Elder Law

You and your loved ones want to remain independent for as long as possible. With proper planning that protects your assets such as your home and savings, you will be able to keep your independence and remain in control of your finances. Asset protection planning uses estate planning techniques that are tailored to your specific situation to pass on as large an inheritance as possible to those you care about. Asset protection planning can minimize estate taxes, protect assets from future long-term care costs or catastrophic medical expenses. Whether you are concerned with estate taxes, nursing home costs, or other financial emergencies, let me put your mind at ease by creating an individualized plan for your family.

In order for assets transferred to a trust to be “non-countable” for MassHealth purposes, the trust must be irrevocable. This means that once you have created the trust and transferred assets to the trustee, you cannot change the terms of the trust agreement or demand that the trust assets be returned to you. The trust agreement can, however, contain language that would allow you to appoint a new trustee. The trust agreement can also give you a so-called “power of appointment,” which would allow you to change the interests of the beneficiaries named in the trust agreement by changing your will. However, once you transfer assets to a trustee of an irrevocable trust, you no longer own the assets – the trustee does. You may, however, continue to benefit from the trust assets in many ways.

In simplest terms, you create a trust by entering into a written agreement (called the trust agreement) with another person (called the trustee) and by transferring property that you select to the trustee. The trustee agrees under the terms of the trust agreement to hold the property transferred to the trustee and to dispose of it for the benefit of persons identified in the trust as the beneficiaries. The trustee could be one or more individuals or an institution such as a trust company that is in the business of acting as a trustee.

An irrevocable asset protection trust is often an effective means of protecting your home or other appreciated assets from being counted against you if you were to apply for benefits from MassHealth. However, MassHealth will consider the trust assets to be “non-countable” only if the trust meets certain requirements.

The trust agreement must provide that none of the trust principal can be paid to you under any circumstances. This limit on the return of principal is critical in making sure that the trust assets are “non-countable” for MassHealth purposes. It may be helpful to think of your irrevocable trust as being like a locked safe, that is, property transferred to an irrevocable trust must remain in the trust. However, the trustee can sell trust assets. For example, if real estate is placed in the trust, it can be subsequently sold, but the proceeds from the sale must remain in the trust. The trustee could use the proceeds to purchase a new home in which you could live; however, title to the new home would be held by the trustee.
In addition, you could have a continuing right to live in any real estate owned by the trust. Additionally, any interest or dividends earned on the trust property and any rental income from real estate owned by the trust could be paid to you. However, since you no longer hold title to the property held in the trust, you would be unlikely to be able to obtain a mortgage loan or equity loan secured by trust property.

If you transfer assets to an irrevocable trust you and your spouse become ineligible for MassHealth benefits for five years starting with the date of the transfer. It is critical that you not file a MassHealth application until the five year “look-back” period has expired. If you apply too soon, you and your spouse may become ineligible for MassHealth benefits for more than five years.