Planning for Life

By Harry S. Margolis

The MassHealth Board of Appeals recently decided a case involving real estate held by a trust in favor of Patricia D'Agostino's client, a current nursing home resident who had sought coverage beginning in December 2017. The trust had been created by the client's now-deceased husband back in 1995 and held two vacation rental properties.

The Trust in Question

At issue were two provisions in the trust. The first gave the client the right to use and occupy the vacation properties and to receive the net rental income. The second permitted the dissolution of the trust upon agreement of all the beneficiaries and the sale of the trust property with the proceeds being paid to the beneficiaries listed on "the then current schedule of beneficiaries," the couple's children.

In general, trustees have a duty of loyalty and care that must be upheld in the management of trust assets and funds. The trustee must only disburse and transfer funds for the benefit of the beneficiaries and for the purposes set out in the terms of the established trust. But what happens when these duties are breached, and the trustee starts transferring funds for their own benefit? For instance, maybe they transfer funds to their own personal bank account and purchase a timeshare in Mexico. This is precisely the alleged situation that divided a family in Whittaker et. al. v. Whittaker (United States District Court, D. Massachusetts, 2019) which they turned into a federal case.

By Harry S. Margolis

So you've been appointed trustee. Now what do you do?

Of course, there are your administrative functions in terms of investments, bookkeeping, and paying taxes. But how do you decide how much to give each of the beneficiaries? When? For what purposes?

Some trusts are quite simple—you're directed to distribute the income, invest the principal and distribute what's left when the life beneficiaries pass away.

By Harry S. Margolis

In the combined cases of Jean Maas v. Mary Lou Sudders (Suffolk CA No. 18-129-D) and Henry Hirvi and Eva Hirvi v. Mary Lou Sudders (Suffolk CA No. 18-845-D), Superior Court Judge Douglas H. Wilkins finds that in denying applications for MassHealth benefits in cases involving trusts, MassHealth fails to satisfy the requirements of federal regulation 42 C.F.R. sec. 431.210 (b) that it explain the reasons for the denial.

By Harry S. Margolis

In a case argued by Margolis & Bloom senior associate Sarah Hartline, the Essex Superior Court has overturned a MassHealth denial of coverage for a nursing home resident who MassHealth found had countable assets available from a trust she had created.

The trust in question in Yanow v. Office of Medicaid (Essex Sup. Ct. CA No. 1677CV00599, March 7, 2018), provided for the payment of income earned on trust assets to the grantor, but barred the distribution of any principal to her. Nevertheless, MassHealth argued that due to an administrative provision in the trust which permits the trustee "to determine what part of the trust property is income and what part is principal" the trustee was able to deem all of the trust property "income" and distribute it to the grantor (the applicant for MassHealth benefits).

By Harry S. Margolis

Dad created an estate plan that distributed three quarters of his estate to three of his children and the fourth quarter in trust for one of his daughters, Elaine, and her two children, Paul and Alicia. He named another daughter, Madeline, and her daughter, Paula, as trustees.

Dad died in 2001. The trust for Elaine and her children originally held $542,042. For the next 15 years, Madeline and Paula distributed nothing to Elaine or her children, until 2016 when a court ordered them to make distributions to Elaine so that she "could pay her medical bills and obtain housing." Madeline and Paula did, however, spend more than $50,000 paying for storage of personal items left to Elaine and paid themselves and their attorney.

By Harry S. Margolis

The other day I met with a husband, wife, and their adult son to discuss the parents' estate plan. We discussed tax planning, avoiding probate, and steps to provide for financial management if either or both spouses become incapacitated.

Then I told the son that he and his sister have a choice. When they inherit from their parents they can either have everything distributed outright to them or have it remain in trust for their benefit. We call these "family protection trusts." As I explained to the son, family protection trusts provide the following benefits:

By Harry S. Margolis

Two cases decided by the Supreme Judicial Court, Morse v. Kraft (466 Mass. 92, 2013) and Ferri v. Powell-Ferri (476 Mass. 651, 2017), have confirmed and arguably expanded the power of trustees to transfer trust assets to new trusts. This allows them to better carry out the goals of the trust grantors who created the trusts in the first place. The Ferri case permitted the trustee to transfer funds into a new, more restrictive trust even though the trust beneficiary had the right to withdraw the funds from the original trust, since the trustee had the power to distribute the funds to other beneficiaries.

By Harry S. Margolis

In its long-awaited decision in the Daley and Nadeau cases released on May 30th, 2017 ( Daley v. Secretary of the Executive Office of Health and Human Services (Mass., No. SJC-12200, May 30, 2017) and Nadeau v. Director of the Office of Medicaid (Mass., No. SJC-12205, May 30, 2017)), the Supreme Judicial Court rules that MassHealth cannot count assets owned by irrevocable trusts as available to an applicant for MassHealth unless and only to the extent the trustee may distribute principal to the applicant or his or her spouse. MassHealth had argued that the right of the applicant or his or her spouse to use and occupy a residence owned by a trust makes it available and countable.