Guilfoil v. Sec'y of the Exec. Office of Health & Human Servs.

• Decision Date: 09 February 2021
• Docket Number: SJC-12922
• Citation: 162 N.E.3d 627,486 Mass. 788
• Parties: Joellen GUILFOIL, personal representative, v. SECRETARY OF the EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

486 Mass. 788

162 N.E.3d 627

Joellen GUILFOIL, personal representative,¹

v.SECRETARY OF the EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES.

SJC-12922

Supreme Judicial Court of Massachusetts, Worcester..

Argued October 7, 2020.

Decided February 9, 2021.

Lisa M. Neeley, for the plaintiff.

Samuel M. Furgang, Assistant Attorney General, for the defendant.

Patricia Keane Martin, Wellesley, & C. Alex Hahn, for Massachusetts Chapter of the National Academy of Elder Law Attorneys, amicus curiae, submitted a brief.

Present: Budd, C.J., Gaziano, Lowy, Cypher, & Kafker, JJ.

CYPHER, J.

This case concerns whether the entire interest in a property transferred into a nominee trust is a countable asset in an individual's Medicaid eligibility determination where the individual has retained a life estate in the property. The plaintiff, Dorothy Frank,² created a trust, the sole corpus of which consisted of her home. The plaintiff retained a life estate interest in the property as a beneficiary, while her five children had a remainder interest. The office of Medicaid's board of hearings determined that the property was a countable asset that rendered the plaintiff ineligible for long-term care benefits. The plaintiff appealed, and a Superior Court judge ruled in favor of the agency. We conclude that because the trust is a nominee trust, not a true trust, the plaintiff possesses no ability to reclaim ownership of the property's remainder interest and her only interest in the property is a life estate. We further conclude that the plaintiff's life estate is not a countable asset for Medicaid eligibility purposes. Accordingly, we reverse.³

1. Background. We set forth the basic facts and the procedural background of the case, reserving additional details for the discussion section. We begin with an overview of the Medicaid framework to provide context for the discussion.

a. Medicaid framework. Medicaid is a cooperative Federal and State program that "provides medical assistance to low income persons based on financial need." Rudow v. Commissioner of the Div. of Med. Assistance, 429 Mass. 218, 221-222, 707 N.E.2d 339 (1999). See Tarin v. Commissioner of the Div. of Med. Assistance, 424 Mass. 743, 746, 678 N.E.2d 146 (1997). See also 42 U.S.C. § 1396-1. "State participation in this public assistance program is voluntary, and those that choose to participate must submit, for Federal approval, a State Medicaid plan that complies with the Medicaid Act and its implementing regulations." Rudow, supra at 222, 707 N.E.2d 339, citing 42 U.S.C §§ 1396 et seq. The Medicaid program in Massachusetts is known as MassHealth. See G. L. c. 118E, § 9. Recipients of MassHealth must meet certain financial eligibility requirements pursuant to 130 Code Mass. Regs. § 520.001 (2014). See Tarin, supra at 747, 678 N.E.2d 146.

Relevant here is the provision that "[t]he total value of countable assets owned by or available to individuals applying for" MassHealth may not exceed $2,000. 130 Code Mass. Regs. § 520.003(A)(1) (2019). Title 130 Code Mass. Regs. § 520.007 (2019) defines countable assets as "all assets that must be included in the determination of eligibility. Countable assets include assets to which the applicant or member or his or her 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." All real estate owned by the applicant, with the exception of the principal place of residence, is considered a countable asset. 130 Code Mass. Regs. § 520.007(G) (2014).

In order to preserve scarce public resources, "[i]ndividuals are expected to deplete their own resources before obtaining assistance from the government." Lebow v. Commissioner of the Div. of Med. Assistance, 433 Mass. 171, 172, 740 N.E.2d 978 (2001). On many occasions, however, we have been tasked with confronting the "unfortunate reality" that affluent individuals sometimes "devise strategies to appear impoverished in order to qualify for Medicaid benefits." Id. "One such strategy is to transfer assets into an inter vivos trust, whereby funds appear to be out of the individual's control, yet generally are administered by a family member or loved one." Id. Often known as "Medicaid planning," such strategies may dangerously "divert[ ] scarce Federal and State resources from low-income [qualifying individuals]." Cohen v. Commissioner of the Div. of Med. Assistance, 423 Mass. 399, 404, 668 N.E.2d 769 (1996), cert. denied sub nom. Kokoska v. Bullen, 519 U.S. 1057, 117 S.Ct. 687, 136 L.Ed.2d 611 (1997), quoting H.R. Rep. No. 265, 99th Cong., 1st Sess., pt. 1, at 72 (1985). See Daley v. Secretary of the Exec. Office of Health & Human Servs., 477 Mass. 188, 192, 74 N.E.3d 1269 (2017).

Congress has attempted to curtail such practices by enacting what is known as the "any circumstances" provision. In the case of an irrevocable trust, for the purpose of demonstrating Medicaid eligibility, the Federal statute provides that "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" (emphasis added). 42 U.S.C. § 1396p(d)(3)(B)(i).⁴ The relevant MassHealth regulation defines an irrevocable trust as "a trust that cannot be in any way revoked by the grantor," 130 Code Mass. Regs. § 515.001 (2013), and adopts the same "any circumstances test." The regulation provides that "[a]ny 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 benefit of the individual is a countable asset." 130 Code Mass. Regs. § 520.023(C)(1)(a) (2014).

The Federal statute also provides that, in the case of a revocable trust, "the corpus of the trust shall be considered resources available to the individual."

42 U.S.C. § 1396p(d)(3)(A)(i). The Massachusetts regulation defines a revocable trust as a "trust whose terms allow the grantor to take action to regain any of the property or funds in the trust."⁵ 130 Code Mass. Regs. § 515.001. Much like the Federal statute, the State regulation provides that "[t]he entire principal in a revocable trust is a countable asset." 130 Code Mass. Regs. § 520.023(B)(1) (2013).⁶

One further constraint that Congress established to protect against Medicaid planning is the so-called "look-back" rule. Under 42 U.S.C. § 1396p(c)(1)(B)(i), the look-back rule "imposes a penalty for any asset transfer for less than fair market value made by an individual within five years of the individual's application for Medicaid benefits." Daley, 477 Mass. at 193, 74 N.E.3d 1269. If such a transfer occurs during the five years (the look-back period), the applicant is ineligible for Medicaid benefits for a period of time determined by dividing the value of the transfer by the average monthly cost of the nursing home facility. See 42 U.S.C. § 1396p(c)(1)(E). After the look-back period has expired, the individual is not subject to any penalty.

b. The trust. On December 16, 1999, the plaintiff established the Frank Family Realty Trust (trust). The plaintiff transferred her home in Fitchburg to the trust, which was "intended to be a nominee trust." Under the terms of the trust, the plaintiff was the trustee, as well as one of six beneficiaries of the trust. The schedule of beneficiaries, a separate document established under the agreement and declaration of trust on June 25, 2001, lists each beneficiary's interest in the property. The plaintiff had a life estate interest in the property under the trust, and the other five beneficiaries, her children, have a remainder interest as joint tenants with rights of survivorship. The trust contains nine articles. Of particular significance here are the articles titled "Trustees," "Beneficiaries," Powers of Trustees," "Termination," and "Amendments." According to the agreement and declaration of trust, the trust can be amended in a writing signed by all beneficiaries. The trust can be terminated at any time by notice in writing from any of the beneficiaries. If terminated, the trust's assets will be transferred and conveyed to the beneficiaries as tenants in common in proportion to their respective interests or as otherwise directed by all of the beneficiaries. The trustee, except in a case of termination, has "no power to deal in or with the Trust Estate except as directed by all of the Beneficiaries."

At the time this suit was initiated, the plaintiff was a ninety-one year old woman who had been living in a long-term nursing facility since March 2017. Shortly after she moved to the facility, she applied for long-term benefits from MassHealth. Her application was denied because MassHealth determined that her countable assets exceeded the $2,000 limit. In its determination of her countable assets, MassHealth included a small amount of funds the plaintiff had in a credit union account and her real property, worth $109,000, that had been transferred to the trust. The credit union account contained less than $2,000; therefore, the only issue in dispute is whether the real property was a countable asset that rendered the plaintiff ineligible for long-term benefits. The plaintiff appealed, and after a hearing, the hearing officer upheld MassHealth's denial of her application. A Superior Court judge denied the plaintiff's motion for judgment on the pleadings and affirmed the decision of the hearing officer. The plaintiff appealed, and we transferred the case to this court on our own motion.

2. Standard of review. In reviewing administrative agency decisions, we give "due weight to the experience, technical competence, and specialized knowledge of the agency, as well as to the discretionary authority conferred...