or refuse, upon a resident's written authorization, to hold, safeguard, manage, and account for the personal funds of the resident deposited with the facility, as specified in 940 CMR 4.07(4) through (7) or, for residents of chronic disease and rehabilitation hospitals, as defined by 940 CMR 4.01(12);

940 CMR 36.l ADD077


4.07: continued

(4) to manage a resident's personal funds without either his/her written authorization to do so or the written authorization of his/her legal representative; the written authorization shall contain the information required by 940 CMR 4.01(17) and shall include specification of the funds over which the licensee or administrator shall have control;

(5) in the event that any resident or his/her legal representative provides the facility with written authorization to manage personal funds, -to fail to:

(a) deposit a resident's personal funds in excess of $50, in an interest-bearing escrow account, separate from any of the facility's operating accounts, that credits all interest .earned on resident's funds to that account, and is in a bank located within the Commonwealth, under such terms as will place such deposit beyond the claims of creditors of the licensee, including a receiver or trustee in bankruptcy; (b) miµntain a resident's funds that do not exceed $50 in a bearing escrow account, an interest-bearing escrow account, or in a petty cash fund; (c) to provide the resident, his/her legal representative or next of kiri with the name of the bank and the account number where any funds of the resident are deposited; (d) provide the resident with his/her personal funds to spend upon his/her request.

(6) if the licensee or administrator manages a resident's personal funds, to fail or refuse to establish and maintain a system that assures ·a full and complete and separate accounting according to generally accepted accounting principles of each resident's personal funds entrusted to the facility on the resident's behalf; to fail or refuse to provide an individual financial record which shall include a written record of all financial transactions and documentation of all interest earned thereon; such record must be available through quarterly statements and on request to the resident, his/her legal representative or next of kin;

(7) to fail or refuse to permit a resident to rescind at any time his/her written authorization that the licensee or administrator manage his/her personlil funds;

(8) except in the case of a private resident, if a resident's personal funds are managed by the facility, to fail to notify the resident and his/her next of kiri or legal representative when such funds are within $200 of the amount that could result in a loss of eligibility for Medicaid or SSI under 42 CFR § 483.10(c)(5)(i) through (ii) and any applicable state regulation; ·

(9) to fail or refuse to· permit a resident to retain and use personal possessions, including some furnishings and appropriate clothing as space permits, unless to do so would infringe upon rights or health and safety of other residents;

(10) to fail to· provide adequate and secure storage space to each resident for his/her personal property as well as individual ;iccess to a private storage area, which shall include, but need not be limited to, a private; individually locked drawer or box to which the resident shall have sole control of the key, except that the administrator or a designee shall hold a master key t? such locked spaces;

(11) to fail or refuse to upon the death or transfer of a resident, the resident's personal funds which had been deposited with the facility and a final accounting of those funds either to the resident, legal representative, or the individual administering the resident's estate, within 30 busiriess days of said resident's transfer or death.

(12) to permit any commingling of resident funds with facility funds or with the funds of any person other than another resident.

4.08: Medical Treatment and Information

10/21/94

It shall be an. unfair or deceptive act or practice, in violation of M.G.L. c. 93A, § 2, for a licensee or an administrator:

940 CMR 36.2 ADD078


4.08: continued

10/21/94

(1) to fail or refuse to permit a resident to choose his/her personal attending physician;

(2) to fail or refuse to permit a resident to be fully informed in advance about care and treatment and of any changes in care or treatment that may affect the resident's well being;

(3) to fail or refuse to permit a resident to participate in the planning of his/her care and treatment or in decisions relating to changes in such care or treatment; where a resident has been adjudged incompetent under Massachusetts state law, his/her legal representative shall act on his/her behalf;

(4) to fail or refuse to inform each resident of the name, specialty, and way of contacting the physician responsible for his or her care;

(5) to fail or refuse to permit a resident or his/her legal representative, upon an oral or written request, to access within 24 hours all records pertaining to himself/herself including current clinical records except if otherwise prohibited by law;

(6) to fail or refuse to permit a resident, after receipt of his/her records for inspection, to purchase at a cost not to exceed the community standard, photocopies of the records or any portions thereof upon request and two working days advance notice; for residents who are entitled to receive such photocopies free of charge pursuant to state or federal law, to fail or refuse to provide such photocopies free of charge;

(7) to fail or refuse to inform the resident or· his/her legal representative, in a language the resident understands, of the resident's total health status, including, but not limited to, his/her medical condition;

(8) to fail or refuse to permit a resident to refuse treatment, to refuse to participate in experimental research, and to formulate an advance directive; to fail or refuse to comply with an advance directive, except if otherwise prohibited by law;

(9) if a resident refuses treatment or drugs, to fail or refuse to make prompt and good faith efforts to obtain information from qualified sources about the likely consequences of a resident's refusal to receive the treatment or drugs or to fail or refuse to provide the resident with that information as soon a.S possible;

(10) to fail or refuse to respond promptly, to the licensee's or administrator's best .knowledge, to any inquiry by the resident relating to anything in his/her medical or personal record;

(11) to fail or refuse to permit any person who has a resident's written authorization to examine, at reasonable times, all the medical and personal records relating to such resident, or to fail or refuse to respond promptly, to the extent of the licensee's or administrator's best knowledge, to any inquiry made by the person who has the resident's written authorization relating to anything in the resident's medical or personal records; ·

(12) to release a resident's personal or medical record to any individual outside the facility without the prior written authorization of the resident or his/her legal representative except in case of his/her transfer to another health care institution or as required by law or third-party contract;

(13) to fail or refuse to immediately inform the resident, consult with the resident's physician, and, if known, notify the resident's legal representative or next of kin when there is:

(a) an accident involving the resident which results in injUry and has the potential for requiring physician intervention;

940 CMR 36.3 ADD079

940 CMR: OFFICE OF THE A 'ITORNEY GENERAL

4.08: continued

(b) a significant change in the resident's physical, mental or psychosocial status, (e.g., a deterioration in health, mental, or psychosocial status in either life-threatening conditions or clinical complications); (c) a need to alter treatment significantly (e.g., a need to discontinue an existing form of treatment due to adverse consequences, or to commence a new form of treatment);

(14) to fail or refuse to permit a resident to purchase necessary drugs or personal items at the pharmacy of his/her choice, provided that the prescription complies with all relevant regulations governing pharmacy labeling;

(15) to fail or refuse to effectuate the right of any resident to be free from any physical or chemical restraints, except in accordance with state and federal law;

(16) to fail or refuse to effectuate the right of any resident to be free from verbal, sexual, physical and mental abuse, corporal punishment, and involuntary seclusion;

(17) to fail or refuse to ensure that all alleged violations involving mistreatment, neglect, or abuse, including injuries of unknown source and misappropriation of resident property are reported immediately to the administrator of the facility and other officials in accordance with state law through established procedures;

· (18) to administer or permit the administration of any psychotropic drug to any resident who has not been adjudged incompetent to make treatment decisions concerning him/herself without:

(a) obtaining the resident's informed consent and written authorization to do so, and (b) following a written plan Of treatment which has been prepared by the resident's physician and is designed to eliminate or modify the symptoms for which the drugs ate prescribed;

(19) to administer or permit the administration of any psychotropic drug to any resident who has been adjudged incompetent of making treatment decisions other than pursuant to a ::ourt-ordered substituted judgment establishing a treatment plan in accordance with the standards set forth in Rogers v. Commissioner of Department of Mental Health, 390 Mass. 489 (1983), and subsequent case law.

4.09: Discharge and Transfers

10/21/94

It shall be an unfair or deceptive act or practice, in violation of M.G.L. c. 93A, § 2, for a licensee or administrator ·

(1) to fail, in discharging or transferring a resident of a nursing facility, to comply with the Division of Medical Assistance regulations at 130 CMR 610.000 et seq., or any substitute or further amended regulations promulgated by any successor state agency. Under 940 CMR 4.00, the obligation of a licensee or administrator includes but is not limited to providing a resident with advance written notice of the discharge or transfer, which notice shall ll.iclude a statement informing the resident of his or her right to request a hearing before the Division of Medical Assistance. A licensee or administrator may discharge or transfer a resident only for one or more of the reasons set forth in 130 CMR 610.220(A).

(2) to discharge or transfer a resident, when a state or federal agency refuses, or ceases to authorize payment for a Medicare or Medicaid resident until all administrative appeals have been exhausted;

(3) to discharge or transfer a resident without documentation of the reason for such discharge or transfer in the clinical record by the resident's attending physician, unless the health or safety of individuals in the nursing facility would be endangered, in which case the reason for such discharge or transfer may be documented by a physician.

940 CMR 36.4 ADD080

940 CMR: OFFICE OF IBE A ITORNEY GENERAL

4.09: continued

10/21/94

(4) to move a resident to different living quarters within the facility, contrary to the resident's wishes, except to meet the resident's health care or safety needs which otherwise could not be met, as documented in the resident's clinical record by his/her attending physician;

(5) to fail or refuse to readmit to the facility's next available bed in a semi-private room, a resident receiving or eligible to receive public assistance who had been transferred for hospitalization or therapeutic leave and whose absence exceeded the authorized bed-hold leave if that resident requires the facility's services; to fail or refuse to readmit to the facility's next available bed in a semi-private room, a resident who had been transferred for hospitalization or therapeutic leave if that resident requires the facility's services;

(6) to fail to discuss the planned discharge or transfer from the facility with the resident and ·his/her legal representative or next of kin.

(7) to fail to consult the resident and his/her family or legal representative in choosing another facility, and to take all reasonable steps to implement the resident's choice of such facility;

(8) in an institution licensed by the Department of Public Health to provide chronic disease or rehabilitative services to a resident as defined by 940 CMR 4.01(12) .

(a) to fail or refuse to provide, except in the case of an emergency discharge or transfer, seven days advance written notice to the resident of a discharge or transfer; such written notice shall include:

1. the date of the discharge or transfer; 2. the location to which the resident is to be discharged or 3. the reason for the discharge or transfer; 4. a statement informing the resident of.his/her right to request a hearing before the Division of Medical Assistance; 5. the name, address and phone number of the local legal services office;

(b to fail or refuse to document for each resident who is to be discharged, a written discharge plan that specifies the services or care to be required by the resident, the frequency, intensity, and duration of sue) services, and the resources available to provide the care or services, including· available family and community support; such a plan must be updated if the resident's condition changes significantly;

(9) in a facility licensed by the Department of Public Heillth as a residential care facility, convalescent or rest home, infinnary maintained in a town, or charitable home for the aged -to fail or refuse to provide, except in the case of an emergency discharge or transfer, 30 days

advance written· notice to the resident of an anticipated discharge or transfer, such written notice shall include:

(a) sufficient explanation for the discharge or transfer, including the facility's plans and procedures for discharge or transfer; (b) a statement that the resident has the right to express objection to his/her discharge or transfer to a representative of the facility; · ( c) the specific . address of the location to which the resident is to be discharged or transferred; (d) a statement that all reasonable efforts have been taken by representatives of the facility to provide counseling to the resident to prepare him/Iler to adjust to any discharge or transfer; (e) the name, address and phone number of the local legal services office; (f) a statement that all reasonable precautions have been taken to eliminate or reduce any harmful effects that may result from the discharge or transfer.

940 CMR 36.5

ADD081


4.10: Severability

If any provision of 940 CMR 4.00 or the application of such provision to any person or circumstance shall be held invalid, the validity of the remainder of 940 CMR 4.00 and the applicability of such provision to any other person or circumstance shall not be affected thereby.

4.11: Effective Date

940 CMR 4.00 shall become effective on October 21, 1994.

REGULATORY AUTHORITY

940 CMR.4.00: M.G.L. c. 93A, § 2(c).

10/21/94 940 CMR 36.6

ADD082

A beneficiary generally does not have the power to terminate a trust. However, the trust may be aresource to the beneficiary in the rare instance where he or she has the authority to terminate the trustand gain access to the trust assets. In addition, the beneficiary may, in rare instances, have theauthority under the trust to direct the use of the trust principal. ﴾The authority to control the trustprincipal may be either specific trust provisions allowing the beneficiary to act on his or her own or bypermitting the beneficiary to order actions by the trustee.﴿ In such a case, the beneficiary's equitableownership in the trust principal and his or her ability to use it for support and maintenance means it isa resource.

The beneficiary's right to mandatory periodic payments may be a resource equal to the present valueof the anticipated string of payments unless a valid spendthrift clause ﴾see SI 01120.200B.16.﴿ or otherlanguage prohibits anticipation of payments.

While a trustee may have discretion to use the trust principal for the benefit of the beneficiary, thetrustee should be considered a third party and not an agent of the beneficiary, i.e., the actions of thetrustee are not the actions of the beneficiary, unless the trust specifically states otherwise.

Trustee

Occasionally, a trustee may have the legal authority to terminate a trust. However, the trust is not aresource to the trustee unless he or she becomes the owner of the trust principal upon termination.The trustee should be considered a third party. Although the trustee has access to the principal for thebenefit of the beneficiary, this does not mean that the principal is the trustee's resource. If the trusteehas the legal authority to withdraw and use the trust principal for his or her own support andmaintenance, the principal is the trustee's resource for SSI purposes in the amount that can be used.

Totten trust

The creator of a Totten trust has the authority to revoke the financial account trust at any time.Therefore, the funds in the account are his or her resource.

2. Trusts which are not resources

If an individual does not have the legal authority to revoke or terminate the trust or to direct the use ofthe trust assets for his or her own support and maintenance, the trust principal is not the individual'sresource for SSI purposes.

The revocability of a trust and the ability to direct the use of the trust principal depend on the terms ofthe trust agreement and/or on State law. If a trust is irrevocable by its terms and under State law andcannot be used by an individual for support and maintenance ﴾e.g., it contains a valid spendthriftclause; see SI 01120.200B.16.﴿, it is not a resource.

3. Revocabilit y of grantor trusts

Some States follow the general principle of trust law that if a grantor is also the sole beneficiary of atrust, the trust is revocable regardless of language in the trust to the contrary.

ADD083

ADD084

ADD085

ADD086

ADD087

ADD088

,

Findings of Fact

Based on a preponderance of the evidence, I find the following:

1. The appellant is under the age of 65.

2. The appellant is disabled and lives in the community.

3. The appellant was previously eligible for MassHealth Standard because of her disability andbecause her income was under 133% of the federal poverty level.

4. Pursuant to their 2009 separation agreement, the appellant's former husband is required topay alimony of $420 per week. The separation agreement requires that amount be paid intoa trust, which was created on the same date of the divorce judgment

5. The separation agreement was incorporated into a Judgment of Divorce entered by theProbate and Family Court on July 1, 2009.

6. In February 2010, MassHealth tenninated the appellant's benefits for failure t return aneligability review fonn. The appellant filed a timely appeal of the tennination notice, andhearing was scheduled for May 13, 2010.

7. At the time of the May 13, 2010, hearing, the issue of the missing review form bad beenresolved, and MassHealth proceeded to make an eligibility determination. MassHealthfound that the appellant's alimony income was countable, resulting in a detennination thather total monthly income exceeded the limit for MassHealth Standard.

8. At the May 2010, hearing, the parties agreed that the appellant's counsel would have 60days to make revisions to the trust and submit it to the MassHealth legal unit for review.MassHealth agreed to reopen the appellant's benefits retroactive to February 17, 2010, andto keep her case open pending the legal unit's review of the revised trust.

9 . . Tue_appU' tl9f!ley, in nsultation with the appellant's guardians after the May 2010 hearing, opted not to revise the trust.

10. On January 4, 2011, MassHealth reviewed the appellant's eligibility and again determinedthat her monthly income exceeds the limit for MassHealth Standard benefits.

11. The appellant filed a timely appeal, and the appellant's MassHealth Standard benefits haveremained in place pending the appeal.

Page 6 of Appeal No.: 1102569

ADD089

Analysis and Conclusions of Law

At issue in this appeal is MassHealth's detennination that alimony payments made to a tnist on the appellant's behalf are considered countable income, thereby rendering her financially ineligible for

· benefits.7 MassHealth regulations at 130 CMR 506.003 generally define "countable income" toinclude the following:

(A) Gross Earned Income.(1 )Gross earned income is the total amount of compensation received for work or

services performed without regard to any deductions. (2)Gross earned income for the self-employed is the total amount of business income

listed or allowable on a U.S. Tax Return.(3)Seasonal income is income derived from _an income source that is associated with a

particul e .. of the year. Annual gross income is dividJ>y 12 to obtain amonthly gross income with the following·exceptioiis: if the applicant or member has a disabling illness· or accident during or after the seasonal employment period that prevents the person's continued or future employment, only current income will be considered in the eligi'bility determination.

(8) Gross Unearned Income. (1 )Gross unearned income is the total amount of income that does not directly result

from the individual's own labor before any income deductions are made. (2)Uneamed income includes, but is not limited to, social security benefits, ·railroad

retirement benefits, pensions, annuities, federal veterans' benefits, and interest anddividend income.

(C) Rental Income. Rental income is the total amount of gross income less any deductionslisted or allowable on an applicant's or member's U.S. Tax Return.

The regulations at 130 C:MR 506.004 also descn'be specific types of income that are considered "noncountable" for eligibility pwposes:

(A). fucome rei.vd by a Transioal. Aid to Families v<lth Dependent Children (f AFDC), Emergency Assistance for the .. Eideriy;- Disabled' and-chlidien. ·(.EAB.oc;;··or-Soc1aT - - -· - - -. Security Insurance (SSI) recipient;

(B) Sheltered workshop earnin;

7 As described above, the dispute here originally centered around the trust itself, and specifically whether it met (or even needed to meet) the regulatory requirements of a special needs trust. In the post-hearing briefs, the debate drifted away from the contours of the trust and toward the question of whether the alimony income is countable. This decision focuses on the latter issue.


ADD090

(C) The portion of federal veterans' benefits identified as aid and attendance benefits,Wll'eimbursed medical expenses, housebound benefits, or enhanced benefits;

(D) Income-in-kind;

(E) Roomer and boarder income derived from person's residing in the applicant's ormember's principal place of residence;

(F) Any other income that is excluded by fed laws other than the Social Secwity Act; and

(G) Income received by independent foster care adolescents described at 130 CMR.505.002(1().

Although MassHealth regulations do not specifically identify alimony as a form of income, the parties agree that, consistent with federal law, alimony payments are typically considered countaole income for .Medicaid eligibility purposes. The appellant's attorney, however, argues that a distinction must be made between alimony that is paid directly to an ex-spouse and payments that are made indirectly, such as into a trust. While there does not appear to be anything in the MassHealth regulations which addresses this unusual situation, the appellant's attorney pointed to a provision in the Social Security Administration's Program Operations Manual System (POMS) that is on point. Once again, that POMS provision states as follows:

A legally assignable payment ... that is assigned to a trust/trustee, is income for SSI puiposes unless the assignment is irrevocable. For example, child support or alimony payments paid directly to a trust/trustee as a result of a court order, are not income. If the assignment is revocable, the payment is income to the individual legally entitled to receive it. (POMS SI 01120.200(G)(l )(d)).

The second sentence of the paragraph appears to address precisely the circumstances of this case, where alimony payments are paid directly to a trust or trustee as a result of a court order. 8 As the appellant's attorney noted, federal law requires that the methodology used to detennine income and resource eligibility for Medicaid can be no more restrictive than the methodology which would be

- - -- - - 'einploye<f ooaer-tlie·ssrprogram: See"42 USC 1396al"O)C)(i)(III): · By the tetm tift1f1s 1'0MS - - - - ·· -provision, therefo, the alimony payments made to the trust should not be considered countable income for pwposes of her Medicaid eligibility.

This appeal is approved.

8 The court order in this case is the Judgment of Divorce issued by the Probate and Family Court, whichincorporated the separation agreement executed by the parties to the divorce action. The separation agreement includes a provision under which the alimony payments are made to the trust on the appellant's behalf. See Exhibit 12.


ADD091

Order for MassHealth

Deem the alimony payments made to the trust on the appellant's behalf to be non-countableincome. Remove aid pending protection, and redetermine her MassHealth eligibility in accordancewith this decision.

Implementation of this Decision

-

If trud1:lecision is not implemented within 30 days after the date of this decision, you should contactyour MassHealth Enrollment Center. If you experience problems with the implementation of thisdecision, you should report this in writing to the Director of the Board of Hearings at the address onthe first page of this decision.

'kc±J.' Rebecca Brochstein Hearing Officer Board of Hearin

cc: Tewksbury MEC Neal A. Winston, Esq., Moschella & Winston, LLP, 440 Broadway, Somerville, MA 02145

Page 9 of Appeal No.: 1102569 ·

ADD092

Office of MedicaidBOARD OF HEARINGS

Appellant Name and Address:

Appeal Decision: Approved; Remand Appeal Number: 1215864

Decision Date: 3/7/13 Hearing Date: 11/26/2012

Hearing Officer: Marc Tonaszuck Record Open to: 01/18/2013

Appellant Representative: MassHealth Representative:Cristin Rossini

The Commonwealth of MassachusettsExecutive Office of Health and Human Services

Office of MedicaidBoard of Hearings

100 Hancock Street, Quincy, Massachusetts 02171

ADD093

APPEAL DECISION

Appeal Decision: Approved; Remand Issue:

Decision Date: 3/7/13

MassHealth Rep.: Cristin Rossini

Hearing Date:

Appellant Rep.:

Long Term Care

11/26/2012

Hearing Location: Springfield MassHealth Enrollment Center

Authority

This hearing was conducted pursuant to Massachusetts General Laws Chapter 118E,Chapter 30A, and the rules and regulations promulgated thereunder.

Jurisdiction

Through a notice dated 07/12/2012, MassHealth denied appellant's application forMassHealth long term care (LTC) benefits because MassHealth determined that assetsheld in trust are countable and exceed program limits (130 CMR 520.003, 520.023;Exhibit 1). The appellant filed this appeal in a timely manner on 07/25/2012 (130 CMR610.015(6); Exhibit 2). A hearing was scheduled to take place at the SpringfieldMassHealth Enrollment Center (MEC) on 10/29/2012; however, it was rescheduled totake place on 11/26/2012 because the MEC was closed due to inclement weather(Exhibits 3A and 3B). Denial of assistance is valid grounds for appeal (130 CMR610.032).

Action Taken by MassHealth

MassHealth denied appellant's application for MassHealth long-term care benefits.

Issue

The appeal issue is whether MassHealth was correct, pursuant to 130 CMR 520.003,520.023, in determining that assets held in trust are countable to appellant and exceedprogram limits.


ADD094

Summary of Evidence

The MassHealth representative testified that the appellant, an 83 year old widow, entereda skilled nursing facility on 07/26/2006. A MassHealth long term care application wassubmitted on her behalf on 05/31/2012, seeking MassHealth eligibility beginning05/24/2012 (Exhibit 5). Since she was first institutionalized, the appellant privately paidfor her care until 05/24/2012. On 07/12/2012, MassHealth denied appellant's applicationdue to assets of $503,807.00, that were in excess of the $2,000.00 program limits. Thecountable assets are comprised of $607.00 in cash in a bank account and $503,200.00 ofreal estate held in trust and deemed countable to appellant (Exhibit 1).

At issue is a trust executed by the appellant on 12/07/2006 (Exhibit 6). The trust is anirrevocable trust and appellant is the grantor of the trust. On or about 12/07/2006, theappellant transferred her real estate to the trust, her son being appointed as trustee.Trust provisions include the following uncontested provisions:

Article First (C) states that "this trust is irrevocable..."Article Second states that

The trust property shall be disposed of in the following manner:A) During the life of the appellant, the trustees shall periodically distribute as much of

the net income as they in their sole discretion deem necessary to or for the benefitof the appellant. There shall be no distribution of principal to or for the benefit ofthe appellant during her lifetime.

B) The appellant reserves to herself the right to reacquire particular trust assets bysubstituting assets of equal value.

C) 1. The appellant shall have the right to reside at the home owned by the trust, forthe rest of her life; PROVIDED, however, that she is mentally, physically, andfinancially able to maintain the property and voluntarily chooses to do so.2. The trustees shall not sell or otherwise dispose of or encumber said residencewithout the written consent of the appellant or her personal representative whichmay include her guardian, conservator or agent servicing with a valid power ofattorney.

D) 1. In lieu of paying rent to the trust, the appellant shall be solely responsible forthe payment of all home equity and mortgage loans, utilities, insurance, real estatetaxes and normal maintenance and cosmetic repairs for as long as she shalloccupy the property...

F) Upon the death of the appellant, the trustees shall administer and distribute theprincipal, accumulated and undistributed net income of the trust property accordingto the then current schedule of beneficial interest executed and filed with thetrustees. Once such distribution has been completed, the trust shall be terminatedand appropriate notice recorded in any registry of deeds in which this trust orcertificate of trust is recorded, if necessary.

G) The appellant shall have a special power of appointment of the trust principal.This power may be exercised only in favor of the appellant's children and other


ADD095

issue, and the spouses of such children and other issue, in such amounts,proportions and manner, in trust or otherwise, as the holder of the power maydesignate. The holder of the special power of appointment may not exercise thesame in favor of herself, her creditors, her estate or the creditors of her estate.Such power may be exercised by will, trust or separate writing duly signed by theappellant, and duly notarized...

Article Tenth states that the appellant expressly waives any and all rights which she mayhave, by operation of law or otherwise, to revoke, amend or otherwise change thisdeclaration of trust or any of the provisions hereof. The appellant may, however, fromtime to time change the schedule of beneficial interest referred to in Article Second,paragraphs E and F.

Through a legal opinion submitted at hearing, and through a reply to the appellant'sresponse to the legal opinion, MassHealth analyzed the trust under provisions of 42 USC§ 1396p(d), and 130 CMR 520.023(0), as the trust is irrevocable and dated after 1993.Specifically, MassHealth argues that under 130 CMR 520.023(C)(1)(a), 42 USC §1396p(d)(3)(B)(i); and 42 USC § 1396p(d)(2)(B), 42 USC § 1396p(d)(2)(C)(ii), there arecircumstances under the trust provisions that would allow appellant to access the corpusof the trust, and therefore the resources are considered available and countable toappellant. Citing Doherty v. Director of the Office of Medicaid, 74 Mass. App. Ct. 439,443 (2009), MassHealth argues that although Article Second of the trust states that theappellant does not retain any interest in trust principal, the countability of trust principal isnot predicated on merely one trust provision, and the whole of the instrument must bereviewed. MassHealth notes that pursuant to Article Second (C) of the trust, appellanthas a right to live in the property held in trust for so long as she desires and is able;pursuant to Article Second (G), the appellant has the power to appoint the trust principalto her children and grandchildren; and Article Tenth, she retains the power to change theschedule of beneficiaries. MassHealth asserts that these powers render the trustprincipal within appellant's control. MassHealth also asserts that the appellant has controlover the principal under Article Second of the trust that states that she can reacquireparticular trust assets by substituting assets of equal value. Citing Cohen v. Comm'r.Division of Medical Assistance. 423 Mass. 399, 416 (1996), MassHealth argues thatbecause there are circumstance under which principal can be made available or used forappellant's benefit, the trust principal is countable in determined appellant's MassHealtheligibility (Exhibits 7 and 10).

In a post hearing memorandum, appellant counsel asserts that the appellant wasexercising her right to arranger her affairs in any manner she chose prior to the 60-monthMedicaid look back period. He further argues that the trust assets are not available to theappellant and should not be countable in an eligibility determination. The trust allows fordiscretionary distributions of income to the appellant, and as such the income from thetrust is countable; however, there have been no such disbursements to the appellant.The trust gives no latitude to the trustee to distribute principal and the trustee has no


ADD096

combination of powers that would make a distribution of principal possible withoutviolating both the terms of the trust and the trustee's fiduciary duty. Although theappellant had the right to live in the property held in the trust, it is not available to her.MassHealth must look at all terms of the trust and read them together to understand themeaning of the trust, citing Doherty v. Director of the Office of Medicaid. 74 Mass.App.Ct.439 (2009). Additionally, the appellant's special power of appointment dose not give hercontrol or ownership over the trust property, especially because the power expresslyprohibits her form exercising the power in favor of herself, her creditors, her estate, or thecreditors of her estate. Finally, counsel argues that the trustee power to convert theprincipal into an income producing asset has no effect on the trust (Exhibits 9 and 11).

Findings of Fact

Based on a preponderance of the evidence, I find the following:

1. Appellant is an 83 year old widow who entered a skilled nursing facility on07/26/2006.

2. A MassHealth long term care application was submitted on her behalf on05/31/2012, seeking MassHealth eligibility beginning 05/24/2012.

3. On 07/12/2012, MassHealth denied appellant's MassHealth application due toassets in excess of program limits comprised of $607.00 in cash held in a bankaccount and $503,200.00 in real estate held in trust and deemed countable toappellant (Exhibit 1).

4. On 12/07/2006, appellant transferred her real estate consisting of two parcels, tothe trust, with her son serving as trustee.

5. The trust is an irrevocable trust and appellant is the grantor of the trust.

6. Appellant's husband predeceased the creation of the trust.

7. Article First (C) of the trust states that "this trust is irrevocable..."

8. Article Second states that "the trust property shall be disposed of in the followingmanner:

A) During the life of the appellant, the trustees shall periodically distribute as muchof the net income as they in their sole discretion deem necessary to or for thebenefit of the appellant. There shall be no distribution of principal to or for thebenefit of the appellant during her lifetime.B) The appellant reserves to herself the right to reacquire particular trust assets bysubstituting assets of equal value.


ADD097

C) 1. The appellant shall have the right to reside at the home owned by the trust,for the rest of her life; PROVIDED, however, that she is mentally, physically, andfinancially able to maintain the property and voluntarily chooses to do so.

2. The trustees shall not sell or otherwise dispose of or encumber saidresidence without the written consent of the appellant or her personalrepresentative which may include her guardian, conservator or agent servicing witha valid power of attorney.D) 1. In lieu of paying rent to the trust, the appellant shall be solely responsible forthe payment of all home equity and mortgage loans, utilities, insurance, real estatetaxes and normal maintenance and cosmetic repairs for as long as she shalloccupy the property...F) Upon the death of the appellant, the trustees shall administer and distribute theprincipal, accumulated and undistributed net income of the trust property accordingto the then current schedule of beneficial interest executed and filed with thetrustees. Once such distribution has been completed, the trust shall be terminatedand appropriate notice recorded in any registry of deeds in which this trust orcertificate of trust is recorded, if necessary.G) The appellant shall have a special power of appointment of the trust principal.This power may be exercised only in favor of the appellant's children and otherissue, and the spouses of such children and other issue, in such amounts,proportions and manner, in trust or otherwise, as the holder of the power maydesignate. The holder of the special power of appointment may not exercise thesame in favor of herself, her creditors, her estate or the creditors of her estate.Such power may be exercised by will, trust or separate writing duly signed by theappellant, and duly notarized..."

Article Tenth of the trust states that the appellant "expressly waives any and allrights which she may have, by operation of law or otherwise, to revoke, amend orotherwise change this declaration of trust or any of the provisions hereof. Theappellant may, however, from time to time change the schedule of beneficialinterest referred to in Article Second, paragraphs E and F."


In the case at hand, there are no factual disputes; rather, the issues revolve around theinterpretation of the language of the various trust provisions involved. The trust isproperly considered in the context of both state and federal law applying to trusts createdafter 1993, of which pertinent sections follow:

Federal law at 42 U.S.C. 1396p (d)(3)(B)(i) states:

In the case of an irrevocable trust, if there are any circumstances underwhich payment from the trust could be made to or for the benefit of theindividual, the portion of the corpus from which, or the income on thecorpus from which, payment to the individual could be made shall be


ADD098

considered resources available to the individual, and payments from thatportion of the corpus or income (emphasis added).

Regulation 130 CMR 520.023 applies to trusts or similar legal devices created on orafter August 11,1993, and follows in pertinent part:



(a) Any portion of the principal or income from the principal (such asinterest) of an irrevocable trust that could be paid under anycircumstances to or for the benefit of the individual is a countable asset.

(b) Payments from the income or from the principal of an irrevocabletrust made to or for the benefit of the individual are countable income.

(c) Payments from the income or from the principal of an irrevocabletrust made to another and not to or for the benefit of the nursing-facilityresident are considered transfers of resources for less than fair-marketvalue and are treated in accordance with the transfer rules at130CMR520.019(G).

(d) The home or former home of a nursing-facility resident or spouseheld in an irrevocable trust that is available according to the terms of thetrust is a countable asset. Where the home or former home is an assetof the trust, it is not subject to the exemptions of130 CMR 520.007(G)(2) or 520.007(G)(8).

(2) Portion Not Payable. Any portion of the principal or income from theprincipal (such as interest) of an irrevocable trust that could not be paidunder any circumstances to or for the benefit of the nursing-facility residentwill be considered a transfer for less than fair-market value and treated inaccordance with the transfer rules at 130 CMR 520.019(G).

Following is a summary of the powers and provisions pursuant to the Trust:

Article First (C) states that "this trust is irrevocable..."

Article Second states thatThe trust property shall be disposed of in the following manner:

A) During the life of the appellant, the trustees shall periodically distribute as much ofthe net income as they in their sole discretion deem necessary to or for the benefitof the appellant. There shall be no distribution of principal to or for the benefit ofthe appellant during her lifetime.


ADD099

B) The appellant reserves to herself the right to reacquire particular trust assets bysubstituting assets of equal value.

C) 1. The appellant shall have the right to reside at the home owned by the trust, forthe rest of her life; PROVIDED, however, that she is mentally, physically, andfinancially able to maintain the property and voluntarily chooses to do so.

D) 2. The trustees shall not sell or otherwise dispose of or encumber said residencewithout the written consent of the appellant or her personal representative whichmay include her guardian, conservator or agent servicing with a valid power ofattorney.1. In lieu of paying rent to the trust, the appellant shall be solely responsible forthe payment of all home equity and mortgage loans, utilities, insurance, real estatetaxes and normal maintenance and cosmetic repairs for as long as she shalloccupy the property...

F) Upon the death of the appellant, the trustees shall administer and distribute theprincipal, accumulated and undistributed net income of the trust property accordingto the then current schedule of beneficial interest executed and filed with thetrustees. Once such distribution has been completed, the trust shall be terminatedand appropriate notice recorded in any registry of deeds in which this trust orcertificate of trust is recorded, if necessary.

G) The appellant shall have a special power of appointment of the trust principal.This power may be exercised only in favor of the appellant's children and otherissue, and the spouses of such children and other issue, in such amounts,proportions and manner, in trust or otherwise, as the holder of the power maydesignate. The holder of the special power of appointment may not exercise thesame in favor of herself, her creditors, her estate or the creditors of her estate.Such power may be exercised by will, trust or separate writing duly signed by theappellant, and duly notarized...

Article Tenth states that the appellant expressly waives any and all rights which she mayhave, by operation of law or otherwise, to revoke, amend or otherwise change thisdeclaration of trust or any of the provisions hereof. The appellant may, however, fromtime to time change the schedule of beneficial interest referred to in Article Second,paragraphs E and F.

As the MassHealth attorney states, "Congress and courts have recognized and rejectedthe use of trusts as devices to shelter assets for the benefit of the family members whilesimultaneously obtaining taxpayer funded Medicaid benefits.1" See Exhibit 10. The

1 The MassHealth attorney cites and summarizes the holding in the following cases: Cohen v.Commissioner of Div. of Med Assistance, 423 Mass. 399, 416 (1996) (explaining that the rulefor self-settled trusts is addressed to an arrangement "concocted for the purpose of having yourcake and eating it too), Doherty v. Director of the Office of Medicaid, 74 Mass. App. Ct. 439,443 (2009) (Medicaid applicants are prohibited from receiving public health care assistancewhile also preserving assets for their heirs through the use of a trust which purported to cut offapplicant's ability to access the trust principal), Victor v. Massachusetts Executive Office of


ADD100

Massachusetts Supreme Court and the Appellant Courts have provided guidance in theinterpretation of the federal and state laws regarding trusts. While appellant correctlynotes that the court in Doherty v. Director of the Office of Medicaid does recognize thatassets held in trust can be so insulated as to render the assets non countable in adetermination of Medicaid eligibility, the "any circumstances" test mandated by bothfederal and state law does effectively create a presumption that a self-settled, inter vivostrust established by an applicant or spouse or funded with an applicant's assets iscountable in an eligibility determination.2 I find in this case, the trust provisions,considered collectively,3 do not create circumstances, not even a peppercorn, in whichthe appellant can exercise discretion to access trust principal.

The following facts are clear and undisputed. The appellant is the grantor of the trust andher son is the trustee. The date of the transfer of the real estate into the trust was prior tothe 60-month look back period from the date the appellant applied for MassHealthbenefits. The value of the real estate held in the trust is $503,200.00. The appellant hasaccess to the income from the trust; and up until the date of the hearing, there has beennone.

MassHealth argues that the provisions of the trust give the appellant the power andcontrol over the principal, making the total value available to her under somecircumstances. Counsel for the appellant denies the assertion and argues that none ofthe principal is available to the appellant. I agree with appellant's counsel. The appellantcannot, without violating a provision of the trust, take back the real estate held in the trust,unless she replaces it with something of equal value. Likewise, the trustee cannot conveythe real estate back to the appellant without violating the trust or his fiduciary duties.Accordingly, I find that the language of the trust does not violate the regulations or caselaw and as such, the principal of the trust is not countable in a long term care eligibilitydetermination.

This appeal is approved and remanded for MassHealth to make an eligibilitydetermination.

health & Human Services, Mass. App. Ct. 1, 28 Decision 09-P-1361 (July 21, 2010) (Courtupheld the Agency's determination that a trust established by the applicant's husband duringhis lifetime but funded by the husband's Last Will & Testament, was nonetheless countable tothe applicant in an eligibility determination; and Lebow v. Commissioner of Div. of Med.Assistance, 433 Mass. 171, 173 (2000), (Medicaid applicants are expected to deplete their ownresources before obtaining assistance from the government).2 See Cohen, "if there is a peppercorn of discretion, then whatever is the most the beneficiarymight under any state of affairs receive in the full exercise of that discretion is the amount thatis counted as available for Medicaid eligibility."3 See Doherty. a "clause may not be read in isolation; rather, it must be construed and qualifiedin light of the trust instrument as a whole."


ADD101


Rescind the denial notice dated 07/12/2012. Redetermine eligibility based on anapplication date of 05/31/2012. Do not count the principal of the trust. Notify appellant ofeligibility. Include appeal rights.


If this decision is not implemented within 30 days after the date of this decision, youshould contact your MassHealth Enrollment Center. If you experience problems with theimplementation of this decision, you should report this in writing to the Director of theBoard of Hearings at the address on the first page of this decision.

Marc TonaszuckHearing OfficerBoard of Hearings

cc: MassHealth Representative: Maryellen Sullivan

Page 9 of Appeal No.; 1215864

ADD102

The Commonwealth of Massachusetts

Executive Office of Health and Human Services Office of Medicaid Board of Hearings


Office of Medicaid BOARD OF HEARINGS


Appeal Decision: Denied Appeal Number: 1306280


Hearing Officer: Thomas J. Goode Record Open to: 07/24/2013

Appellant Representative: MassHealth Representative: Peter O’Rourke

ADD103

of Appeal No.: 1306280

APPEAL DECISION

Appeal Decision: Denied Issue: Excess Assets


MassHealth Rep.: Peter O’Rourke Appellant Rep.:

Hearing Location: Tewksbury MassHealth Enrollment Center Room 1

Aid Pending: No

Authority This hearing was conducted pursuant to Massachusetts General Laws Chapter 118E, Chapter 30A, and the rules and regulations promulgated thereunder. Jurisdiction Through a notice dated March 27, 2013, MassHealth terminated appellant’s MassHealth benefits because MassHealth determined that assets held in Trust are countable and exceed program limits (see 130 CMR 520.003, 520.023 and Exhibit 1). The appellant filed this appeal in a timely manner on April 16, 2013 (see 130 CMR 610.015(B) and Exhibit 2). Denial of assistance is valid grounds for appeal (see 130 CMR 610.032). The hearing record remained open until July 24, 2013 to allow the parties to submit legal memoranda, which were timely received (Exhibits 8, 9). Action Taken by MassHealth MassHealth terminated appellant’s MassHealth benefits because MassHealth determined that assets held in Trust are countable and exceed program limits. Issue

ADD104


The appeal issue is whether MassHealth was correct, pursuant to 130 CMR 520.023, in determining that assets held in Trust are countable to appellant. Summary of Evidence The MassHealth representative testified that appellant entered a skilled nursing facility on November 4, 2011. MassHealth long term care benefits were approved retroactive to June 1, 2011. Appellant had reported to MassHealth the existence of an irrevocable Trust established by the appellant in 2003. As part of a MassHealth asset verification project, the Trust was reviewed; and assets held in Trust were deemed countable to appellant. As a result, MassHealth issued notice terminating appellant’s MassHealth long term care benefits. On April 28, 2003, for consideration of $100, appellant conveyed title of her former residence to an irrevocable Trust. Appellant retained a life estate in the real estate. Appellant is the Grantor, and her daughter is the Trustee. Appellant is the income beneficiary of the Trust. There is no community spouse. The assessed value of the property held in the Trust is $212,423. The Trust provides the following: Article Second A. reads: “The Trustee shall pay to the Grantor all of the net income of the Trust, quarterly or more often, for the remainder of the Grantor’s life. Article Second B. reads: “During the life of the Grantor the Trustee may distribute part or all of the principal of this Trust to any persons (other than the Grantor) otherwise entitled to the assets of this Trust after the death of the Grantor.” Article Second C. reads: “The Grantor reserves the power, exercisable at any time or from time to time, by written instrument during the Grantor’s lifetime or by the Grantor’s will or any codicil thereto, to appoint any part or all of the principal or income of this Trust to any one or more of the Grantor’s issue, free of trust of (sic) otherwise, referring specifically to this special power of appointment in such written instrument, will, and/or codicil.” Article Eighth reads: “In addition to the powers given to the Trustee in this Trust Agreement or by law, the Trustee shall have the following powers in each case to be exercised in his, her or its sole discretion, upon such terms as he, she or it deems advisable and without leave of any court” and enumerates in part the following Trustee powers:

(A) to make or retain any investment, without notice to or the consent of any interested third party;

(D) to make secured and unsecured loans; (F) to buy, sell, pledge, lease or mortgage any real or personal property and to borrow money, whether for the purpose of paying premiums or making distributions; (J) to purchase life insurance; (M) to borrow money for any purpose and to pledge securities or other property to secure the

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loan; (O) to determine issues as to income and principal; (T) to do any other act which in the judgment of the Trustee is necessary or desirable for the administration of the Trust. Article Ninth reads: The Grantor intends that this trust be a grantor trust for federal income tax purposes and all provisions of this trust shall be construed so as to effectuate this intent. A. Upon the demand by (Appellant’s name), the Trustee shall transfer any trust assets in

exchange for assets of equivalent value. This power is exercisable by (Appellant’s name) solely in a nonfiduciary capacity, and no fiduciary duty imposed upon the Trustee or any other person may be asserted as a defense to the exercise of the powers granted under this Article.

B. (Appellant’s name) may waive this power by a writing delivered to a Trustee and such waiver shall bind (Appellant’s name), the Trustee, and all other persons.

Article Tenth allows the Trustee to pay all or any portion of estate, inheritance or other death taxes, both federal and state, which are payable by reason of the Grantor’s death. Article Fourteeth allows any Trustee to resign. Following the death, resignation, or incapacity of the Trustee, a successor Trustee shall be appointed by a majority of the income beneficiaries at the time of such appointment; provided however, that any successor Trustee shall not be the Grantor or the Grantor’s spouse. MassHealth analyzed the Trust under provisions of 42 USC §1396p(d), and 130 CMR 520.023(C), as the Trust is irrevocable and dated after 1993. Specifically, MassHealth argues that there are circumstances under the Trust provisions that would allow appellant to access the corpus of the Trust, and therefore the resources are considered available and countable to appellant. Pursuant to 130 CMR 520.023(C)(1)(d), appellant’s former home is held in an irrevocable trust that is available to appellant as the income beneficiary; and therefore at a minimum, the home held in Trust is countable to appellant. Citing Cohen v. Comm’r, Division of Medical Assistance, 423 Mass. 399, 416 (1996), and Lebow v. Commissioner of Div. of Med. Assistance, 433 Mass. 171, 177-178 (2000): MassHealth argues that because there are circumstances under which principal can be made available or used for appellant’s benefit, the Trust principal is countable in determining appellant’s MassHealth eligibility. Also citing Doherty v. Director of the Office of Medicaid, 74 Mass. App. Ct. 439, 443 (2009), MassHealth concludes that the Trust is countable because the Trustee and the appellant as Grantor have broad powers to deal with Trust assets. MassHealth argues that under Paragraph C. of the Second Article, appellant retained a power of appointment exercisable during her life or by Will to appoint any part or all of the income and principal, and that such a provision demonstrates that appellant as Grantor did not divest herself of the Trust corpus. Moreover, under the Ninth Article, appellant retained the right to reacquire any Trust assets by substituting property of an equivalent value; and under the Tenth Article, principal may be used for the appellant’s estate or inheritance

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taxes. Under the Eighth Article, MassHealth asserts that there is no restriction on the Trustee’s ability to convert the Trust principal to income producing property such as an annuity, which would then be payable to appellant as the income beneficiary. MassHealth further asserts that pursuant to Paragraph A of the Second Article, appellant as Grantor is entitled to distributions of Trust income, which is countable in an eligibility determination. Therefore, pursuant to 130 CMR 520.023(C)(1)(d), MassHealth asserts that the availability of Trust income renders the former home a countable asset. In a response memorandum, appellant asserts that there are no circumstances under 42 U.S.C. §1396p(d)(3)(B)(i), and §1396p(d)(3)(B)(i), and in contrast with Cohen and Lebow, that would allow appellant access to Trust principal, because the Trustee, appellant’s daughter, lacks discretion to pay principal to appellant, and because under Article Fourteenth, appellant as Grantor is specifically precluded from serving as a Trustee.1 Appellant counsel argues that appellant is specifically precluded from receiving Trust assets under the Second Article. In addition, the only asset received by the Trust was appellant’s former residence, which has never been sold. No income has been generated by Trust assets’ and there have been no income distributions from the Trust. Appellant argues that were the Trustee to distribute Trust assets to appellant, she would be in violation of her fiduciary obligations as Trustee to act in accordance the purpose of the Trust to preserve Trust assets for the remainder beneficiaries. Appellant further argues that appellant retained a life estate interest in the property and transferred the remainder interest to the Trust. Therefore, appellant’s ability to reside in the residence during her lifetime is controlled by the terms of the life estate deed and has no bearing on whether the assets of the Trust, which would consist of the remainder interest in the residence, are a countable asset. Moreover, counsel asserts that appellant has a limited power of appointment to appoint Trust assets to her issue only, and does not allow appellant to appoint Trust assets to herself. Appellant also argues that under Article Ninth, appellant’s ability to exchange assets does not allow the Trustee to transfer assets to appellant for her use as it would result in a breach of the Trustee’s fiduciary obligations to the reminder beneficiaries. Similarly, the Trustee’s ability to utilize Trust assets after appellant’s death to pay estate or inheritance taxes does not allow appellant to access Trust assets during her lifetime. Appellant argues that Trustee powers enumerated under Article Eighth do not allow the Trustee to convert Trust assets to income producing investments such as an annuity because such a conversion would result in a breach of the Trustees fiduciary obligations to the reminder beneficiaries because an annuity would benefit only appellant as the income beneficiary. Citing 42 U.S.C. 1396(d)(3)(B)(i) and 130 CMR 520.023(C)(1)(a), appellant concludes that federal law and MassHealth regulations speak strictly to the ability of the Trustee to pay principal to a MassHealth applicant as the determining factor of whether a trust is countable. Under the terms of the Trust, the Trustee has no authority to make payments of principal to appellant. Therefore, MassHealth benefits should be restored.

1 Counsel also outlines distinctions between the instant appeal and two Board of Hearings decisions in Appeal No. 1205462 and Appeal No. 1215864. Neither hearing decision was included with appellant’s brief.

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In a response memorandum, MassHealth argues that the analysis of the Trust is governed by the federal Medicaid statute dictating the treatment of trusts, case law interpreting the statute, as well as the policy and purpose of the Medicaid program, as opposed to the common law of trusts. MassHealth asserts that federal Medicaid law mandates a presumption that a self-settled, inter-vivos trust established by an applicant or spouse or funded with an applicant’s assets is countable in an eligibility determination. MassHealth also notes that appellant’s analysis relies on previous Board of Hearings decisions which may be informative and provide some guidance, but have no precedential value.2 Findings of Fact Based on a preponderance of the evidence, I find the following:

1) Appellant entered a skilled nursing facility on November 4, 2011.

2) MassHealth long term care benefits were approved retroactive to June 1, 2011.

3) Appellant had reported to MassHealth the existence of an irrevocable Trust established by the appellant in 2003.

4) As part of a MassHealth asset verification project, the Trust was reviewed; and assets held

in Trust were deemed countable to appellant.

5) On April 28, 2003, for consideration of $100, appellant conveyed title of her former residence to an irrevocable Trust.

6) Appellant retained a life estate in the real estate.

7) Appellant is the Grantor, and her daughter is the Trustee of the Trust.

8) Appellant is the income beneficiary of the Trust.

9) There is no community spouse.

10) The assessed value of the property held in the Trust is $212,423.

11) Article Second A. reads: “The Trustee shall pay to the Grantor all of the net income of the

Trust, quarterly or more often, for the remainder of the Grantor’s life.

12) Article Second B. reads: “During the life of the Grantor the Trustee may distribute part or all of the principal of this Trust to any persons (other than the Grantor) otherwise entitled to

2 Citing Ford v. Commr’r of Division of Medical Asst., 74 Mass. App. Ct. 1:28 Decision 08-P-2091 (October 19, 2009).

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the assets of this Trust after the death of the Grantor.”

13) Article Second C. reads: “The Grantor reserves the power, exercisable at any time or from time to time, by written instrument during the Grantor’s lifetime or by the Grantor’s will or any codicil therto, to appoint any part or all of the principal or income of this Trust to any one or more of the Grantor’s issue, free of trust of (sic) otherwise, referring specifically to this special power of appointment in such written instrument, will, and/or codicil.”

14) Article Eighth reads: “In addition to the powers given to the Trustee in this Trust Agreement

or by law, the Trustee shall have the following powers in each case to be exercised in his, her or its sole discretion, upon such terms as he, she or it deems advisable and without leave of any court” and enumerates in part the following Trustee powers:

(A) to make or retain any investment, without notice to or the consent of any interested

third party; (D) to make secured and unsecured loans;

(F) to buy, sell, pledge, lease or mortgage any real or personal property and to borrow money, whether for the purpose of paying premiums or making distributions;

(J) to purchase life insurance; (M) to borrow money for any purpose and to pledge securities or other property to secure the loan;

(O) to determine issues as to income and principal; (T) to do any other act which in the judgment of the Trustee is necessary or desirable for the administration of the Trust.

15) Article Ninth reads: The Grantor intends that this trust be a grantor trust for federal income tax purposes and all provisions of this trust shall be construed so as to effectuate this intent.

A. Upon the demand by (Appellant’s name), the Trustee shall transfer any trust

assets in exchange for assets of equivalent value. This power is exercisable by (Appellant’s name) solely in a nonfiduciary capacity, and no fiduciary duty imposed upon the Trustee or any other person may be asserted as a defense to the exercise of the powers granted under this Article.

B. (Appellant’s name) may waive this power by a writing delivered to a Trustee and such waiver shall bind (Appellant’s name), the Trustee, and all other persons.

16) Article Tenth allows the Trustee to pay all or any portion of estate, inheritance or other death taxes, both federal and state, which are payable by reason of the Grantor’s death.

17) Article Fourteeth allows any Trustee to resign. Following the death, resignation, or

incapacity of the Trustee, a successor Trustee shall be appointed by a majority of the income beneficiaries at the time of the such appointment; provided however, that any successor Trustee shall not be the Grantor or the Grantor’s spouse.


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There are no factual disputes in the case at hand; rather, the issues revolve around the interpretation of the language of the various Trust provisions involved and the applicable regulations. The Trust is properly considered in the context of both state and federal law applying to trusts created after 1993, of which pertinent sections follow: Federal law at 42 USC §1396p provides: (d) Treatment of Trust amounts (1)For purposes of determining an individual’s eligibility for, or amount of, benefits under a State plan under this subchapter, subject to paragraph (4), the rules specified in paragraph (3) shall apply to a Trust established by such individual.

(2)(A)For purposes of this subsection, an individual shall be considered to have established a Trust if assets of the individual were used to form all or part of the corpus of the Trust and if any of the following individuals established such Trust other than by will:

(i)The individual. (ii)The individual’s spouse. (iii)A person, including a court or administrative body, with legal authority to act in place of or on behalf of the individual or the individual’s spouse. (iv)A person, including any court or administrative body, acting at the direction or upon the request of the individual or the individual’s spouse.

(B) In the case of a Trust the corpus of which includes assets of an individual (as determined under subparagraph (A)) and assets of any other person or persons, the provisions of this subsection shall apply to the portion of the Trust attributable to the assets of the individual. (C) Subject to paragraph (4), this subsection shall apply without regard to— (i) the purposes for which a Trust is established, (ii) whether the Trustees have or exercise any discretion under the Trust, (iii) any restrictions on when or whether distributions may be made from theTrust, or (iv) any restrictions on the use of distributions from the Trust.

(3) (A) In the case of a revocable trust— (i) the corpus of the trust shall be considered resources available to the individual, (ii) payments from the trust to or for the benefit of the individual shall be considered income of the individual, and (iii) any other payments from the trust shall be considered assets disposed of by the individual for purposes of subsection (c) of this section.

(B) In the case of an irrevocable trust— (i) if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual, the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be made

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shall be considered resources available to the individual, and payments from that portion of the corpus or income—

(I) to or for the benefit of the individual, shall be considered income of the individual, and (II) for any other purpose, shall be considered a transfer of assets by the individual subject to subsection (c) of this section; and

(ii) any portion of the trust from which, or any income on the corpus from which, no payment could under any circumstances be made to the individual shall be considered, as of the date of establishment of the trust (or, if later, the date on which payment to the individual was foreclosed) to be assets disposed by the individual for purposes of subsection (c) of this section, and the value of the trust shall be determined for purposes of such subsection by including the amount of any payments made from such portion of the trust after such date.

Federal law at 42 U.S.C. 1396p (d)(3)(B)(i) states: In the case of an irrevocable trust, if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual, the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be made shall be considered resources available to the individual, and payments from that portion of the corpus or income (emphasis added).

Regulation 130 CMR 520.023 applies to trusts or similar legal devices created on or after August 11, 1993, and follows in pertinent part with emphasis added:



(a) Any portion of the principal or income from the principal (such as interest) of an irrevocable trust that could be paid under any circumstances to or for the benefit of the individual is a countable asset.

(b) Payments from the income or from the principal of an irrevocable trust made to or for the benefit of the individual are countable income.

(c) Payments from the income or from the principal of an irrevocable trust made to another and not to or for the benefit of the nursing-facility resident are considered transfers of resources for less than fair-market value and are treated in accordance with the transfer rules at 130 CMR 520.019(G).

(d) The home or former home of a nursing-facility resident or spouse held in an irrevocable trust that is available according to the terms of the trust is a countable asset. Where the home or former home is an asset of the trust, it is not subject to the exemptions of 130 CMR 520.007(G)(2) or 520.007(G)(8).

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(2) Portion Not Payable. Any portion of the principal or income from the principal (such as interest) of an irrevocable trust that could not be paid under any circumstances to or for the benefit of the nursing-facility resident will be considered a transfer for less than fair-market value and treated in accordance with the transfer rules at 130 CMR 520.019(G).

Following are Trustee powers and provisions pursuant to the Trust: Article Second A. reads: “The Trustee shall pay to the Grantor all of the net income of the Trust, quarterly or more often, for the remainder of the Grantor’s life. Article Second B. reads: “During the life of the Grantor the Trustee may distribute part or all of the principal of this Trust to any persons (other than the Grantor) otherwise entitled to the assets of this Trust after the death of the Grantor.” Article Second C. reads: “The Grantor reserves the power, exercisable at any time or from time to time, by written instrument during the Grantor’s lifetime or by the Grantor’s will or any codicil therto, to appoint any part or all of the principal or income of this Trust to any one or more of the Grantor’s issue, free of trust of (sic) otherwise, referring specifically to this special power of appointment in such written instrument, will, and/or codicil.” Article Eighth reads: “In addition to the powers given to the Trustee in this Trust Agreement or by law, the Trustee shall have the following powers in each case to be exercised in his, her or its sole discretion, upon such terms as he, she or it deems advisable and without leave of any court” and enumerates in relevant part the following Trustee powers:

(B) to make or retain any investment, without notice to or the consent of any interested third party;

(D) to make secured and unsecured loans; (F) to buy, sell, pledge, lease or mortgage any real or personal property and to borrow money, whether for the purpose of paying premiums or making distributions; (J) to purchase life insurance; (M) to borrow money for any purpose and to pledge securities or other property to secure the loan; (O) to determine issues as to income and principal; (T) to do any other act which in the judgment of the Trustee is necessary or desirable for the administration of the Trust. Article Ninth reads: The Grantor intends that this trust be a grantor trust for federal income tax purposes and all provisions of this trust shall be construed so as to effectuate this intent. C. Upon the demand by (Appellant’s name), the Trustee shall transfer any trust assets in

exchange for assets of equivalent value. This power is exercisable by (Appellant’s name) solely in a nonfiduciary capacity, and no fiduciary duty imposed upon the Trustee or any

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other person may be asserted as a defense to the exercise of the powers granted under this Article.

D. (Appellant’s name) may waive this power by a writing delivered to a Trustee and such waiver shall bind (Appellant’s name), the Trustee, and all other persons.

Article Tenth allows the Trustee to pay all or any portion of estate, inheritance or other death taxes, both federal and state, which are payable by reason of the Grantor’s death. Article Fourteenth allows any Trustee to resign. Following the death, resignation, or incapacity of the Trustee, a successor Trustee shall be appointed by a majority of the income beneficiaries at the time of such appointment; provided however, that any successor Trustee shall not be the Grantor or the Grantor’s spouse. First, this hearing officer has not reviewed the Board of Hearings decisions referred to by appellant. While Board of Hearings decisions involving trusts may be informative, the decisions were not provided, and have no precedential value in the application of law to the facts at hand.3 Second, I disagree in part with the MassHealth position that because appellant is the income beneficiary of a self-settled trust, appellant’s former residence is therefore available under 42 U.S.C. 1396p (d)(2)(A)(B) and (C) and 130 CMR 520.023(C)(1)(d). In the case of an irrevocable trust, 42 U.S.C.1396p(d)(3)(B) imposes the “any circumstances” test under which either income or principal can be paid to the applicant, and considers available the amount that could be paid to the individual from income or from the corpus of the trust. Thus, any income generated by the corpus of the Trust that could be paid to appellant would be considered available. However, the fact that appellant is the income beneficiary of the Trust does not inherently render the corpus of the Trust, her former residence, available to her. Absent a finding that appellant can access the Trust corpus under “any circumstances,” it is possible that only Trust income is available to appellant while Trust principal remains entirely unavailable to her.4 However, I find that the Trust provisions considered collectively allow circumstances in which the appellant can access Trust principal that render her former home available to her.5 A straight forward reading of Article Second C. allows appellant as the Grantor, at any time, or from time to time, to appoint any part or all of the principal or income to any one or more of the Grantor’s issue, free of trust. Article Second C. creates a very low hurdle to appellant regaining ownership of Trust principal outright by allowing her to effectively terminate the Trust by merely presenting the Trustee with a written instrument instructing the Trustee to convey her former residence to any of her issue free of Trust. While the Grantor cannot instruct the Trustee to convey the property directly from the Trust to the Grantor, there is no reason why the Grantor’s issue, who would 3 See Ford v. Commr’r of Division of Medical Asst., 74 Mass. App. Ct. 1:28 Decision 08-P-2091 (October 19, 2009). 4 See Doherty, “… we have no doubt that self-settled, irrevocable trusts may, if so structured, so insulate trust assets that those assets will be deemed unavailable to the settler. 5 See Doherty, a “clause may not be read in isolation; rather, it must be construed and qualified in light of the trust instrument as a whole.”

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receive the property free of Trust on appellant’s instruction, cannot simply convey the property back to appellant, again, free of Trust. In another scenario plausible under the power of appointment in Article Second C, appellant as Grantor can instruct the Trustee to convey the property to her issue in his or her capacity as Trustee of a revocable Trust that names appellant as beneficiary. The “any circumstances” test codified in both state and federal law is very broad, and under the terms of the Trust, payment from the Trust could be made to or for the benefit of the individual in a simple two-step conveyance that allows the Trustee to distribute Trust principal free of Trust, and circumventing the Trustee’s fiduciary duty to the remainder beneficiaries6 in an arrangement “concocted for the purpose of having your cake and eating it too.” 7 Similarly, under Article Ninth appellant as Grantor reserved the right to order the Trustee to transfer any Trust assets in exchange for assets of equivalent value in a manner the relieves the Trustee of fiduciary obligations. In terms of Medicaid trust law, the analysis under federal law and MassHealth regulations considers only the applicant’s ability to access Trust resources, and the discretion the Trustee has to make those resources available to the applicant. Neither 42 U.S.C. 1396p(d)(3)(B)(i), nor 130 CMR 520.023(C) incorporates issues of valuation and principal substitution. The portion of principal payable to the applicant is countable. Article Ninth clearly allows appellant as Grantor to instruct the Trustee to return her former residence to her without a resulting fiduciary breach purportedly in exchange for other assets.8 There is no evidence that this power has been waived. Appellant argues that returning appellant’s residence to her under Article Ninth is not allowable because it would result in a breach of the Trustee’s fiduciary duty. However, this same Article absolves the Trustee of all fiduciary obligations if the Grantor exercises the power: “and no fiduciary duty imposed upon the Trustee or any other person may be asserted as a defense to the exercise of the powers granted under this Article.” While Article Second purports to preclude Trust principal from being returned to appellant, consideration of the Trust document collectively9 reveals powers retained by appellant that allow circumstances where Trust assets can be made available to appellant regardless of the prohibition under Article Second. Last, Trustee powers enumerated under Article Eighth allow the Trustee to convert Trust principal to income producing investments. Accounting issues aside, there is no preclusion

6 See Lebow v. Commissioner of Div. of Med. Assistance, 433 Mass. 171, 177-178 (2000): “The issue is not whether the trustee has the authority to make payments to the grantor at a particular moment in time. Rather, if there is any state of affairs, at any time during the operation of the trust, that would permit the trustee to distribute the assets to the grantor, those assets count in calculating the grantor’s Medicaid eligibility.” 7 See Cohen v. Commissioner of Div. of Med Assistance, 423 Mass. 399, 416 (1996). 8 Even if the matter of substitution was somehow incorporated into the analysis of Medicaid eligibility as appellant asserts, appellant would have to have assets valued at $212,423 which would put her over the $2,000 asset limit, and transfer those assets to the Trust resulting in a disqualifying resource transfer. As appellant is the only individual who can invoke this substitution order, it is difficult to envision another intended purpose for this provision other than allowing appellant to substitute her own assets in exchange for the return on her former home despite the prohibition under Article Second. 9 See fn. 5.

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preventing the Trustee from selling the appellant’s former home and purchasing an annuity or other income producing investment vehicle. As the Trust fails the “any circumstances” test, analysis of Article Tenth and the Trustee’s ability to pay estate, inheritance or other death taxes after the Grantor’s death is not necessary. As the MassHealth attorney notes, “Congress and courts have recognized and rejected the use of trusts as devices to shelter assets for the benefit of the family members while simultaneously obtaining taxpayer funded Medicaid benefits.” The Massachusetts Supreme Court and the Appellate Courts have provided guidance in the interpretation of the federal and state laws regarding trusts and the “any circumstances” test mandated by both federal and state law that does effectively create a presumption that a self-settled, inter vivos trust established by an applicant or spouse or funded with an applicant’s assets is countable in an eligibility determination. The Trust principal in this case is countable as the Trust fails the “any circumstances” test under 130 CMR 520.023(C)(1)(a) read within the context of 42 U.S.C. 1396p (d)(3)(B)(i). Appellant’s former home held in Trust is therefore available to appellant, and is not subject to exemptions at 130 CMR 520.007(G)(2), or 520.007(G)(8).

The appeal is DENIED.

Order for MassHealth None. Notification of Your Right to Appeal to Court If you disagree with this decision, you have the right to appeal to Court in accordance with Chapter 30A of the Massachusetts General Laws. To appeal, you must file a complaint with the Superior Court for the county where you reside, or Suffolk County Superior Court, within 30 days of your receipt of this decision. Thomas J. Goode Hearing Officer Board of Hearings

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cc: MassHealth Representative: Sylvia Tiar Appellant Attorney:

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Appeal Decision: Approved; Remand Appeal Number: 1401170

Decision Date: 6/5/14 Hearing Date:

Hearing Officer: Rebecca Brochstcin Record Closed:

02/19/2014

03/19/2014

Appearances for Appellant: Appearances for MassHcalth:Lucy Gucciardi, Chelsea MHC

Commonwealth of MassachusettsExecutive Office of Health and Human Services

Office of MedicaidBoard of Hearings100 Hancock StreetQuincy, MA 02171

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APPEAL DECISION

Appeal Decision:

Decision Date:

Approved; Remand

6/5/14

MassHealth's Rep.: Lucy Gucciardi

Issue:

Hearing Date:

Appellant's Reps.:

Long-term careeligibility

02/19/2014

Hearing Location: Chelsea MassHealthEnrollment Center

Authority

This hearing was conducted pursuant to Massachusetts General Laws Chapters 118E and 30A, andthe rules and regulations promulgated thereunder.

Jurisdiction

Through a notice dated December 24, 2013, MassHealth denied the appellant's application forbenefits due to excess assets (Exhibit 3. The appellant filed a timely appeal on January 21, 2014(130 CMR 610.015(B); Exhibit 2). Denial of an application tor benefits is a valid basis for appeal(130 CMR 610.032). After a hearing on February 19, 2014, the record was held open for theappellant's attorney to submit a legal brief (Exhibits 8 and 9).


MassHealth denied the appellant's application for benefits because it determined that she had morecountable assets than are allowable under MassHealth regulations.

Issue

The appeal issue is whether MassHeallh correctly determined that assets in a trust established by theappellant are countable to her.


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Summary of Evidence

A MassIIealth representative appeared at the hearing and testified as follows: The appellant wasadmitted to a nursing facility on August 12, 2013. A MassHcalth long-term care application wasfiled on her behalf on September 4, 2013, seeking coverage as of the date of admission.MassHealth denied the application for missing verifications, but re-logged the application forNovember 4, 2013, when the verifications were submitted. In reviewing the application, theMassHealth legal unit advised the eligibility worker that the assets of a trust that the appellant hadestablished in 2005, the [DO] Irrevocable Income Trust, remained countable to the appellant foreligibility purposes. On December 24, 2013, MassHealth denied the case for excess assets. SeeExhibit 1.

The MassHcalth representative submitted a copy of the trust instrument, which was executed by theappellant on March 10, 2005. The appellant named her daughter as the sole trustee. The relevanttrust provisions include the following:

Article II - Transfers to TrustThe Grantor [appellant] hereby conveys to the Trustee all her interest in the assets listed onSchedule A, which together with any assets later added to this Trust are referred to as the"Trust Estate." Any person may transfer assets to the Trust Estate, if the Trustee agree [sic] toaccept them. Assets do not have to be listed on Schedule A to be part of the Trust Estate.Unless otherwise specified in writing at the time of the transfer, those assets will be held asprovided in this Trust. The Trustee acknowledges receipt of the current Trust assets andagrees to hold the Trust Estate as set forth in this Trust.

Article III - Irrevocable ProvisionThe Grantor declares that she has no right to alter, amend, modify, or revoke this Trust.

Article IV - Rights Reserved by Grantor4.1 Income: During the lifetime of the Grantor, the Trustee shall pay to or apply for thebenefit of the Grantor the net income, but not principal, at least quarterly, so long as saidamount is equal to or in excess of one hundred dollars ($100). Any undistributed income shallbe added to the Trust principal.4.2 Special Power of Appointment: The Grantor reserves the power, exercisable at any timeor from time to time by written instrument delivered to the Trustee during the Grantor'slifetime or by the Last Will of the Grantor duly allowed for probate by the Court havingjurisdiction over such Grantor's estate, or any Codicil thereto, to appoint any part or all of theprincipal or income of the Trust Estate, outright or upon trusts, conditions or limitations, toand among any one or more of the issue then living of the Grantor, spouses, or surviving

1 The only asset in the trust is an Ameriprise portfolio account that had a balance of $188,880.26 as of July31 ,2013 . See Exhibit 9.


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spouses of such issue, or any one or more organi/ations described in Section 50I(c)(3) of theInternal Revenue Code, or any successor provision thereto of similar purport (hereinafter"charitable organizations"). Such power of appointment must be exercised by specificreference to this instrument. A general provision or residuary clause in the Will of the (irantorshall not be considered an exercise of said power of appointment. Such appointment may.however, be for such estates and interests and upon such terms, trusts, conditions andlimitations as such Grantor may designate.

Article V - Administration During the Grantor's LifetimeSubject to the preceding provisions of Article IV, during the l i fe t ime of the Grantor, theTrustee may distribute to and among such of the issue of the Grantor, spouses and survivingspouses of such issue, or said charitable organizations so much of the income and so much ofthe principal of the Trust at such time or times and in such amounts and proportions as theTrustee, in her uncontrolled discretion, may determine.

Article XI - Fiduciary PowersSubject to Article XI herein, the Grantor grants to the Trustee full power to deal freely withany property in the Trust. The Trustee may exercise these powers independently and withoutthe approval of any court. No person dealing with the Trustee need inquire into the proprietyof any of her actions or into the application of any funds or assets. The Trustee shallhowever, exercise all powers in a fiduciary capacity for the best interest of the beneficiaries ofany trust created in this Trust. Without l imiting the generality of the foregoing, the Trustee isgiven the following discretionary powers in addition to any other powers conferred by law:11.4 Specific Securities: To invest in assets, securities, or interests in securities of any nature.

11 .5 Property Transactions: To buy, sell, pledge, exchange, or lease any real or personalproperty. . . ; to execute deeds, leases, contracts, bills of sale, notes, mortgages, securityinstruments, and other written instruments. . . .11.7 Maintain Assets: To expend whatever funds she deems proper for the preservation,maintenance, or improvement of assets. . . .11.25 Advances: To make cash advances or loans to beneficiaries, with or without security.

Article XIV - Section 121 of the Internal Revenue CodeFor purposes of taxation in conformity with the provisions of Section 121 of the InternalRevenue Code of 1986, as from time to time amended; and any provision under 20 C.F.R.Section 416.1246 (198°) and 20 C.F.R. Section 416.1103 (1989). as from time to timeamended; 42 U.S.C. Section 1305 or Section 303(c); the Medicare Catastrophic Coverage Actof 1988, as from time to time amended; or by any provisions adopted August 10. 1993, as partof the Omnibus Reconciliation Act of 1993, or any future amendments thereto; the HealthInsurance Portability and Accountability Act of 1996; and Section 4734 of the BalancedBudget Act of 1997; the Trustee may engage in any transaction to comply with saidprovisions.


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Article XII - Grantor's Trust PowersThe Grantor intends that she he treated as the owners [sic] of the Trust Estate (both incomeand principal) for income tax purposes under one or more of Sections 671 through 678 of theInternal Revenue Code. . . . (Exhibit 5

The trust further provided that upon the appellant's death, the trust assets would be distributed inunequal amounts to her three adult children and one grandson. See Exhibit 5.

The MassIIealth representative provided a copy of memorandum prepared by an attorney in theagency's legal unit . The MassIIealth attorney maintains that whi l e Article 4.1 slates that the trusteeshall not make any distributions of principal to the appellant, there are other trust provisions whichcarve out circumstances under which the trust assets could be made to her or used for her benefi t .Specifically, the legal memo points to Article XIV (authorizing the trustee to engage in transactionsto comply with the Omnibus Reconciliation Act of 1993); Article XI (authori/ing the trustee tomake cash advances or loans to trust beneficiaries); Article XI (allowing the trustee to invest trustassets and make distributions); Article IV (under which the appellant reserved a power ofappointment); and Article XII (under which the appellant claims the right to be treated as owner ofincome and principal for income tax purposes). See Exhibit 5.

The appellant was represented at the hearing by her daughter (also her power of attorney) as well asan attorney. As he had not seen the MassIIealth legal memorandum, the appellant's attorney wasalso given the opportunity to submit a reply brief during the record open period. In his post-hearingmemorandum, the appellant's attorney disagrees with MassHeallh's finding that the trustee has therequisite "peppercorn of discretion" to distribute trust assets to the appellant. He addresses each ofthe specific provisions raised in the Massl lealth legal memo and argues that none allows the trusteeto use trust assets for the appellant's benefit. See Exhibit 9."

Findings of Fact

Based on a preponderance of the evidence, 1 find the following:

1. On March 10, 2005. the appellant J O G ] Irrevocable Income Trust. She named her daughteras the sole trustee.

2. The trust terms include the following:

a. The Grantor (appellant) "has no right to alter, amend, modify, or revoke this Trust."(Article III)

: The attorney also reported in his memorandum that the appellant had died.


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b. The Trustee is required to pay to or apply for the benefit of the Grantor "the netincome, but not principal, at least quarterly, so long as said amount is equal to or inexcess of one hundred dollars. . . ." (Article IV (4.1))

c. The Grantor reserves the power 'kto appoint any part or all of the principal or incomeof the Trust Instate . . . to and among any one or more of the issue then living of theGrantor, spouses, or surviving spouses of such issue," or to a charitableorganization. (Article IV (4.2))

d. During the Grantor's lifetime, "the Trustee may distribute to and among such of theissue of the Grantor, spouses and surviving spouses of such issue, or said charitableorganizations so mueh of the income and so much of the principal of the Trust atsuch time or times and in such amounts and proportions as the Trustee, in heruncontrolled discretion, may determine." (Article V)

e. The Trustee is granted "full power to deal freely with any property in the Trust."Specifically, the Trustee is authori/.ed to invest in assets, securities, or interests insecurities of any nature; to buy, sell, pledge, exchange or lease any real or personalproperty; to execute deeds, leases, contracts, bil ls of sale, notes, mortgages, securityinstruments, and other written instruments; to expend whatever funds she deemsproper for the preservation, maintenance, or improvement of assets; and to makeeash advances or loans to beneficiaries, with or without security. (Article XI)

f. The Trustee is specifically authorized to engage in any transaction to comply withthe provisions of various federal laws, including the Omnibus Reconciliation Act of1993. (Article XIV)

g. The Grantor intends that she be treated as the owner of the Trust Hstate (bothincome and principal) for federal income tax purposes (Article XII)

h. Upon the Grantor's death, the trust assets are to be distributed in unequal amounts toher three adult children and one grandson (Article VI)

3. On August 12, 2013, the appellant was admitted to a nursing facility.

4. On September 4, 2013, a MassHealth long-term care application was filed on theappellant's behalf, seeking coverage as of the date of admission.

5. MassHealth initially denied the application for missing verifications, but re-logged theapplication for November 4, 2013, when the verifications were submitted.

6. On December 24, 2013, MassIIcalth denied the application for excess assets, determining


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that the assets in the trust remained countable to the appellant.


Generally, resources held in a trust are considered available if under any circumstances describedin the terms of the trust, any of the resources can be made available to the individual. 130 CMR520.023. For property held in a revocable trust - defined in 130 CMR 515.001 as "a trust whoseterms allow the grantor to take action to regain any of the property or funds in the trust" - therules arc as follows (130 CMR 520.023(3)):

( 1 ) The entire principal in a revocable trust is a countable asset.(2) Payments from a revocable trust made to or for the benefit of the individual arecountable income.(3) Payments from a revocable trust made other than to or for the benefit of the nursing-facility resident are considered transfers for less than fair-market value and are treated inaccordance with the transfer rules at 130 CMR 520.019(G).(4) The home or former home of a nursing-facility resident or spouse held in a revocabletrust is a countable asset. Where the home or former home is an asset of the trust, it is notsubject to the exemptions of 130 CMR 520.007(G(2) or 520.007(G)(8).

For an irrevocable trust - defined as "a trust that cannot be in any way revoked by the grantor"the amount countable to an applicant is determined as follows (130 CMR 520.023(C)):

(a) Any portion of the principal or income from the principal (such as interest) of anirrevocable trust that could be paid under any circumstances to or for the benefit of theindividual is a countable asset.(b) Payments from the income or from the principal of an irrevocable (rust made to or forthe benefit of the individual are countable income.(c) Payments from the income or from the principal of an irrevocable trust made toanother and not to or for the benefit of the nursing-facility resident are consideredtransfers of resources for less than fair-market value and are treated in accordance withthe transfer rules at 130 CMR 520.019(G).(d) The home or former home of a nursing-facility resident or spouse held in anirrevocable trust that is available according to the terms of the trust is a countable asset.Where the home or former home is an asset of the trust, it is not subject to the exemptionsof 130 CMR 520.007(G)(2) or (8).

In this case. Masslleallh determined that assets in a trust established by the appellant in 2005 remaincountable to her for Massllealth eligibility puiposes. Massllealth does not dispute that the trust isirrevocable, but contends that various provisions in the trust nevertheless allow the trustee to accessprincipal for the appellant's benefit. See F.xhibit 5. After reviewing the trust instrument. I concludethat the trust provisions, whether considered individually or collectively, do not allow for the trust


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principal to be distributed to the appellant or used on her behalf.

One of the provisions which MassHealth invokes is in Article XIV of the trust, stating that the trusteemay engage in any transaction in order to comply with the Omnibus Reconciliation Act of 1993("OBRA '93"). MassHealth points out that 42 U.S.C. §1396p(d), which was part of OBRA '93,"requires that funds in trusts created and/or funded by an applicant or spouse are consideredavailable/' As the trustee is "authorized to comply with federal Medieaid law," MassHealth argues,he or she can make the principal available for the benefit of the appellant. See Exhibit 5. Thisargument is an oversimplification of federal law. The statute does not simply stale that any funds insuch a trust are automatically countable for Medieaid eligibility purposes. Rather, the law sets forthcriteria for determining countability, rules which largely mirror MassHealth regulations at 130 CAMR520.023(C). A trust provision which simply authorizes the trustee to ''comply" with federal Medieaidlaw does not vest the trustee with enhanced powers to use the trust property for the appellant's benefit.

MassHealth also highlights provisions in Article XI which authorize the trustee to make cash advancesor loans to trust beneficiaries (a class which includes the appellant), as well as to use trust assets topurchase annuities (which would generate countable income) on the appellant's behalf. I disagree thatthe clause pertaining to cash advances or loans enables the trustee to distribute trust assets to theappellant. At most, it would authorize a loan - which by definition would have to be repaid to thetrust. This cannot reasonably be viewed as a circumstance in which the trust principal can be made"available" to pay lor the appellant's nursing home care, as she would be obligated to repay thosefunds. As to the contention that the trustee can purchase an annuity on the appellant's behalf.MassHcalth relies on language that empowers the trustee to "invest" trust assets. However, otherlanguage in Article XI suggests that the purpose behind granting this administrative power, amongothers, is to "preserve, maintain, or improve" the trust assets. I do not see the "investment" in anannuity, which would have the effect of depleting trust assets, as consistent with the trustee's powershere.

MassIIcalth next argues that the appellant's reservation of a power of appointment suggests that sheretained eontrol of and access to the trust principal. The appellant's power of appointment, set forthunder Article IV (4.2), allows her to appoint trust property to "any one or more of the issue then livingof the Grantor, spouses, or surviving spouses of such issue" or to a qualifying charitable organi/ation(emphasis added). It does not give her the power to appoint trust property to herself or for use on herbehalf. MassHealth's suggestion that this clause would be a "nullity" had the appellant actuallydivested herself of control of trust assets is not persuasive.

Finally, MassHealth argues that the appellant's expressed intent to be treated as the owner of the trustestate for federal income tax purposes is inconsistent with her claim that she retained no control overthe trust property for MassIIeallh eligibility purposes. The appellant's expressed desire to seek

1 Unlike language often found in other trusts, this trust instrument docs not explicitly enumerate thepurchase of annuities as among the trustee's powers.


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beneficial tax treatment as owner of the trust, without more, does not evidence actual "control" overthe trust assets. This clause does not instill in her any affirmative powers over the trust corpus.

On the whole, I agree with the appellant that the trust instrument does not reflect any intent that thetrust principal could be accessed for the appellant's own needs. Compare Doherty v. Director of theOffice of Medieaid, 74 Mass. App. Ct. 439, 442 (2009) ("When considered as a whole, what strikes usmost strongly is that (applicant's! trust constitutes a remarkably lluid legal vehicle, intelligentlystructured to provide both [the applicant] and the trustees maximum flexibility to respond to [theapplicant's] changing life needs."). The appellant has not reserved the right to access the trustprincipal, and the trustee has no authority to distribute it to her or to use it on her behalf.

A secondary issue here is whether the appellant received any income from the trust, and if not.whether her failure to receive such income constituted a disqualifying transfer oi" resources. Theappellant is the undisputed income beneficiary of the trust, which provides in Article IV that thetrustee "is required to pay to or apply for the benefit of the Grantor the net income, but not principal, atleast quarterly, so long as said amount is equal to or in excess of one hundred dollars. . . ." AlthoughMassllealth raised the issue generally in its legal memorandum, the agency has not made any specificdetermination regarding the appellant's alleged failure to receive trust income. Now that the trustcorpus has been found to be noncountablc, the matter is remanded to MassHealth to determinewhether the appellant failed to receive any trust income to which she was entitled, and if so, whethersuch failure constituted a disqualifying transfer of resources.

This appeal is approved and remanded.


Rescind the notice dated December 24. 2013. Deem the appellant to have had no access to theprincipal of the trust. Proceed to redetermine her long-term care eligibility (including anydeterminations concerning disqualifying resource transfers) in accordance with this decision.


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If this decision is not implemented within 30 days after the date hereon. you should contact yourMassliealth Knrollment Center. If you experience further problems with the implementation of thisdecision, you should report this in writing to the Director of the Board of Hearings at the address onthe first page of this decision.

Rebecca BrochstcinHearing OfficerBoard of Hearings

cc: Chelsea MEC

Page 9 of Appeal No.: 140I I70

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Appeal Decision:

Decision Date:

Hearing Officer:

Approved

5/15/14

B. Padgett

Appellant Representative:

Appeal Number:

Hearing Dates:

Record Open:

1401798

April 04, 2014

April 25, 2014

MassHealth Representative:

E. Daniel

Commonwealth of MassachusettsExecutive Office of Health ami Hitman Services


100 Hancock Street, &h floorQuincy, MA 02171

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APPEAL DECISION

Appeal Decision:

Decision Date:

Approved

5/15/14

MassHealth Rep.: E. Daniel

Hearing Location: Springfield

Issue:

Hearing Dates:

Appellant Rep.:

130 CMR 520.023

April 04, 2014

Authority

This hearing was conducted pursuant to Massachusetts General Laws Chapter 118E, Chapter 30A,and the rules and regulations promulgated thereunder.

Jurisdiction

The appellant received a notice dated January 27, 2014 stating: "The Division has denied yourapplication for MassHealth Standard benefits,,. This is because your countable assets are over theprogram limit. The limit is $119,240.00 lor you and your spouse. 130 CMR 520.003, 520.016(B)."(Exhibit I ) . 1

The appellant filed this appeal timely on May 10, 2013. (130 CMR 610.015(8); Exhibit 2).

Denial of assistance is valid grounds for appeal (130 CMR 610.032).


The appellant's long term care application was denied.

Issue

Is the appellant over the asset limit for long term eare eligibility?

1 The appellant also appealed a notice dated January 06, 2014 denying benefits due lo incomplete verifications, howeverthat issue was resolved prior to the hearing.


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Summary of Evidence

MassHealth testified the 90 year old appellant entered a nursing facility on September 18, 2013 andapplied for long term care benefits on November 18, 2013 requesting coverage beginning October23, 2013. A request for verification was made on November 21, 2013. On January 27, 2014 theappellant's application was denied for being over the $2,000.00 asset limit for MassHealth longterm care benefits. MassHealth maintains the appellant has countable assets contained in a trustconsisting of a multi family residence valued at $155,638.00. MassHeallh submitted the followinginto evidence: application, VC-1, Trust document (Exhibit 4 and legal memorandum (Exhibit 5).

The appellant's representative argued the assets consist of a multifamily home in which thecommunity spouse currently resides and which have been placed in an irrevocable trust. Thehome generates income; however the appellant has no access to any of the Trust assets. Theappellant's representative submitted a memorandum in support (Exhibit 6) and argued that she isunaware of the legal reasoning behind the MassHealth memorandum and requested time toreview and respond.

At the appellant's request the record remained open until April 25, 2014 to submit a Memorandumin Support responding to the submission by the MassHealth legal division (Exhibit 7).

The MassHealth legal memorandum dated April 04, 2014 argued the income and principal of theBoudreau Realty Trust (Realty Trust) and the Irrevocable Trust are countable under 130 CMR520.203(C). The memorandum states that on November 13, 2006 the appellant and her husbandtransferred to themselves, for no consideration, real estate located in Southbridge, Massachusetts, asTrustees of the Realty Trust. The Realty Trust indicates the trustees are to hold the trust property forthe benefit of the beneficiaries. The trustees are to make a distribution of income and principal asthe beneficiaries direct. The Realty Trust also indicates the beneficiaries may terminate the RealtyTrust at any time and the property shall be conveyed to the beneficiaries. The Schedule ofBeneficial Interest dated November 13, 2006 states 100% of the beneficial interest in the RealtyTrust is held by the "Boudreau Family Irrevocable Trust" (the Irrevocable Trust) which was alsoestablished on November 13, 2006 by the appellant and her husband. On November 07, 2013 theappellant resigned as Trustee of the Irrevocable Trust assigning all her interest to her spouse.MassHealth concludes that prior to this transfer, which occurred within the look back period, theappellant and her spouse had the authority to transfer trust assets or terminate the Realty Trusttherefore this assignment is a disqualifying transfer.

The MassHealth memorandum argues applicants for MassHealth have the burden to prove theireligibility including total countable assets are below $2,000.00. 130 CMR 520.007 states countableassets include assets to which the applicant would be entitled whether or not these assets areactually received when the failure to receive such assets results from the action or inaction of theapplicant or person acting on his or her behalf. Medieaid is a statutory program governed byregulations and is not a program in equity and cannot be trumped by common law, state law orequitable principals and is designed to provide health care for the poor, and that individuals areexpected to deplete their own resources before obtaining assistance from the government. This


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sentiment is echoed by the Supreme Judicial Court in Cohen v. Comm'r of the Div. of Med.Assistance, 423 Mass. 299. 403 (1996). The SJC stated when evaluating a trusts under Medieaideligibility determination, the common law of trusts and general trust laws principals cannot be usedto circumvent the Medieaid statute "for the purpose of having your cake and eating it too." 'Thepurpose of the statute is to prevent individuals from using trust law to ensure their eligibility forMedieaid coverage, while preserving their assets for themselves or their heirs.1' Lebow v. Comm 'rof the Div. of Med. Assistance, 433 Mass. 171, 172 (2001). "The issue is not whether the trusteehas the authority to make payments to the grantor at a particular moment in time. Rather, if there isany state of affairs, at any time during the operation of the trust, that would permit the trustee todistribute trust assets to the grantor, those assets count in calculating the grantor's Medieaideligibility." Doherty v. Director of the Office ^/Medieaid, 74 Mass. App. Ct. 439, 443 (2009).

MassHealth asserts all assets in the Realty Trust and the Irrevocable Trust are countable indetermining the Appellant's eligibility as they are self-settled inter vivos trusts. In accordance with42 U.S.C. §1396p(d)(2)(B) the portion of the Trust attributed to the assets of the applicant and/ortheir spouse shall be considered available. Since the Appellant established and funded both Truststhen all the assets in the Trusts are considered available. The federal Medieaid statute provides thatthe countability of a self-settle inter vivos trust is made without regard to whether the Trustee canexercise discretion under the trust or whether distributions may be made from the trust. MassHealthasserts federal Medieaid law effectively "creates a presumption that trusts containing the assets ofan applicant and/or spouse are countable for eligibility determination." 42 U.S.C. §1396p el seq.The federal Medieaid statute dictates thai in the case of an irrevocable trust "if there is anycircumstances under which payment from the trust could be made to or for the benefit ol" theindividual, the portion of the corpus from which, or the income on the corpus from which, paymentto the individual could be made shall be considered resources available to the individual." (42U.S.C.§1396p(d)(3)(B)(i)).

MassHealth maintains the circumstances under which the value of the Irrevocable Trust can bemade available to the Appellant (Paragraph 4.4 gives the Trustees broad powers and authority todeal with Trust assets, including the to (d) invest principal and income; (e) sell, exchange orotherwise dispose of or encumber property; (i) determine what part of Trust property is income orprincipal; and (k) borrow or lend. Paragraph 5.2 allows any beneficiary to disclaim his or herinterest in the Trust. Paragraph 6 the Trustee has the authority to pay the appellant's estate or taxingauthority). These arc the "any circumstance" or "peppercorn of discretion" which allow the Trusteeto use the principal could be used for the benefit of the Appellant and pursuant to the Medieaidstatute the trust principal is therefore countable. As a result the Boudreau Realty Trust and theBoudreau Family Irrevocable Trust are fully countable in MassHealth eligibility determination 130CMR 520.023, 42 U.S.C. §1396p(d).

MassHealth concludes the appellant cannot credibly claim the real estate held in the Trust isavailable for her to: (1) reside in it; (2) use countable assets to pay expenses and maintenance forits upkeep; (3) claim payment of real estate taxes as deductions; (4) obtain a more favorable taxbasis, but then state it is not available because she seeks taxpayer funded nursing facility care.The claim that she is only entitled to Trust income, which the Trust has never produced, while


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simultaneously claiming she is not entitled an access principal when she was and her spouse wereliving in the Trust principal since it was transferred in 2006, demonstrates the incongruity offinding the Trust principal unavailable. Such an arrangement is an example of "having your cakeand eating it to" Cohen v, Comm'r of the Div oj 'Meet Assistance, 423 Mass. 399, 403 (1996).MassHealth concludes that if the Trust is found to be not countable the matter should beremanded to assess and evaluate regarding a disqualification of resources (See Exhibit 5).

The appellant's memorandum argues that the property is not countable in determining eligibilityfor the following reasons: (i) The real estate is held in Trust and the appellant has no access to theprincipal in the Trust; and there are no circumstances under which the real property could bedistributed to the appellant or community spouse; (ii) The community spouse derives rentalincome from the Trust property; (iii) The real estate is business property essential to thecommunity spouse for self-support because of the rental income it generates, (iv) The communityspouse is entitled to retain the "excess" assets as part of an increased community spouse resourceallowance; (v) The denial notice does not cite the specific grounds upon which the denial isbased and therefore is defective on its face; (vi) The appellant claims hardship, since she has andhad no control over the asset once she conveyed her income interest from the Trust to herhusband. The representative concludes to deny long term care benefits, places the appellant atgrave risk as set forth in 130 CMR 520.19 (L) (See Exhibit 6).

The appellant submitted an additional memorandum within the required time limits arguing thatMassIIealth is singling out Trust provisions and taking them out of context to fabricate a"circumstance" that would make the Trust assets countable. MassHealth states that Medicaid lawrequires only one circumstance to f ind the principal countable, and refers to paragraphspertaining to a beneficiary's power of appointment. These provisions do not expand in any waythe income interest of the beneficiary which now belongs to the community spouse, but simplyallows a beneficiary to appoint the interest he may have. In fact, the income interest terminates atdeath so the power of appointment cannot, in any way, expand the beneficiary's right to accessprincipal. The appellant and her spouse retained the income interest only and divested the right toprincipal when the Trust was created in 2006. The general Trust provisions regarding power ofappointment are a null i ty and hence no basis for asserting the "any circumstance" required torender the Trust assets countable. MassIIealth refers to paragraph 4.4 as the "circumstance"which renders the Trust assets countable. Paragraph 4.4 refers to the "General" powers andauthority of the Trustee. Again, MassHealth has selectively ignored the actual language of theTrust. The actual wording of the Trust provision includes the words "except as otherwiseprovided herein". "Except as otherwise provided herein" means that if the substantive Trustprovisions limit the beneficiary's interest to income only, then, the Trust has already "otherwiseprovided herein" that the applicant or her spouse have no interest in the principal of the Trust. If aTrust provision is limited in scope, it cannot be used to expand the authority of the Trustee-beyond its own limits. The regulations recognize that there arc situations where irrevocableTrusts may not be countable. See 130 CMR 520.023(C)(2). (Exhibit 8).


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Findings of Fact

Based on a preponderance of the evidenee, I find the following:

1. The appellant entered the nursing facility on September 18, 2013 and applied for long termcare benefits on November 18, 2013 requesting coverage beginning October 23, 2013.

2. On January 27, 2014 the appellant's application was denied for being over the $2,000.00asset l imit for MassHealth long term care benefits as MassHealth maintains the appellanthas access to countable trust assets in the amount of $155,638.00.

3. On November 13, 2006 the appellant and her husband created a Realty Trust transferringreal estate located in Southbridge, Massachusetts, to the realty trust.

4. The Realty Trust states "The trust may be terminated at any time by the Beneficiaries... Incase of any such termination, the Trustees shall transfer and convey the entire Trustproperty to the Beneficiaries in proportion to their respective interests/'

5. On November 13. 2006 the appellant and her husband created an Irrevocable Trust.

6. The Schedule of Beneficial Interest of the Really Trust states 100% of the beneficial interestin the realty trust is held by the Irrevocable Trust.

7. On November 07, 2013 the appellant resigned as Trustee of the Irrevocable Trust assigningall her interest to her spouse.


The appellant is a 90 years old resident of a nursing facility who applied for MassHealth benefitson December 03, 2012. On November 13, 2006, the appellant and her husband established aRealty Trust and an Irrevocable Trust; therefore, regulations at 130 CMR 520.023 (Trusts orSimilar Legal Devices Created on or after August 11, 1993) are controlling.

MassHealth maintains the property contained in the Realty Trust is countable when determineeligibility for the appellant's nursing home stay and as a result the appellant is over the asset limitfor MassIIcalth long term care benefits. MassHcalth's argument focuses on the language containedin sections 1.2., 2, 3.1., 4.4., 5.3., and 6.5., of the Irrevocable Trust2 maintaining those provisions

2 1. The Trust Fund 1.2. The Trust created by this agreement shall be irrevocable. I may not revoke or amend thisagreement in any way. My trustee, however, may at any time, or from lime to time, amend any administrativeprovisions of this trust by any instrument in writing signed and acknowledged by my trustee. For purposes of theforegoing, the term "administrative provision'' refers to any provision of the trust dealing with the management andadministration of the trust, and in no event shall any such amendment affect, enlarge, or shift any beneficial interestscreated hereunder. 2 Payment of Income and Principal If any property is place in trust during my life, my trustees


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allow access to the principal of the Irrevocable Trust under 130 CMR 520.023(C)(l)(d)3 ,however I do not agree.

MassIIealth has the obligation to scrutini/e trust documents as the long term care program isdesigned to assist in providing health care for the poor and as a result those individuals areexpected to deplete their own resources before obtaining assistance from the government.However while there are individuals and trusts which go to great lengths to appear to transferfunds out of their control while administering the trust in a manner that they maintain authorityover the funds, there are also legitimate trusts that have been drafted to provide for a familymember in l i fe as well as preserving and protecting assets for beneficiaries upon the familymember's death that are not an attempt of the applicant/beneficiaries to "have their cake and catit to."

The appellant was a trustee of the Realty Trust and the Irrevocable Trust and was limited to andbound by the fiduciary obligations set forth in each trust document. The Realty Trust holds titleto the real estate for the benefit of the beneficiaries, who as listed on The Schedule of BeneficialInterest as the Irrevocable Trust. There is no provision which allows the appellant to revoke theRealty Trust as only the beneficiary of the Realty Trust, which is the Irrevocable Trust, canterminate the Realty Trust.

As for the Irrevocable Trust. Paragraph two of the trust indicates the appellant is an incomebeneficiaiy only and shall have no right to the principal of the trust. While MassHcalth allegesaccess to the trust principle through a number of provisions wi th in the Irrevocable Trust (Seesections 3.1., 4.4., 5.3., and 6.5). these conditions do not allow the appellant to circumvent the

may pay me or may pay on my behalf as much of the income of the trust as il shall determine its sole andnonrevievvable discretion to be necessary' for my care and well-being. Any income nol so paid may be accumulatedand added to the pr incipal . The pr inc ipa l may be distributed to or for the bcnetlt of my daughter ... at an> t ime andfrom lime to t ime as the trustees may in their sole discretion determine. Any principal not distributed shal l be heldu n t i l the termination of the trust. 3 Distribution of Trust Assets 3.1. Disposition upon in> death (a ) Pa\eundis t r ibuted income to or for the benefit of any on or more of my spouse, my children, their spouses and issue, or tom\s or their spouses and issue, as I shall appoint by w i l l ; and (b) Pa\e remaining pr incipal andundis t r ibuted income lo my daughter . . . . -4 . The Trustee 4.4. General powers of trustee In addition to all commonlaw and statutory authori ty, my trustee, except as otherwise provided, shall have the power without approval of anycourt and in any manner it considers advisable: (d) to invest income and pr incipal without subject to the legall i m i t a t i o n s on investment by fiduciaries; (e) to sell, mortgage, exchange, lease, or otherwise dispose of or encumberany property on any terms, no purchaser being bound to see to the application of any proceeds and whether or not theeffect thereof extends beyond the terms of this trust; (i) determine what part of the trust properly is income and whatpart is pr inc ipa l ; (k) to borrow or lend any amount; ... 5. Beneficiaries' Interests and Powers 5.3. Payment forbeneticjaries (a) income payable to a person and income or principal that in the discretion of my truslee may he paidto a person may be used by my truslee for the person's benefit whether or to tha t person us legally competent orunder conservalorship or guardianship. 6. Taxes and Other Payments 6.5. Riuhl of substi tution I retain the r ight toreacquire the principal of this trust by substituting property of an equivalent value therefore.' (C) Irrevocable Trusts. ( 1 ) Portion Payable, (d) The home or former home of a nursing-faci l i ty resident or spouseheld in an irrevocable trust that is avai lable according to the terms of the trust is a countable asset. Where the homeor former home is an asset of the trust, il is not subject to the exemptions of 130 CMR 520.007(G)(2) or520.007(G)(8).


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purpose of the Irrevocable Trust. The provisions highlighted by Massllcalth contain the usuallanguage which details the fiduciary obligation of a trustee and grants customary authority to theadministration of a trust, and do not constitute the "peppercorn" which MassHealth is claiming.Further these provisions do not eliminate language which definitively denies the appellant accessto principal and affirmatively state the Trust is irrevocable as MassHealth suggest. Lastly,because the appellant is not a beneficiary of the Irrevocable Trust, she has no authority to compelthe Trustees of the Irrevocable Trust to take any such actions. As a result I find nothing in eitherthe Realty Trust or the Irrevocable Trust documents which allows either Trust to be revoked orallow trust principal to be distributed to the appellant and this appeal is approved.

Regarding Appellant's counsel argument that on November 07, 2013 the appellant transferredher income interest in the Irrevocable Trust to her community spouse under 130 CMR520.016(b)(3)4 and MassHealtlrs request that if the Trust is found not to be countable the mattershould be remanded to evaluate potential disqualification; the transfer of the appellant's trustincome interest to her spouse has no effect on the countability of the asset which is the subject ofthis appeal. Further although any transfer of a resource within the look back period potentiallyeffects eligibility, this issue may be moot as all income including spousal income must beconsidered when determining the countable income of the household under 130 CMR520.023(C)(l)(b)5 and 130 CMR 520.009.6 In addition there is no need to remand the issue toMassHealth as they will be required to rcdctermine the appellant's long term care eligibility afterdisregarding assets contained in the Realty Trust and can make a determination as whether it willtake any additional action with regard to the appellant's income and or eligibili ty they deemappropriate at that time.

Order for the MassHealth

Rcdetermine long term care eligibility as of dale of application after disregarding assets containedin The Boudreau Realty Trust.

4 130 CMR 520.016(b)(3) concerns Post-Eligibility Transfer of Assets4 and not income and is therefore notapplicable. 130 CMR 520.016(b)(3) Post-Eligibility Transfer of Assets, (a) To meet the needs of the communityspouse and to allow the continuing el igibi l i ty of the institutionalized spouse, the MassHealth agency allows theinstitutionalized spouse, after he or she has been determined eligible for MassHeallh Standard, to transfer assets to orfor the sole benefit of the community spouse in accordance with 130 CMR 520.016(B)(1) and (2).^Trusts or Similar Legal Devices Created on or after August 1 1, 1993 (C) Irrevocable Trusts. (I) Portion Payable.(b) Payments from the income or from the principal of an irrevocable trust made to or for the benefit of theindiv idual are countable income.11 Countable-Income Amount (A) Overview. (I) An individual 's and the spouse's gross earned and unearned incomeless certain business expenses and standard income deductions is referred to as the countable-income amount. Indetermining gross monthly income....


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If this decision is not implemented within 30 days after the date of this decision, you should contactyour MassHealth Enrollment Center. If you experience problems with the implementation of thisdecision, you should report this in writing to the Director of the Board of Hearings, Division ofMedical Assistance, at the address on the first page of this decision.

Brook PadgettHearing OfficerBoard of Hearings

cc: Springfield MliC


ADD135



Appeal Decision: Approved Appeal Number: 1402145

Decision Date: 7/10/14 Hearing Date:

Hearing Officer: Stanley Kallianidis Record OpenDate:

05/20/14

06/20/14

Appellant Representative:

MassHealth Representative:

Mary Alice Baker, Springfield

Commonwealth of MassachusettsExecutive Office of Health and Human Services


100 Hancock Street, 6"' FloorQuit icy, MA 02171

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APPEAL DECISION

Appeal Decision: Approved

Decision Date: 7/10/14

Issue:

Hearing Date:

Trust Assets

05/20/14

MassHealth Rep.: Mary Alice Baker

Authority

This hearing was conducted pursuant to Massachusetts General Laws Chapter 118E,Chapter 30A, and the rules and regulations promulgated thereunder.

Jurisdiction

Notice dated 01/29/13 was sent to the appellant stating that MassHealth had denied herapplication for MassHealth benefits due to excess assets (Exhibit 1). The appellant filedthis appeal on 02/13/14 and, therefore, it is timely (see Exhibit 2 and 130 CMR 610.015).A denial of MassHealth benefits is grounds for appeal 130 CMR 610.032).


MassHealth denied the appellant's MassHealth application due to excess assets.

Issue

Pursuant to 130 CMR 520.023(C), was MassHealth correct in counting the assets of anirrevocable trust in determining the appellant's eligibility?


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Summary of Evidence

The MassHealth representative testified that the appellant filed a MassHealth SeniorMedical Benefit Request (hereinafter "application") on November 6, 2013 (Exhibit 3). Theappellant's application was denied due to excess assets. According to the denial letter,the excess assets were over the $2000.00 limit. The assets totaled $136,757.00 andwere from a trust valued at $135,054.00, and a bank account of $1703.29. Since at thetime of the notice, the bank account was under $2000.00, the only issue and dispute wasover whether or not assets held in the Y.S. Irrevocable Trust (Y.S. Trust) were countable(Exhibits 4 & 5).

The MassHealth representative explained that, on June 5, 2007, the appellant as donorestablished the Y.S. Trust. One of the appellant's daughters is the trustee, and herchildren are the beneficiaries. The appellant cannot become a trustee. According to theSeventh Article, the donor has no right to alter, amend or revoke the trust. Under the FirstArticle, the donor is entitled to income of the trust. However, also under the First Article,"The Trustee shall have no authority or discretion to distribute principal of the Trust to orfor the benefit of the Donor." Under the Fifth Article, the trustee has power to retain anyinvestment, acquire property, make loans to any individual other than the donor, andpurchase life insurance, annuities or other insurance on the life of the donor (Exhibit 4).The trust was funded by an August 10, 2007 deed in which the appellant transferred herhome to the trust reserving a life estate (Exhibit 5).

The decision to count the assets of the trust was based upon a memo from MassHealth'slegal division, which held that, even though the trust is irrevocable, the principal isavailable to the appellant and therefore is a countable asset. The MassHealth attorneyrelied on Articles which gives the trustee broad power and authority to deal with trustassets such as life insurance. Also, the appellant is entitled to trust income, and has a lifeestate interest in the property. Finally, under the Eighth Article, "The Trustee may, to theextent that the income of the trust generates a tax liability for the Donor, pay suchamounts of income or principal of the trust as the Trustee deems necessary to satisfysuch tax obligation. The Donor retains the right to reacquire the principal of the Trust bysubstituting property of an equivalent value" (Exhibit 6).

The MassHealth attorney concluded that the principal from the trust is fully countable. Ifthe appellant cures the trust, the countability of the property should be evaluated underrelevant MassHealth regulations (Exhibit 6).

The appellant's memo was based upon the perception that MassHealth was counting thevalue of the life estate and not trust assets (Exhibit 7).

The record was left open for the appellant to respond to MassHealth's legal arguments(Exhibits).


ADD138

According to argument in a memo and addendum from the appellant's attorney, thetrustee is not allowed to distribute principal to the donor, only income. Moreover, justbecause the trustee can control the property in the trust does not mean she may make itavailable to the appellant. Finally, even though the trustee may pay the appellant's trustincome tax from the trust does not make the entire principal countable because there hasbeen no trust income to date let alone any income tax owed on the trust (Exhibit 9).

Findings of Fact

The record shows, and I so find:

1. The appellant filed a MassHealth application on November 6, 2013 (Exhibit 3).

2. The appellant's application was denied due to excess assets over the $2000.00 limit(Exhibit 1).

3. The countable assets at issue were from an irrevocable Y.S. trust valued at$135,054.00 (Exhibit 1).

4. On June 5, 2007, the appellant as donor established the Y.S. Trust. One of theappellant's daughters is the trustee, and her children are the beneficiaries. Theappellant cannot serve as trustee (Exhibit 4).

5. The trust was funded by an August 10, 2007 deed in which the appellant transferredher home to the trust reserving a life estate (Exhibit 5).

6. According to the Seventh Article, the donor has no right to alter, amend or revoke thetrust (Exhibit 4).

7. Under the First Article, the donor is entitled to income of the trust (Exhibit 4).

8. Under the First Article, "The Trustee shall have no authority or discretion to distributeprincipal of the Trust to or for the benefit of the Donor" (Exhibit 4).

9. Under the Fifth Article, the trustee has power to retain any investment, acquireproperty, make loans to any individual other than the donor, and purchase lifeinsurance, annuities or other insurance on the life of the donor (Exhibit 4).

10. Under the Eighth Article, "The Trustee may, to the extent that the income of the trustgenerates a tax liability for the Donor, pay such amounts of income or principal of thetrust as the Trustee deems necessary to satisfy such tax obligation. The Donorretains the right to reacquire the principal of the Trust by substituting property of anequivalent value" (Exhibit 4)


ADD139


MassHealth regulation 130 CMR 520.023C)(1), Irrevocable Trusts states.

(a) Any portion of the principal or income from the principal (such as interest) of anirrevocable trust that could be paid under any circumstances to or for the benefit of theindividual is a countable asset.

(b) Payments from the income or from the principal of an irrevocable trust made to orfor the benefit of the individual are countable income.

(c) Payments from the income or from the principal of an irrevocable trust made toanother and not to or for the benefit of the nursing-facility resident are consideredtransfers of resources for less than fair-market value and are treated in accordance withthe transfer rules at 130 CMR 520.019(G).

(d) The home or former home of a nursing-facility resident or spouse held in anirrevocable trust that is available according to the terms of the trust is a countable asset.Where the home or former home is an asset of the trust, it is not subject to theexemptions of 130 CMR 520.007(G)2) or 520.007(G)(8).

(2) Portion Not Payable. Any portion of the principal or income from the principal (suchas interest) of an irrevocable trust that could not be paid under any circumstances to orfor the benefit of the nursing-facility resident will be considered a transfer for less thanfair-market value and treated in accordance with the transfer rules at 130 CMR520.019(G).

In the instant appeal, I have found that the appellant file an application for MassHealth onNovember 6, 2013. The appellant's application was denied due to excess assets from atrust valued at $135,054.00. On June 5, 2007, the appellant as donor established theY.S. Trust. One of the appellant's daughters is the trustee, and her children are thebeneficiaries. The appellant cannot become a trustee. The trust was funded by anAugust 10, 2007 deed in which the appellant transferred her home to the trust reserving alife estate.

There is no dispute that the trust is irrevocable. Similarly, there is no issue of countableincome. The parties agree that income from the trust is available to the appellant. Thefact that the appellant is entitled to income from the trust has no bearing on the issue ofthe accessibility of principal.

Herein, the pertinent question is whether the principal of the Y.S. Trust is available to theappellant under any circumstance, and if so, to what extent? The answer is found in thesimple language of the trust's articles.


ADD140

Under the straightforward, unequivocal language of the First Article, "The Trustee shallhave no authority or discretion to distribute principal of the Trust to or for the benefit of theDonor."

However, MassHealth in its justification for counting the trust's assets argues that,under the Fifth Article, the trustee has power to retain any investment, acquire property,make loans to any individual other than the donor, and purchase life insurance, annuitiesor other insurance on the life of the donor. MassHealth cites this trustee power as theprime example of why the trust is countable. I disagree with MassHealth that the abovepower gives the appellant access to the principal of the trust. By the terms of the trust,any and all assets purchased by the trust would be owned by the trust and not theappellant. More importantly, due to the trustee's restrictions, no such asset would bemade available to the appellant as donor.

MassHealth also cites that, under the Eighth Article, "The Trustee may, to the extent thatthe income of the trust generates a tax liability for the Donor, pay such amounts ofincome or principal of the trust as the Trustee deems necessary to satisfy such taxobligation." However, there is no indication that the Trust has ever generated income tothe appellant, and/or that she ever even owed any tax from such income. Accordingly,there can be no principal of the trust attributable to the appellant on this basis.

In conclusion, the assets of Y.S. Trust are unavailable to the appellant as she does nothave authority to revoke the instrument, and the trustee has no authority to distributeprincipal to her. Accordingly, based upon the above cited regulations, this asset shouldnot have been counted in her eligibility determination.

There remains only a question of the appellant's life estate interest and whether or notthis is a countable asset. MassHealth has yet to make a determination on this asset, andit is not a subject of this appeal.

The appeal is therefore approved.


Re-open application and determine appellant's eligibility for MassHealth exempting alltrust assets.


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If this decision is not implemented within 30 days after the date of this notice, you shouldcontact your local office. If you experience problems with the implementation of thisdecision, you should report this in writing to the Director of the Board of Hearings at theaddress on the first page of this decision.

Stanley KallianidisHearing OfficerBoard of Hearings

cc:


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Decision Date: 8/5/15 Hearing Date: May 11, 2015

Hearing Officer: B. Padgett Record Open: June 29, 2015 Appellant Representative: MassHealth Representative:

R. Perez N. Beltran

Commonwealth of Massachusetts Executive Office of Health and Human Services

Office of Medicaid Board of Hearings

100 Hancock Street, 6th floor Quincy, MA 02171

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APPEAL DECISION

Appeal Decision: Approved Issue: 130 CMR 520.023

Decision Date: 8/5/15 Hearing Date: May 11, 2015

MassHealth Rep.: R. Perez N. Beltran

Appellant Rep.:

Hearing Location: Springfield

Authority This hearing was conducted pursuant to Massachusetts General Laws Chapter 118E, Chapter 30A, and the rules and regulations promulgated thereunder.

Jurisdiction The Appellant received a notice dated March 05, 2015 stating: MassHealth has reviewed your application for MassHealth long term care services which you filed on January 26, 2015. You are not eligible for long term care services because you have more countable assets than MassHealth benefits allow (Exhibit 1). The Appellant filed this appeal timely on March 24, 2015 (130 CMR




ADD230

610.015(B); Exhibit 2). Denial of assistance is valid grounds for appeal (130 CMR 610.032).

Action Taken by MassHealth The Appellant’s application for long term care benefits was denied as he is over the asset limit.

Issue Is the Appellant over assets limit for long term care eligibility?




ADD231

Summary of Evidence MassHealth testified the Appellant applied for long term care benefits on December 02, 2014 requesting a start date of November 04, 2014. MassHealth stated the request was denied on March 05, 2015 as the Appellant transferred property valued at greater than $2,000.00 into the 1

D.E.L. Irrevocable Trust (Trust) on November 12, 2004, which MassHealth has deemed 2

countable (130 CMR 520.023(C)(1)(a)). MassHealth submitted a memorandum from the legal department regarding the determination (Exhibit 4). The MassHealth’s legal position as argued in the memorandum is that the principal of the Trust is countable in determination of long term care eligibility; specifically citing the SECOND Article, section C and the EIGHT Article, sections A, C, D, F, J. L, N, T, NINTH and the FOURTEENTH Article, which allow the Appellant who is the Grantor of the Trust the ability to distribute, invest, loan, buy, sell, lease, pay, purchase, exchange Trust assets, or do any other act deemed necessary or desirable for the administration of the Trust. MassHealth asserts that based on these provisions the Trust assets are available and can be used to pay for the Appellant's nursing facility care. MassHealth maintains applicants for MassHealth have the burden to prove their eligibility including that their total countable assets are below $2,000.00 (130 CMR 520.007). 3

MassHealth argues the Appellant established and funded the Trust and therefore the assets contained therein are considered available. MassHealth cites to the federal Medicaid statute

1 130 CMR 520.003. 2 Initials are used to preserve confidentiality. 3 Countable assets include assets to which the applicant would be entitled whether or not these assets are actually received when the failure to receive such assets results from the action or inaction of the applicant or person acting on his or her behalf




ADD232

which provides that the countability of a self-settle inter-vivos trust is made without regard to whether the Trustee can exercise discretion under the trust or whether distributions may be made from the trust. MassHealth asserts federal Medicaid law effectively “creates a presumption that trusts containing the assets of an applicant and/or spouse are countable for eligibility determination” (citing 42 U.S.C. §1396p et seq.). MassHealth argues countable assets include assets to which the applicant or member would be entitled whether or not these assets are actually received, when failure to receive such assets results from the action or inaction of the applicant. MassHealth points out that Medicaid is a statutory program governed by regulations and is not a program in equity and that common law principals do not override statutory provisions or policies and purposes underpinning the program which was designed to provide health care for the poor and that individuals are expected to deplete their own resources before obtaining assistance from the government (Lebow v.Comm’r of Div. of Med. Assist., 433 Mass. 171, 172 (2001)). MassHealth asserts the Supreme Judicial Court (SJC) maintains when a trust is evaluated for Medicaid eligibility, the common law of trusts and general trust laws principals cannot be used to circumvent the Medicaid statute “for the purpose of having your cake and eating it too.” “The purpose of the statute is to prevent individuals from using trust law to ensure their eligibility for Medicaid coverage, while preserving their assets for themselves or their heirs.” (citing Lebow v. Comm’r of the Div. of Med. Assist., 433 Mass. 171, 172 (2001)). “The issue is not whether the trustee has the authority to make payments to the grantor at a particular moment in time. Rather, if there is any state of affairs, at any time during the operation of the trust, that would permit the trustee to distribute trust assets to the grantor, those assets count in calculating the grantor’s Medicaid eligibility” (citing Doherty v. Director of the Office of Medicaid, 74 Mass. App. Ct. 439, 443 (2009)). MassHealth argues Medicaid statutes dictate that a trust is countable if there is “any circumstance” which allows principal to be available for the benefit of an applicant and a review of this Trust reveals that “any circumstance” can be found in a number of Trust Articles. As a result the Appellant retains substantial control over Trust 4

4 Referencing specifically, SECOND Article: Appellant retains power of appointment; EIGHTH Article (A) make




ADD233

assets which may be used for her benefit. Appellant was represented by counsel who appeared via telephone and responded that it appears MassHealth legal does not understand trust law or rather than reading the document in its entirety chooses to misread standard fiduciary language to argue the entire corpus of a trust is available for the Appellant to spend. Counsel highlighted the FIRST Article which states “ The Grantor expressly waives any and all rights which she may have by operation of law or otherwise amend, alter, terminate or otherwise change this Agreement or any of the provisions hereof.” As well as the SECOND Article, section B which states “During the lifetime of the Grantor the Trustee may distribute part or all of the principal of this Trust to any persons (other than the Grantor) otherwise entitled to the assets of this Trust after the death of the Grantor.” At the counsel’s request the record remained open until June 15, 2015 to allow the Appellant to respond to the MassHealth legal position (Exhibit 5). On June 09, 2015 Appellant’s counsel requested additional time to submit their response and the record open period was extended to June 29, 2015 (Exhibit 6). Counsel submitted the Appellant's response within the required time limits (Exhibit 7). The Appellant’s response argues the SECOND Article is the controlling provision with regard to distribution of principal and income and it is this provision that dictates the interpretation of all other provisions. According to Appellant, MassHealth has erroneously based its conclusion that

investments, (B) exercise options under insurance, (C) borrow against cash value of insurance, (D) make secure or unsecured loans, (E) use trust property to pay premiums, (F) buy, sell lease, mortgage to borrow money to pay premiums or make distributions, (J) purchase life insurance, (L) make loans, (M) borrow money to secure a loan, execute a deed, mortgage or other instruments, (O) determine issues of income and principal, and (T) any other act which in the judgment of the Trustee is necessary; NINTH Article: “upon demand” of the Appellant the Trustee “shall transfer any trust assets in exchange for assets of an equivalent value”; TENTH Article: allows principal to be used for tax obligations; and FOURTEENTH Article: the Appellant can appoint successor trustees.




ADD234

the assets of the Trust are available because they are reading a number of provisions in isolation essentially ignoring other provisions which prohibit the Trust from allowing the Appellant access to Trust assets. Appellant maintains MassHealth misapplies the Court’s finding in Cohen and Doherty which urged that all provisions of a trust be read and considered in it entirety. The restriction of the SECOND Article addresses the Appellant's intent to preserve Trust principal for the benefit of the remainderman and controls the interpretation of all other Trust provisions. The Trustee has no authority to make payments of principal to the Appellant under any circumstances nor does the Appellant have the authority to demand such a distribution of principal. As a result the Trust principal is a non-countable asset for the purposes of MassHealth long term care eligibility.

Findings of Fact Based on a preponderance of the evidence, I find the following: 1. The Appellant is a 90 year old single woman residing in a nursing facility who filed an

application for MassHealth long term care benefits on December 02, 2014. 2. On March 05, 2015 the application was denied due to excess assets greater than $2,000.00. 3. On November 12, 2004 the Appellant as Grantor established the D.E.L. Irrevocable Trust

with her son as Trustee. 4. By a deed dated November 12, 2004, Appellant for less than 100 dollars consideration,

transferred real estate located in Paxton, MA to the Trust, and reserved a life estate interest in the property.




ADD235

5. The entire corpus of the Trust is the assessed value of the Appellant’s primary residence. 6. The FIRST Article states:

This Trust shall be known as referred to as the “[D.E.L.] IRREVOCABLE TRUST.” The grantor expressly waives any and all rights which she may have by operation of law or otherwise to amend, alter, terminate or otherwise change this Agreement or any of the provisions hereof.

7. The SECOND Article states:

A. The Trustee shall pay to the Grantor all of the net income of the Trust, quarterly or more often, for remainder of the Grantor’s life.

B. During the life of the grantor the Trustee may distribute part or all of the principal of their Trust to any person (other than the Grantor) otherwise entitled to the assets of this Trust after the death of the Grantor.

C. The Grantor reserves the power, exercisable at any time or from time to time, by written instrument during the Grantor’s lifetime or by the Grantor’s will or any other codicil thereto, to appoint any part or all of the principal or income of this Trust to any one or more of the Grantor’s issue, free of trust of otherwise, referring specifically to this special power of appointment in such written instrument, will, and/or codicil.

Analysis and Conclusions of Law The Appellant is a resident of a nursing facility who applied for MassHealth long term care




ADD236

benefits on December 02, 2014. On November 12, 2004 the Appellant established and funded the D.E.L. Irrevocable Trust; therefore, regulations at 130 CMR 520.023 (Trusts or Similar Legal Devices Created on or after August 11, 1993) are controlling. The MassHealth long term care program is designed to assist in providing health care for the poor and therefore MassHealth has the obligation to scrutinize trust documents as it is expected that applicant’s deplete their own resources before obtaining assistance from the government to pay for their care. While there are individuals and trusts which go to great lengths to appear to transfer funds out of an applicant’s control while administering the trust in a manner so that they continue to maintain authority over the funds, there are also legitimate trusts that have been drafted to provide for a family member in life as well as preserving and protecting assets for beneficiaries upon the family member’s death, that are not an attempt of the applicant to “have their cake and eat it to.” MassHealth asserts the assets contained in the Appellant's trust are countable based on a number of Trust provisions including the SECOND, EIGHT, NINTH, TENTH an FOURTEENTH Articles maintaining these provisions allow access to the principal of the Trust under 130 CMR 520.023(C)(1)(d). However I do not agree as I find these provisions do not allow the Appellant 5

or the Trustee to circumvent the intended purpose of the irrevocable trust. It is clear that under 42 U.S.C §1396p(d)(2)(A) that the Appellant established a Trust which was funded with her primary residence; however I find nothing in 42 U.S.C §1396p(d)(2)(C)(ii) and (iii) to presume that assets held in Trust are countable as MassHealth asserts. What is relevant in determining the countability of assets held in an irrevocable Trust established by an applicant or

5 (C) Irrevocable Trusts. (1) Portion Payable. (d) The home or former home of a nursing-facility resident or spouse held in an irrevocable trust that is available according to the terms of the trust is a countable asset. Where the home or former home is an asset of the trust, it is not subject to the exemptions of 130 CMR 520.007(G)(2) or 520.007(G)(8).




ADD237

spouse or funded with an applicant’s assets is the “any circumstances” test mandated at 42 U.S.C §1396p(d)(3)(B)(i) and 130 CMR 520.023(C)(1). To understand the federal statue and the MassHealth regulations, the decisions of Cohen and Doherty provide the most constructive guidance. The Court in Cohen directs: “if there is a peppercorn of discretion, then whatever is the most the beneficiary might under any state of affairs receive in the full exercise of that discretion is the amount that is counted as available for Medicaid eligibility.” The Court in Doherty held that a “clause may not be read in isolation; rather, it must be construed and qualified in light of the trust instrument as a whole,” but also concludes that “assets held in trust can be so insulated as to render the assets non countable in a determination of Medicaid eligibility.” I find that the Trust provisions in this case, considered collectively, create such an instrument that renders assets noncountable in the determination of Medicaid eligibility. The FIRST Article states the Trust is irrevocable, and cannot be altered or amended by the Grantor. The SECOND Article, section (A), states the Grantor receives all of the net income of the Trust, and section (B) the Trustee may distribute part or all of the principal of their Trust to any person entitled to the assets of the Trust except for the Grantor. The FOURTH Article details how the property shall be transferred under the laws of Massachusetts in the Grantor dies intestate. The EIGHTH Article is standard trust powers concerning investments, loans, insurance, mortgages, borrowing or purchasing assets. The NINTH Article allows the Grantor to exchange assets for assets of an equivalent value. TENTH Article concerns the payment of taxes and FOURTEENTH explains what procedure must occur in the case of Trustee resignation or death. After review of the Trust articles I find there is no set of circumstances that allows discretion to pay principal to the nonbeneficiary Appellant. Under both federal law and MassHealth regulations regarding the treatment of assets held in an irrevocable trust, it is the Trustee’s ability to make payment from principal that renders resources countable. In the Trust at hand, there is no ability to make payment from principal to Appellant because she is not a beneficiary of the Trust; and payment of principal is not allowed under the




ADD238

SECOND Article. The provisions highlighted by MassHealth do not constitute the “any circumstance” which MassHealth is suggesting. Further any uncertainty caused with regard to these provisions does not eliminate the language which definitively denies the Appellant access to principal and affirmatively state the Trust is irrevocable. I find nothing in the Trust document which allows the Appellant to either revoke the Trust or allow Trust principal to be distributed to the Appellant as claimed by MassHealth; as a result this appeal is approved.

Order for the MassHealth Redetermine long term care eligibility as of date of application after disregarding assets contained in the Dorothy Lederer Irrevocable Trust.




ADD239

Implementation of this Decision If this decision is not implemented within 30 days after the date of this decision, you should contact your MassHealth Enrollment Center. If you experience problems with the implementation of this decision, you should report this in writing to the Director of the Board of Hearings, Division of Medical Assistance, at the address on the first page of this decision.

Brook Padgett Hearing Officer Board of Hearings

cc: Springfield MEC




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Decision Date: 11/2 Hearing Date: 08/27/2015

Hearing Officer: Thomas J. Goode Record Open to: 10/16/2015 Appellant Representative: MassHealth Representative: Diana Hunter, Tewksbury MEC

The Commonwealth of Massachusetts

Executive Office of Health and Human Services Office of Medicaid Board of Hearings


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APPEAL DECISION

Appeal Decision: Approved Issue: 130 CMR 520.023

Decision Date: 11/2 Hearing Date: 08/27/2015

MassHealth Rep.: Diana Hunter Appellant Rep.:

Hearing Location: Tewksbury MassHealth Enrollment Center Room 1

Aid Pending: No

Authority This hearing was conducted pursuant to Massachusetts General Laws Chapter 118E, Chapter 30A, and the rules and regulations promulgated thereunder. Jurisdiction Through a notice dated July 10, 2015, MassHealth denied Appellant's application for MassHealth benefits because it determined that assets held in trust are countable and exceed program limits (see 130 CMR 520.003, 520.023 and Exhibit 1). Appellant filed this appeal in a timely manner on July 22, 2015 (see 130 CMR 610.015(B) and Exhibit 2). Denial of assistance is valid grounds for appeal (see 130 CMR 610.032). A hearing was held on August 27, 2015. The hearing record remained open until September 18, 2015 to allow Appellant to submit a response to the MassHealth legal memorandum submitted at hearing (Exhibit 4). Appellant’s legal memorandum was timely received (Exhibit 5). MassHealth was instructed to request that the hearing record reopen if a second legal memorandum was to be entered into evidence. On September 24, 2015, MassHealth requested that the hearing record reopen to allow a response. The hearing record was reopened, and the MassHealth response memorandum was timely received on October 1, 2015 (Exhibit 6). Appellant was allowed to submit a final response, which was timely received on October 14, 2015 (Exhibit 7).

Page 1 of Appeal No.: «APPEALNUM»

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Action Taken by MassHealth MassHealth denied appellant's application for MassHealth long-term care benefits due to assets held in trust deemed countable to Appellant.

Issue The appeal issue is whether MassHealth was correct, pursuant to 130 CMR 520.023, in determining that assets held in trust are countable to appellant.

Summary of Evidence The MassHealth representative testified that Appellant entered a skilled nursing facility on June 27, 2013. A MassHealth long term care application was submitted on her behalf on April 10, 2015, seeking MassHealth eligibility beginning January 1, 2015. The MassHealth representative stated that Medicare paid for nursing care through July 10, 2013, Appellant then paid privately through November 9, 2014. On July 10, 2015, MassHealth denied Appellant’s MassHealth application due to assets in excess of program limits comprised of property valued at $230,000 held in trust and deemed countable to appellant (Exhibit 1). At issue is an Irrevocable Trust established by Appellant on April 16, 2009 (Exhibit 8). Appellant is the Donor, and Appellant’s son is Trustee. There is no community spouse. Appellant is the income only beneficiary. Appellant’s children are the remainder beneficiaries. By a deed dated April 16, 2009, Appellant transferred her primary residence to the Trust, and reserved a right to occupy the property during her lifetime. SUMMARY OF RELEVANT TRUST PROVISIONS Section 1.2 reads: “The purpose of this Trust is to manage my assets and to use them to allow me to live in the community for as long as possible.” Section 1.3 reads: “The Trust created by this agreement shall be irrevocable. I may not revoke or amend this agreement in any way. My trustee, however, may at any time, or from time to time, amend any administrative provisions of this trust by an instrument in writing signed and acknowledged by my trustee. For purposes of the foregoing, the term “administrative provision” refers to any provision of the trust dealing with the management and administration of the trust and in no event shall any such amendment affect, enlarge or shift any beneficial interests created hereunder.”


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Section 2.1 reads: “If any property is placed in trust during my life, my trustee may pay me or may pay on my behalf as much of the income of the trust as it shall determine in its sole and nonreviewable discretion to be necessary for my care and well-being. Any income not so paid may be accumulated and added to the principal. The principal shall be held until the termination of this Trust, unless distributed under the provisions of paragraph 2.2….” Section 2.2 states that an independent trustee may distribute to Appellant’s children such portions of the Trust principal as the independent trustee in its absolute and uncontrolled discretion may deem advisable. Section 2.3 reads: “I shall also have the right to use and occupy any residence that may from time to time be held in trust. During my lifetime, the trustee shall not mortgage, encumber, sell or dispose of the principal residence or other real estate held in trust or interest therein without my written consent or the written consent of my personal representative including my attorney-in-fact, it being my intention to retain such residence and real estate for my benefit during my lifetime, and without the right of partition. I reserve the right to the use and occupancy of the real estate during my lifetime and pay for all maintenance and repairs, water and sewer charges, insurance charges, and taxes relating to said premises, if I shall so elect. In addition, for further clarification, during my life, I shall have the right to possession or enjoyment of any real estate, which constitutes the principal residence. Nothing herein shall be construed to limit the ability of the trustee to alienate, sell or convey the real estate or any interest therein, or to lease, mortgage or demise any or all of the premises, so long as the provision stated above are met.” Section 2.4 states: “My reservation of my right to use and occupancy in the real estate specifically includes the conveyance of real estate located at [property address] in order to conform with the requirements of Kirby v. Board of Assessors of Medford…pertaining to any eligibility requirements for residential abatements offered by the cities and towns of the Commonwealth of Massachusetts.” Section 4 states that Appellant cannot serve as trustee, but gives Appellant the power to appoint successor and additional trustees as well as the power to remove any trustee. Section 4.4 states that the Trustee has the power and authority to invest income and principal; sell, mortgage, exchange, lease or otherwise dispose of any property; determine what part of the trust property is income and what part is principal; and to borrow or lend any amounts. Section 6.1 reads: “My trustee may in its sole discretion pay to my estate or to the tax authorities any taxes payable by reason of my death chargeable against the residue of my estate and any other debts of my estate or expenses of its administration and legacies under my will that, if paid


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by my executor, would reduce the residue of my estate. This paragraph shall not be construed to require any such payments by my trustee.” Section 6.2 reads: “In addition to payments under paragraph 6.1, my trustee may pay or reimburse any person for all or any part of any other tax or expense payable by reason of my death with respect to any property and shall charge the payment against any trusts or shares as my trustee considers equitable.” Section 6.4 reads: “It is the intent of the grantor that this trust be construed as a “grantor trust”

under Internal Revenue Code Section 677(a). All income distributed, held, or accumulated by this trust shall be taxable to me. My trustee may, to the extent that the income of the trust generates a tax liability for me, distribute to the Internal Revenue Service or other tax authority, such amounts of income of the trust as my trustee deems necessary to satisfy such tax obligation.” Section 6.5 reads: “I retain the right to reacquire the principal of this trust by substituting property of an equivalent value therefor.” Section 7.1 reads: “Income means net income and accumulated income not added to the principal and does not include capital gain. Income received during the period of administration of my estate shall be treated as income by my trustee if it would have been so treated had it been received directly by my trustee. Undistributed income at the termination of the income interest to which it relates shall be dealt with as if accrued and received thereafter.” SUMMARY OF MASSHEALTH’S POSITION

MassHealth determined that all assets held by the Irrevocable Trust are countable in a Medicaid eligibility determination under 130 CMR 520.023; 42 U.S.C. §1396p(d). MassHealth asserts that trust assets are countable to Appellant because under the terms of the Trust Appellant has the right to live in her former residence to the exclusion of others, and to pay for all related maintenance, repairs, water and sewer charges, insurance charges, and taxes out of her own bank account just as a true owner would. MassHealth further argues that there are conditions under terms of the Trust that permit the Trustee to distribute income and principal to or for the benefit of Appellant, specifically under Section 6.4 which allows the Trustee to distribute income or principal to pay taxes incurred by Appellant, and to determine what is considered principal versus income. Further, MassHealth asserts that Appellant’s ability to use and occupy the principal of the Trust constitutes a “payment” from the Trust for her benefit, and therefore meets the “any circumstance” test under 42 U.S.C. §1396p(d)(3)(B)(i). MassHealth argues that the State Medicaid Manual, HCFA Transmittal 64 §3259.1(A)(8), provides a definition of payment that includes property disbursements including the right to use and occupy real property.


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Therefore, MassHealth concludes that because Appellant has the right to use and occupy her former residence under the terms of the Trust, she has received a payment from the Trust. Thus, the principal of the Trust is countable to Appellant in a Medicaid eligibility determination. SUMMARY OF APPELLANT’S POSITION Appellant argues that although Appellant has the right to use and occupy the former residence, she does not have the legal right to waste or sell the residence, and cannot access the equity in the residence. Appellant does not have an unlimited right to use and occupy the property without regard to the interests of the remaindermen, and thus her use of the property is not a payment of principal to Appellant. In return for her ability to use the property, Appellant is obligated to pay rent in the form of paying bills and taxes associated with the property. Absent Trustee discretion to distribute property to Appellant free of trust, retaining the power to use and occupy the former home does not render it countable. The “any circumstances” test at 42 U.S.C. §1396p (d)(3)(B) requires that trust principal be available such that trust principal may be paid to an applicant. Because Appellant does not have legal title to the property, the Trustee cannot make such a principal payment to Appellant. Therefore, if the right to occupy is considered a payment, it would be correctly characterized as a payment of income. Appellant also argues that the ability to substitute assets does not render the principal countable because Appellant would be obligated to substitute assets of equal value. Moreover, the Trustee’s ability to determine what is considered income versus an asset is limited. Appellant argues that MassHealth misread 1

Section 6.4, which does not allow payment of taxes from principal.

Findings of Fact Based on a preponderance of the evidence, I find the following:

1. Appellant entered a skilled nursing facility on June 27, 2013.

2. A MassHealth long term care application was submitted on her behalf on April 10, 2015, seeking MassHealth eligibility beginning January 1, 2015.

3. Medicare paid for nursing care through July 10, 2013.

4. Appellant paid privately through November 9, 2014.

5. On July 10, 2015, MassHealth denied Appellant’s MassHealth application due to assets

1 Citing Doherty v. Director of the Office of Medicaid, 74 Mass. App. Ct. 439,441 (2009).


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in excess of program limits comprised of property valued at $230,000 held in trust and deemed countable to Appellant.

6. Appellant established an Irrevocable Trust on April 16, 2009.

7. Appellant is the Donor, and Appellant’s son is Trustee.

8. There is no community spouse.

9. By a deed dated April 16, 2009, Appellant transferred her primary residence to the Trust,

and reserved a life estate interest in the property.

10. Appellant is the income only beneficiary of the Trust.

11. Appellant’s children are the remainder beneficiaries of the Trust.

12. Section 1.2 reads: “The purpose of this Trust is to manage my assets and to use them to allow me to live in the community for as long as possible.”

13. Section 1.3 reads: “The Trust created by this agreement shall be irrevocable. I may not

revoke or amend this agreement in any way. My trustee, however, may at any time, or from time to time, amend any administrative provisions of this trust by an instrument in writing signed and acknowledged by my trustee. For purposes of the foregoing, the term “administrative provision” refers to any provision of the trust dealing with the management and administration of the trust and in no event shall any such amendment affect, enlarge or shift any beneficial interests created hereunder.”

14. Section 2.1 reads: “If any property is placed in trust during my life, my trustee may pay

me or may pay on my behalf as much of the income of the trust as it shall determine in its sole and nonreviewable discretion to be necessary for my care and well-being. Any income not so paid may be accumulated and added to the principal. The principal shall be held until the termination of this Trust, unless distributed under the provisions of paragraph 2.2….”

15. Section 2.2 states that an independent trustee may distribute to Appellant’s children such

portions of the Trust principal as the independent trustee in its absolute and uncontrolled discretion may deem advisable.

16. Section 2.3 reads: “I shall also have the right to use and occupy any residence that may

from time to time be held in trust. During my lifetime, the trustee shall not mortgage, encumber, sell or dispose of the principal residence or other real estate held in trust or


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interest therein without my written consent or the written consent of my personal representative including my attorney-in-fact, it being my intention to retain such residence and real estate for my benefit during my lifetime, and without the right of partition. I reserve the right to the use and occupancy of the real estate during my lifetime and pay for all maintenance and repairs, water and sewer charges, insurance charges, and taxes relating to said premises, if I shall so elect. In addition, for further clarification, during my life, I shall have the right to possession or enjoyment of any real estate, which constitutes the principal residence. Nothing herein shall be construed to limit the ability of the trustee to alienate, sell or convey the real estate or any interest therein, or to lease, mortgage or demise any or all of the premises, so long as the provision stated above are met.”

17. Section 2.4 states: “My reservation of my right to use and occupancy in the real estate

specifically includes the conveyance of real estate located at [property address] in order to conform with the requirements of Kirby v. Board of Assessors of Medford…pertaining to any eligibility requirements for residential abatements offered by the cities and towns of the Commonwealth of Massachusetts.”

18. Section 4 states that Appellant cannot serve as trustee, but gives Appellant the power to

appoint successor and additional trustees as well as the power to remove any trustee.

19. Section 4.4 states that the Trustee has the power and authority to invest income and principal; sell, mortgage, exchange, lease or otherwise dispose of any property; determine what part of the trust property is income and what part is principal; and to borrow or lend any amounts.

20. Section 6.1 reads: “My trustee may in its sole discretion pay to my estate or to the tax

authorities any taxes payable by reason of my death chargeable against the residue of my estate and any other debts of my estate or expenses of its administration and legacies under my will that, if paid by my executor, would reduce the residue of my estate. This paragraph shall not be construed to require any such payments by my trustee.”

21. Section 6.2 reads: “In addition to payments under paragraph 6.1, my trustee may pay or

reimburse any person for all or any part of any other tax or expense payable by reason of my death with respect to any property and shall charge the payment against any trusts or shares as my trustee considers equitable.”

22. Section 6.4 reads: “It is the intent of the grantor that this trust be construed as a “grantor

trust” under Internal Revenue Code Section 677(a). All income distributed, held, or accumulated by this trust shall be taxable to me. My trustee may, to the extent that the income of the trust generates a tax liability for me, distribute to the Internal Revenue


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Service or other tax authority, such amounts of income of the trust as my trustee deems necessary to satisfy such tax obligation.”

23. Section 6.5 reads: “I retain the right to reacquire the principal of this trust by substituting

property of an equivalent value therefor.”

24. Section 7.1 reads: “Income means net income and accumulated income not added to the principal and does not include capital gain. Income received during the period of administration of my estate shall be treated as income by my trustee if it would have been so treated had it been received directly by my trustee. Undistributed income at the termination of the income interest to which it relates shall be dealt with as if accrued and received thereafter.”

Analysis and Conclusions of Law There are no factual disputes in the case at hand; rather, the issues revolve around the interpretation of the language of the various Trust provisions involved and the applicable regulations. The Trust is properly considered in the context of both state and federal law applying to trusts created after 1993, of which pertinent sections follow: Federal law at 42 USC §1396p provides: (d) Treatment of Trust amounts

(1)For purposes of determining an individual’s eligibility for, or amount of, benefits under a State plan under this subchapter, subject to paragraph (4), the rules specified in paragraph (3) shall apply to a Trust established by such individual.

(2)(A)For purposes of this subsection, an individual shall be considered to have established a Trust if assets of the individual were used to form all or part of the corpus of the Trust and if any of the following individuals established such Trust other than by will:

(i)The individual. (ii)The individual’s spouse. (iii)A person, including a court or administrative body, with legal authority to act in place of or on behalf of the individual or the individual’s spouse. (iv)A person, including any court or administrative body, acting at the direction or upon the request of the individual or the individual’s spouse.

(B) In the case of a Trust the corpus of which includes assets of an individual (as

determined under subparagraph (A)) and assets of any other person or persons, the


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provisions of this subsection shall apply to the portion of the Trust attributable to the assets of the individual.

(C) Subject to paragraph (4), this subsection shall apply without regard to— (i) the purposes for which a Trust is established, (ii) whether the Trustees have or exercise any discretion under the Trust,

(iii) any restrictions on when or whether distributions may be made from the Trust, or

(iv) any restrictions on the use of distributions from the Trust.

(3) (A) In the case of a revocable trust— (i) the corpus of the trust shall be considered resources available to the individual, (ii) payments from the trust to or for the benefit of the individual shall be considered income of the individual, and (iii) any other payments from the trust shall be considered assets disposed of by the individual for purposes of subsection (c) of this section.

(B) In the case of an irrevocable trust— (i) if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual, the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be made shall be considered resources available to the individual, and payments from that portion of the corpus or income —

(I) to or for the benefit of the individual, shall be considered income of the individual, and (II) for any other purpose, shall be considered a transfer of assets by the individual subject to subsection (c) of this section; and

(ii) any portion of the trust from which, or any income on the corpus from which, no payment could under any circumstances be made to the individual shall be considered, as of the date of establishment of the trust (or, if later, the date on which payment to the individual was foreclosed) to be assets disposed by the individual for purposes of subsection (c) of this section, and the value of the trust shall be determined for purposes of such subsection by including the amount of any payments made from such portion of the trust after such date.

(emphasis added).

Regulation 130 CMR 520.023 applies to trusts or similar legal devices created on or after August 11, 1993, and follows in pertinent part with emphasis added:

(C) Irrevocable Trusts .


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(1) Portion Payable .

(a) Any portion of the principal or income from the principal (such as interest) of an irrevocable trust that could be paid under any circumstances to or for the benefit of the individual is a countable asset.

(b) Payments from the income or from the principal of an irrevocable trust made to or for the benefit of the individual are countable income.

(c) Payments from the income or from the principal of an irrevocable trust made to another and not to or for the benefit of the nursing-facility resident are considered transfers of resources for less than fair-market value and are treated in accordance with the transfer rules at 130 CMR 520.019(G).

(d) The home or former home of a nursing-facility resident or spouse held in an irrevocable trust that is available according to the terms of the trust is a countable asset. Where the home or former home is an asset of the trust, it is not subject to the exemptions of 130 CMR 520.007(G)(2) or 520.007(G)(8).

(2) Portion Not Payable. Any portion of the principal or income from the principal (such as interest) of an irrevocable trust that could not be paid under any circumstances to or for the benefit of the nursing-facility resident will be considered a transfer for less than fair-market value and treated in accordance with the transfer rules at 130 CMR 520.019(G).

First, MassHealth argues that because Appellant reserved the right to use and occupy her former residence, the former residence held in trust is “available” under the terms of the Trust, and is therefore countable under 42 U.S.C. 1396p (d)(2)(A)(B) and (C) and under 130 CMR 520.023(C)(1)(d). I disagree. In the case of an irrevocable trust, 42 U.S.C.1396p(d)(3)(B) imposes the “any circumstances” test that considers available the amount of income or principal that could be paid to the individual from income or from the corpus of the trust. The Trust was established in 2009. The Trust cannot be amended or revoked by Appellant, and cannot be substantively amended by the Trustee. Appellant deeded property, specifically, her residence, 2

to the Trust on April 16, 2009. Appellant also reserved the right to use and occupy her former residence. MassHealth relies on direction from the State Medicaid Manual, HCFA Transmittal 64 §3259.1(A)(8) in determining that the value of the property is available to Appellant:

2 Although Section 1.3 allows the Trustee to amend administrative provisions, MassHealth does not argue that the ability to amend administrative provisions could result in principal payments to Appellant.


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[f]or purposes of this section a payment from a trust is any disbursal from the corpus of the trust or from income generated by the trust which benefits the party receiving it. A payment may include actual cash, as well as a noncash or property disbursements such as the right to use and occupy real property.

Assuming the right to occupy the property is properly considered a disbursal, and is therefore a payment dated to the Trust’s inception, the value of the payment would be limited to the value of the right to occupy the property, i.e., Appellant’s equitable interest that she reserved. However, characterizing the right to occupy as a payment to Appellant does not vest in the Trustee the discretion or requirement to make legal title to the property available to Appellant. Moreover, 3

as Appellant is an income only beneficiary, and cannot receive payments from principal, it follows that characterizing the right to occupy the former residence as a payment would result in an income payment and not a payment from principal.

The MassHealth position implies that by retaining a life estate interest, or the right to occupy the former home, the entire value of the former home becomes countable. However, regulation 130 CMR 520.023 (C)(1)(d), read within the context of the “any circumstances” test at 42 U.S.C.1396p(d)(3)(B), requires that Trust property, whether the former home or not, is “available” such that it would result in Trust principal being paid to the applicant. The value of the right to occupy not withstanding as it is not calculated in this case, such payment would require the availability of legal title to the former home rather than just the availability of equitable title retained through the right to occupy the former residence. I find no preclusion under either federal law or MassHealth regulations restricting an applicant from retaining a life estate interest in the former residence, or a right to occupy the former home under the terms of Trust. Therefore, it would be inconsistent to determine that the former home held in Trust is countable under 520.023(C)(1)(d) without a finding that, according to the terms of the Trust, the Trustee can sell the property, and pay the proceeds to the individual to be used for her benefit. As a practical matter, the presumption here is that the proceeds could be paid to the individual/applicant free of Trust to pay for the cost of nursing facility care. The availability of an equitable interest only cannot accomplish this goal. Next, MassHealth deems countable Trust principal because Appellant either derives a benefit

3 Cohen: “This court construed the provisions of 42 U.S.C. s. 1396(k)(2), defining a Medicaid qualifying trust before the amendment effected by Pub. L. 103-66, s. 13611, 107 Stat. 627 (1993), to encompass any trust established by a person (or that person's spouse) under which that person may receive any payments in the discretion of the trustees, and further, under the provisions of s. 1396a(k)(1), the amount of money deemed to be available to the beneficiary is the greatest amount that the trustees in any set of circumstances might have discretion to pay out”(emphasis added).


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from the principal, or retains substantial control over the principal because she must consent to its sale, pay for improvements and costs associated with the property, and retains the power to live in the property as though she were the absolute owner. Appellant’s retention of these powers does not render legal title to the property available to her, or allow her to receive payments from principal. Nor does the Trust’s stated purpose “to manage my assets and to use them to allow me to live in the community for as long as possible” render the real estate countable absent Trustee discretion to distribute the property to Appellant free of Trust. The federal law at 42 U.S.C. 1396p(d)(3)(B) does not state that retaining substantial control over principal or deriving a benefit from principal renders the assets countable. Rather, it establishes that any payment from the trust that could be made to or for the benefit of the individual shall be considered resources available to the individual. Similarly, 130 CMR 520.023(C)(1) looks to principal that could be paid under any circumstances to or for the benefit of the individual. In both the federal law and MassHealth regulations, payment is the clear prerequisite to the use of principal for the benefit of the individual. I disagree with the MassHealth interpretation that focuses solely on benefits derived from principal or substantial control of principal assets equating to availability. I find no preclusion in the regulations to an individual or spouse deriving a benefit from principal including use of the property, or the attainment of tax benefits. The “any circumstances” test is focused specifically on the Trustee’s ability and discretion to make payment to the individual. I find no requirement that an individual must demonstrate complete divestment from principal to the exclusion of any benefit to be derived from principal. If the trust regulations are to be interpreted to require an applicant to demonstrate complete divestment from principal, then arguably the income derived from the principal by an income only beneficiary, as is the case here, would not only be counted as income, but would also render the principal available because the individual is not completely divested from the principal that funded the Trust. If trust principal is rendered “available” it is because the Trustee has discretion to make payments from the principal to the individual. There are no circumstances in the instant trust that permit such payments from principal. Similarly, Appellant’s reservation of the right to reacquire the property if she were to substitute assets of equal value does not render the property available in the absence of Appellant actually having other assets of equal value to substitute into the Trust, which would then trigger discretion in the Trustee to distribute the property to her in exchange for the assets of equal value. The discovery of these assets of equal value would clearly result in an excess asset issue, and potentially a resource transfer issue; however, this clause read either in isolation or within the larger context of the Trust document, does not vest in the Trustee the ability or discretion to make a payment or disbursal without first establishing that Appellant actually has assets of equal value to substitute for the corpus of the Trust. Nor does the Trustee’s discretion with regard to determinations of income and principal allow the Trustee to make payments from principal in light of the restriction to distribute only income under Section 2.1, the definition of income under


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Section 7.1, and general accounting principles that would also apply. Finally, MassHealth’s 4

reading of Section 6.4 of the Trust in finding a “peppercorn of discretion” appears to be in error. MassHealth argues that Section 6.4 allows distributions of principal to satisfy Appellant’s tax obligations (Exhibit 4, p.3). Section 6.4 allows only distributions of income, not principal, to satisfy tax obligations (Exhibit 8). Under both federal law and MassHealth regulations regarding the treatment of assets held in an irrevocable trust, it is the Trustee’s ability or discretion to make payment from principal that renders resources available, and therefore countable. In the Trust at hand, the Trustee does not 5

have the authority or discretion to make payment from principal to Appellant because she is not, and cannot become, a principal beneficiary of the Trust.

The appeal is APPROVED.

Order for MassHealth Redetermine eligibility based on the April 10, 2015 application date, and exclude the value of assets held in the Irrevocable Trust established on April 16, 2009.

Implementation of this Decision If this decision is not implemented within 30 days after the date of this decision, you should contact your MassHealth Enrollment Center. If you experience problems with the implementation of this decision, you should report this in writing to the Director of the Board of Hearings at the address on the first page of this decision.

Thomas J. Goode Hearing Officer Board of Hearings

4 See Doherty: “We doubt, for example, that the trustees may, willynilly, simply characterize a trust asset as "income" and thereby, free of fiduciary fault, convey that asset to Muriel free of trust.” 5 See fn. 3.


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cc: MassHealth Representative: Sylvia Tiar


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GENERAL AND CATEGORICAL 3259.6 (Cont.) ELIGIBILITY REQUIREMENTS 11-94 When that portion of a trust which cannot be paid to an individual is treated as a transfer of assets for less than fair market value, the usual 36 month look-back period is extended to 60 months. (See §3258.4 for the look-back period for transfers of assets for less than fair market value.)

EXAMPLE: Use the same facts that are used in the examples in subsections A and B, except that the trustee is precluded by the trust from disbursing any of the corpus of the trust to or for the benefit of Mr. Baker. Again, the $100 and $500 (which come from income to the trust) count as income to Mr. Baker. Because none of the corpus can be disbursed to Mr. Baker, the entire value of the corpus at the time the trust was created ($100,000 in March 1994) is treated as a transfer of assets for less than fair market value. As with the revocable trust discussed in subsection A, the date of transfer is within the 60 month look-back period that applies to portions of trusts that cannot be disbursed to or for the individual. Thus, a transfer of assets is considered to have occurred as of March 1, 1994. The fact that $50,000 was actually transferred out of the trust to Mr. Baker’s brother does not alter the amount of the transfer upon which the penalty is based. That amount remains $100,000, even after the gift to Mr. Baker's brother. If, at some point after establishing the trust, Mr. Baker places an additional $50,000 in the trust, none of which can be disbursed to him, that $50,000 is treated as an additional transfer of assets. The penalty period that applies to that $50,000 starts when those funds are placed in the trust, provided no penalty period from the previous transfer of $100,000 is still running. If a previous penalty period is still in effect, the new penalty period cannot begin until the previous penalty period has expired. (See §§3258ff. for transfers of assets for less than fair market value.) Amounts are considered transferred as of the time the trust is first established or, if later, payment to the individual is foreclosed. Each time the individual places a new amount into the trust, payment to the individual from this new portion is foreclosed. It is this later date that determines when a transfer has occurred.

D. Payments Made From Revocable Or Irrevocable Trusts to or on Behalf of Individual.--Payments are considered to be made to the individual when any amount from the trust, including an amount from the corpus or income produced by the corpus, is paid directly to the individual or to someone acting on his/her behalf, e.g., a guardian or legal representative. Payments made for the benefit of the individual are payments of any sort, including an amount from the corpus or income produced by the corpus, paid to another person or entity such that the individual derives some benefit from the payment. For example, such payments could include purchase of clothing or other items, such as a radio or television, for the individual. Also, such payments could include payment for services the individual may require, or care, whether medical or personal, that the individual may need. Payments to maintain a home are also payments for the benefit of the individual.

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3-3-109.29 Rev. 64 ===================================================================

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GENERAL AND CATEGORICAL 11-94 ELIGIBILITY REQUIREMENTS 3259.6 (Cont.)

NOTE: A payment to or for the benefit of the individual is counted under this provision only if such a payment is ordinarily counted as income under the SSI program. For example, payments made on behalf of an individual for medical care are not counted in determining income eligibility under the SSI program. Thus, such payments are not counted as income under the trust provision.

E. Circumstances Under Which Payments Can or Cannot Be Made.--In determining whether payments can or cannot be made from a trust to or for an individual, take into account any restrictions on payments, such as use restrictions, exculpatory clauses, or limits on trustee discretion that may be included in the trust. For example, if an irrevocable trust provides that the trustee can disburse only $1,000 to or for the individual out of a $20,000 trust, only the $1,000 is treated as a payment that could be made under the rules in subsection B. The remaining $19,000 is treated as an amount which cannot, under any circumstances, be paid to or for the benefit of the individual. On the other hand, if a trust contains $50,000 that the trustee can pay to the grantor only in the event that the grantor needs, for example, a heart transplant, this full amount is considered as payment that could be made under some circumstances, even though the likelihood of payment is remote. Similarly, if a payment cannot be made until some point in the distant future, it is still payment that can be made under some circumstances.

F. Placement of Excluded Assets in Trust.--Section 1917(e) of the Act provides that, for trust and transfer purposes, assets include both income and resources. Section 1917(e) of the Act further provides that income has the meaning given the term in §1612 of the Act and resources has the meaning given that term in §1613 of the Act. The only exception is that for institutionalized individuals, the home is not an excluded resource. Thus, transferring an excluded asset (either income or a resource, with the exception of the home of an institutionalized individual) for less than fair market value does not result in a penalty under the transfer provisions because the excluded asset is not an asset for transfer purposes. Similarly, placement of an excluded asset in a trust does not change the excluded nature of that asset; it remains excluded. As noted in the previous paragraph, the only exception is the home of an institutionalized individual. Because §1917(e) of the Act provides that the home is not an excluded resource for institutionalized individuals, placement of the home of an institutionalized individual in a trust results in the home becoming a countable resource.

G. Use of Trust vs. Transfer Rules for Assets Placed in Trust.--When a nonexcluded asset is placed in a trust, a transfer of assets for less than fair market value generally takes place. An individual placing an asset in a trust generally gives up ownership of the asset to the trust. If the individual does not receive fair compensation in return, you can impose a penalty under the transfer of assets provisions. However, the trust provisions contain specific requirements for treatment of assets placed in trusts. As discussed in subsections A through C, these requirements deal with counting assets placed in trusts as available income, available resources, and/or a transfer of assets for less than fair market value, depending on the circumstances of the particular trust. Application of the trust

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64

ii. Legal interpretations. Here the writer can identify the operative statute, regulation, or other source of authority and interpret it if its meaning is disputed. He can also identify any aids to interpretation such as court decisions or his own agency’s previous rulings. If appropriate, he should explain why he did not consider it necessary to make certain findings or apply certain legal principles (thereby demonstrating that he didn’t simply ignore or was unaware of these matters). In addition, he can explain if necessary how the governing legal principles combine with the facts he has found to produce the final decision. The legal analysis section of the decision should follow a distinctly logical path. First, identify the discrete issue, perhaps by a section heading; then present the statutory or common law rule that applies and show how that rule has been applied in other analogous cases. Finally, apply that rule to the facts in the case at hand by presenting both parties’ arguments and reach a definite conclusion indicating which argument is more persuasive. When analyzing an issue, use deductive logic (such as a categorical syllogism) to derive a valid and sound conclusion. In the typical three-part legal syllogism, the writer sets forth two propositions that are true – the major and minor premises—in order to come to a valid and true conclusion. Often, a statutory provision, a regulation, a binding opinion, or an agency policy makes up the major premise. Just be sure to state the law accurately. The minor premise comes from the factual pattern of the specific case at hand. The writer first has to make one or more findings of fact to state a true proposition that will be adopted as the minor premise. Deductive logic requires the conclusion to be true if the propositions are both true and the conclusion is derived validly from the propositions. In structuring a paragraph with a legal syllogism, it is entirely possible and beneficial often to follow the I-R-A-C (issue-rule-analysis-conclusion) format. The format can be repeated for however many issues the case presents. Naturally, the final disposition of the case should reflect the sum of, and not be inconsistent with any of, the individual conclusions pertaining to the separate issues on appeal.

iii. Remedy. Certain cases will require that the board formulate a remedy. Many statutes and regulations authorize a range of remedies, with the ultimate choice left to the administrative agency. In this section, the writer has an opportunity to explain the basis on which the board exercised its discretion.

Boards do not, in general, have the duty to explain why the result in one case is different from the result in another. Rather, the reasons provided by the board serve to distinguish cases. Massachusetts Electric Co. v. Dept. of Public Utilities, 376 Mass. 294, 312 (1978). That said, in cases in which a board is departing from longstanding precedent, the board must explain its rationale carefully. Although not bound in a strict sense by stare decisis, boards and administrative tribunals are under a special duty to explain themselves where they depart from an established line of decisions.

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110 / Massachusetts Law Review

chaRt i: tRust PRovisions that caused the outcoMe foR each faiR heaRing decision

Truste

e cou

ld te

rmina

te tr

ust

Truste

e cou

ld su

bstit

ute p

rope

rty of

eq

uivale

nt va

lue

Gran

tor p

ower

of ap

poin

tmen

t

Truste

e cou

ld co

nver

t prin

cipal

into

in

com

e-pr

oduc

ing p

rodu

ct (d

eter

-m

ine i

ncom

e fro

m pr

incip

al)

Truste

e (or

gran

tor, a

s tru

stee)

had

abilit

y to i

nves

t/ re

inves

t tru

st pr

oper

ty

Reta

ined

righ

t to o

ccup

y, co

ntro

l ove

r sa

le, m

ortg

age,

etc.

of re

al es

tate

Trust

did no

t dist

ingu

ish pr

incip

al fro

m in

com

e ben

eficia

ries f

or

distri

butio

ns

Truste

e cou

ld m

ake u

nsec

ured

loan

s, se

ll, m

ortg

age,

lease

trus

t pro

perty

Accu

mula

te pr

incip

al to

exte

nt

feas

ible f

or ap

plica

nt’s f

utur

e nee

ds/

mak

e dist

ribut

ions o

f prin

cipal

with

-ou

t reg

ards

to ot

her b

enefi

ciarie

s

Gran

tor h

ad ri

ght t

o elim

inate

bene

fi-cia

ry or

reall

ocat

e int

eres

t

Gran

tor c

ould

borro

w tru

st pr

incip

al an

d/or

rem

ove/

appo

int n

ew tr

uste

e

Uniqu

e den

ial19

1

Hear

ing L

ocat

ion19

2

Priva

te Pa

y bef

ore a

ppl. (

mo.)

193

HEARING NUMBER DENIALS1201407 & 1201408 X T/C 0

1305949 X X X X X S 61308151 X X X X TK NP1204615 X S 21208209 X X X X C 41216681 X X X S 21306089 X X X T 31308251 X X X X X X C 361305018 X X X S 21104515 X X X X X R 01111829 X TK NP1221777 X C NP1307250 X TK 8194 1217298 X X X C 11303150 X X X S 1

1306280195 X X X TK 71307413 X S NP1119248 X X X TK NP1306727 X X X C 11311737 X TK 51110974 X X X R NP1211060 X X C 31211362 X C 3

1021232 & 1214622 X X X S 21401264 X X X C 11401492 X X X X X X X T NP1401212 X X X X X TK NP1403514 X X X X X X S 21308755 X X X X X X C 01313685 X X X C 41222688 X X X X X C 191403851 X X X X TK 12

191. Unique denial refers to those that were not denied or approved based on similar provisions analyzed in Doherty. 192. T=Taunton, S=Springfield, C=Chelsea, TK=Tewksbury, R=Revere.193. The approximate number of months the applicant privately paid before applying for benefits. NP=Not Provided.

194. Applicant was denied after eight months; decision does not indicate the date of the application. 195. This trust was originally approved, but after review as part of a MassHealth asset verification project, the applicant’s benefits were terminated.

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Trusts Used in Medicaid Planning / 111

chaRt i (cont.): tRust PRovisions that caused the outcoMe foR each faiR heaRing decision

Truste

e cou

ld te

rmina

te tr

ust

Truste

e cou

ld su

bstit

ute p

rope

rty of

equiv

a-len

t valu

e

Gran

tor p

ower

of ap

poin

tmen

t

Truste

e cou

ld co

nver

t prin

cipal

into

inco

me-

prod

ucin

g pro

duct

(det

erm

ine i

ncom

e fro

m

prin

cipal)

Truste

e (or

gran

tor, a

s tru

stee)

had a

bility

to

inves

t/ re

inves

t tru

st pr

oper

ty

Reta

ined

righ

t to o

ccup

y, co

ntro

l ove

r sale

, m

ortg

age,

etc.

of re

al es

tate

Trust

did no

t dist

ingu

ish pr

incip

al fro

m

inco

me b

enefi

ciarie

s for

distr

ibutio

ns

Truste

e cou

ld m

ake u

nsec

ured

loan

s, se

ll, m

ortg

age,

lease

trus

t pro

perty

Accu

mula

te pr

incip

al to

exte

nt fe

asibl

e for

ap

plica

nt’s f

utur

e nee

ds/m

ake d

istrib

u-tio

ns of

prin

cipal

with

out r

egar

ds to

othe

r be

nefic

iaries

Gran

tor h

ad ri

ght t

o elim

inate

bene

ficiar

y or

reall

ocat

e int

eres

t

Gran

tor c

ould

borro

w tru

st pr

incip

al an

d/or

re

mov

e/ap

poin

t new

trus

tee

Uniqu

e den

ial

Hear

ing L

ocat

ion

Priva

te Pa

y bef

ore a

ppl. (

mo.)

HEARING NUMBER APPROVALS1200356 X TK 11201761 X TK 221214578 X X C 11115916 X X TK 31213366 X X C 01311906 X S NP1303372 X C 11303305 X X X C 01215864 X X X S 721205462 X X TK 6

1404274 & 1404275 X X TK NP1311826 X X X X X S 181401798 X X X X X X S 21401521 X X X X X S 21403170 X X X X X X X TK NP1402476 X X X X TK 51401539 X X X X X X S NP1402348 X X X X X S 51403093 X X C 11306967 X X X S 01318124 X X X X X C 121314721 X X X X TK 61401170 X X X X X C 1

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112 / Massachusetts Law Review

chaRt ii: the ReLationshiP between tRust PRovisions and aPPeaL outcoMes

PROVISION DENIALS APPROVALSTrustee has right to convert principal to income/ allocate income and principal

22 CASES208209, 1216681, 1217298, 1211060, 1211362,

1308251, 1104515, 1119248, 1303150, 1305949, 1306089, 1306280, 1306727, 1307413, 1308151, 1401264, 1401492, 1401212, 1403514, 1308755,

1313685, 1222688

12 CASES1311906, 1115916, 1311826, 1401798, 1401521, 1403170, 1402476, 1401539, 1402348, 1318124, 1314721, 1401170

Grantor has a power of Appointment 14 CASES1208209, 1211060, 1104515, 1110974, 1305018, 1305949, 1306089, 1306280, 1401492, 1401212, 1403514, 1308755, 1403851, 1404274 & 1404275

14 CASES1213366, 1215864, 1303305, 1115916, 1401798, 1401521, 1403170, 1402476, 1401539, 1402348, 1306967, 1318124,

1314721, 1401170

Grantor retains control over real estate — right to occupy, consent required to sell property, mortgage, rent, pay taxes, direct trustees to use proceeds from sale to purchase and hold title, etc.

20 CASES1216681, 1211060, 1308251, 1104515, 1110974, 1111829, 1119248, 1305949, 1306089, 1307250, 1307413, 1308151, 1401264, 1401492, 1401212,

1403514, 1308755, 1313685, 1403851, 404274 & 1404275

14 CASES1200356, 1213366, 1215864, 1303305, 1205462, 1311826, 1401798, 1401521, 1403170, 1401539, 1402348, 1403093,

1306967, 1318124

Trust attempts to limit distributions or terminate 7 CASES1204615, 1104515, 1110974, 1311737, 1401492,

1021232 & 1214622, 1403851

1 CASE1311826

Broad trustee powers with distributions to ben-eficiaries (e.g., supporting applicant’s food, health services, buy real estate, pay debts) or trust did not specify that applicant was not a “beneficiary” of the trust principal distributions

9 CASES1221777, 1111829, 1305018, 1306727,

1307413, 1222688, 1021232, 1215622, 1403851

1 CASE311826

Grantor can borrow/ make loans on trust principal or reacquire particular trust assets by substituting assets of equivalent value

8 CASES1217298, 1217298, 1305949, 1307413, 1215864,

1401212, 1403514, 1222688

3 CASES1303305, 1401798, 1401170

Trustees can terminate the trust (either at the trustee’s discretion or the grantor’s right to order the trustee)

10 CASES1201407 & 1201408, 1204615, 1211060,

1303150, 1104515, 1305949, 1306089, 1308151, 1401492, 140385

3 CASES1201761, 1311826, 1318124

Grantor can eliminate any beneficiary or reallocate part or all of interest of any beneficiary

1 CASE1308251

2 CASES1403170, 1402476

Grantor retains a life estate 3 CASES1211060, 1308151, 1222688

3 CASES1201761, 1311826, 1318124

Trustee has power to exchange principal for assets of equivalent value, right to sell, purchase and convey, mortgage, lease, invest/reinvest property, make secured or unsecured loans, etc.

16 CASES1217298, 1308251, 1303150, 1305949, 1306089, 1306280 1307250, 1307413, 1308151, 1401264, 1401492, 1401212, 1403514, 1308755, 1313685,

1222688

13 CASES1201761, 1213366, 1214578, 1115916, 1311826, 1401798, 1401521, 1403170, 1401539, 1402348, 1403093, 1314721,

1401170

Trustee is to accumulate principal to the extent feasible due to the unforeseeability of the settlor’s future needs without regard to interest of the remaindermen/ best enable the applicant to lead as normal, comfortable and fulfilling life as possible

3 CASES1119248, 1303150, 1308151

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Trusts Used in Medicaid Planning / 113

chaRt iiiChart III shows the percentage of appeals approved by hearing

officers per year. In 2011, only two MassHealth Doherty-related denials were appealed and both were denied. In 2012, 47 percent of cases appealed were denied. The year 2013 was very trouble-some for attorneys and their clients as hearing officers agreed with MassHealth in most situations, reversing denials in only 29 percent of appeals. In the first six months of 2014, however, 59 percent of appeals have been approved. This trend may be significant since, if continued, it will mean that hearing officers are becoming skeptical

when confronting caseworkers’ denials and MassHealth legal de-partment memoranda. The significance of the fact that Doherty-re-lated denials were reversed in 2014 more than in any other year since the Doherty decision is, of course, subject to speculation. It does appear, however, that improved advocacy on behalf of applicants, and the tendency of MassHealth’s legal office to broad-brush its ap-proach by repetitively submitting similar memoranda rather than analyzing each trust on its own, may create a new environment for Irrevocable Income Only Trusts.

office Locations

PROVISION TOTAL APPEALS PERCENTAGE APROVED

CHELSEA 18 39%

TEWKSBURY 16 50%

SPRINGFIELD 16 50%

TAUNTON 3 0%

REVERE 2 0%

chaRt iii: the PeRcentage of aPPeaLs aPPRoved PeR yeaR

YEAR NUMBER OF CASES DENIED NUMBER OF CASES APPROVED PERCENTAGE APPROVED

2011 2 -- 0%

2012 8 7 47%

2013 15 6 29%

2014 (6 months only) 7 10 59%

ADD389

2005] JUDICIAL DEFERENCE, AGENCY COMMITMENT 1015

ADEC’s seemingly contradictory treatment of a decades-old agency statutory construction underscores an abiding confusion in deference doctrine that flows from its failure to provide a coherent account of the significance of agency interpretive consistency. Chevron celebrated agency interpretive flexibility by proclaiming that initial agency interpretations are not “instantly carved in stone” and that agencies “must consider varying interpretations and the wisdom of [their] polic[ies] on a continuing basis.”8 Reading this remark for all it might be worth, one might conclude that an agency ought to be able to change a statutory construction without triggering stricter judicial review; and, indeed, there is a good deal of case law that adheres to something like this view.9 But for over a century preceding Chevron, the case law was replete with opinions that treated administrative consistency as a crucial factor for determining deference.10 The common sense behind this stance is powerful: Inconsistency suggests an arbitrary or unsure interpreter upon whom the regulated cannot rely.

The current framework for determining the applicability of Chevron’s strong deference sidesteps the problem of balancing the virtues of interpretive flexibility and consistency with an analysis that is instead rooted in a complex mix of fiction and proceduralism. The lead case on this point, 2001’s United States v. Mead Corp.,11 held that strong deference applies where: (a) Congress has “delegated authority to the agency generally to make rules carrying the force of law,” and (b) “the agency interpretation claiming deference was promulgated in the exercise of that authority.”12 In other cases, agency constructions should net only Skidmore “deference,” which basically instructs courts to exercise independent judgment regarding statutory meaning subject to the weak requirement that they carefully consider agency views for persuasiveness.13

8 Chevron, 467 U.S. at 863–64. 9 See, e.g., Smiley v. Citibank, N.A., 517 U.S. 735, 742 (1996) (stressing that

interpretive “change is not invalidating, since the whole point of Chevron is to leave the discretion provided by the ambiguities of a statute with the implementing agency”).

10 See infra Part II.A (discussing the pre-Chevron significance of agency consistency to deference).

11 United States v. Mead Corp., 533 U.S. 218, 226–27 (2001). 12 Id. 13 Id. at 237 (citing Skidmore v. Swift & Co., 323 U.S. 134, 139 (1944)). Skidmore

advised courts that the weight of an agency interpretation in a given case should depend on “the thoroughness evident in [the agency’s] consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Skidmore, 323 U.S. at 140. Given such instructions, some might reasonably question whether it is appropriate to characterize Skidmore “deference” as a form of independent judicial review. See, e.g., Thomas W.

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commonwealth of massachusetts appeals court ac no. 2016-p-1123 mary e. daley, personal

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