A Massachusetts court held that the state is not entitled to recover Medicaid benefits from a community spouse’s annuity. Dermody v. The Executive Office of Health and Human Services (Mass. Super. Ct., No. 1781CV02342, Jan. 16, 2020).

Robert Hamel purchased an annuity that named the state as primary beneficiary to the extent any Medicaid benefits are paid. His daughter, Laurie Dermody, was the contingent beneficiary. Mr. Hamel’s wife, Joan, entered a nursing home and applied for Medicaid. The state approved her application. When Mr. Hamel died, the state demanded payment from the annuity as reimbursement for benefits paid on Ms. Hamel’s behalf, and the annuity company paid the state.

Ms. Dermody sued the state and the annuity company, claiming that she is entitled to the remainder of the annuity contract as the contingent beneficiary. Ms. Dermody argued that Mr. Hamel purchased the annuity under the “sole benefit rule,” which allows transfers to a spouse for the sole benefit of the spouse. The state argued that the “extent benefits paid” language in the annuity applied to benefits paid on behalf of Ms. Hamel.

The Massachusetts Superior Court granted Ms. Dermody’s motion for summary judgment. The court held that any transaction that satisfies the sole benefit rule is exempt from the transfer penalty rules, including the requirement to name the state as the primary beneficiary of an annuity. According to the court, Mr. Hamel “was not required to name [the state] as his primary beneficiary to the extent benefits were paid on [Ms. Hamel’s] behalf, and because [Mr. Hamel] did not receive [Medicaid] benefits himself, [Ms. Dermody] is the proper beneficiary of his annuity contract.”

For the full text of this decision, click here: Dermody v. The Executive Office of Health and Human Services

(Article reprinted from the ElderLawAnswers website. Mr. Vanarelli is a founding member of ElderLawAnswers.) 

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