Property Transferred By Applicant To Irrevocable Trust With Retained Power Of Appointment Not Countable By Medicaid

In this case, the Massachusetts Supreme Judicial Court held that property in an irrevocable trust is not countable by Medicaid even if the grantor/applicant retains a limited power of appointment over the property in the trust. Patricia A. Fournier vs. Secretary of the Exec. Office of Health & Human Services (SJC-13059, July 23, 2021) (SJC-13059, July 23, 2021)

Emily Misiaszek and her husband created an irrevocable trust into which they transferred their home, and named their daughter as trustee. The terms of the trust granted Misiaszek, during her lifetime, a limited power of appointment to appoint all or any portion of the trust principal to a nonprofit or charitable organization over which she has no controlling interest.

(Many trusts which our law firm creates for the purpose of sheltering homes of older individuals concerned about paying for nursing home care have included a limited power of appointment permitting the trust grantor during his or her life to appoint property—in other words, to direct a distribution—to non-profit organizations. The reason to include such provisions in these trusts is to make certain that if the home were sold during the grantor’s life that it would qualify for the $250,000 exclusion on capital gains available to homeowners.)

Misiaszek applied for and was denied Medicaid benefits. The Medicaid agency determined that the home was a countable asset, concluding that Misiaszek ostensibly could use her limited power of appointment to appoint portions of the home’s equity to the nonprofit nursing home where she resided as payment for her care.

Misiaszek appealed, and the Massachusetts Office of Medicaid’s board of hearings (board) affirmed the denial. Misiaszek then sought judicial review of the board’s decision, and a Superior Court judge reversed the board’s ineligibility determination. The board then appealed the court’s decision reversing the denial of Medicaid benefits.

On appeal, the Massachusetts Supreme Judicial Court affirmed the lower court’s decision finding Misiaszek eligible for Medicaid. The Supreme Judicial Court held that  “MassHealth’s hypothesized appointment is not permitted under established principles of trust and property law.” Citing prior cases, the appellate court found that Ms. Misiaszek may not use the power of appointment for her own benefit. Further, the SJC looks at how the power of appointment fits into the entire trust:

Taken together, the terms of the Misiaszek trust only permit Misiaszek to live in the home during her lifetime, to receive payments of trust income, and to make charitable contributions to organizations in which she has no interest. She is not permitted to receive any distribution of trust principal from the trustee, and the termination of the trust is contingent on events beyond her control. We do not discern from the trust language any intent for Misiaszek to benefit personally from any distribution of the trust principal.

Finally, the Court found that the power of appointment could not be used to force the trustee to make payments on the grantor’s behalf because to do so would force her to violate her fiduciary duty to the ultimate beneficiaries of the trust, Ms. Misiaszek’s children.

The Patricia A. Fournier vs. Secretary of the Exec. Office of Health & Human Services (SJC-13059, July 23, 2021) case is attached here: [gview file=””]

(This blog post is adapted from an article on the ElderLawAnswers website. Mr. Vanarelli is a founding member of ElderLawAnswers.)

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