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A Common Mistake...
By Michelle Beneski, Esq.
A Common Mistake that Almost Lost the Family Home!
A daughter came to see me after Mass Health denied her mom benefits because mom had more than $2,000 in countable assets. It was clear from the denial notice that mom’s house was being counted as an asset. The house was in a 1992 irrevocable trust. The daughter told me that she thought this was all taken care of because of the trust and she hadn’t ever seen the trust until mom got sick. Why didn’t the trust work? What should she do now? Mass Health told her she should list the house for sale and then mom’s nursing home care would be covered right away but the house had to be sold in 9 months! Does she have to sell the house?
A quick examination of the trust confirmed that the trust did not protect the house as intended. The trust did work in 1992 but in 1996 the Massachusetts Supreme Court ruled that the assets in this type of trust are accessible. What went wrong? The first mistake, in the almost 20 years since mom got the trust, was that she never had the trust reviewed to ensure that it continued to work as intended. This is very common. We recommend that clients have their estate plan reviewed every three to five years. Why? Because laws change and your family situation changes. If your documents do not reflect those changes then the documents won’t work as intended. Mom’s lawyer isn’t under any obligation to contact her and offer a review -- it was up to mom to ask for one and she never did. She probably didn’t know that she should.
The next mistake that mom made was not to go to an experienced elder law attorney. Mom’s attorney was and still is a general practitioner. When the daughter called him about the denial he insisted the trust still worked. Since he doesn’t practice primarily in the area of elder law he was unaware of the changes to the law that had taken place. Medicaid and asset protection are very complex topics and require the expertise of an attorney whose focus is primarily in that area.
I explained to the daughter that the house needed to be put back into her mother’s name. Once the house is out of the trust it is no longer a countable asset if mom checks a box on the Mass Health application that she intends to return home from the nursing home. Mom only needs a physiological intent to return home. She does not need to have the physical ability to return home. Once the home is a non- countable asset mom does not have to sell the home. Mom will not be allowed to keep any money to pay for the real estate taxes, house insurance and other on-going costs. In this situation many families elect to rent the home. Mass Health will place a lien on the house that must be paid off at Mom’s death. With this family situation it is too late to protect the home now. In other families, depending on facts, it may be possible to protect the home from the lien.
If the home stays in the Trust then the house must be sold. If the home is listed for sale and the family is working at selling the home then Mom can go on Mass Health immediately. Mom is usually given nine months to sell the home but in the current environment extensions can be given if a good faith effort is made to sell the home. Once the home sells, Mass Health will be paid from the sales proceeds for the care received so far. If there is any additional money above $2,000, mom will be above the countable asset limit and will be off Mass Health until she spends down her money to $2,000.
Michelle Beneski, Esq.
Michelle D. Beneski, Esq. is a partner in the Surprenant & Beneski, P.C. located in New Bedford, Massachusetts. The firm concentrates on Elder Law and Estate Planning Issues.
She is a frequent speaker and author on estate planning topics.
Michelle is a graduate of Pepperdine University School of Law, Cum Laude and holds L.L.M. in Taxation from the University of Florida, College of Law. She is a member of the National Academy of Elder Law Attorneys, Wealth Counsel and the Bristol County Estate Planning Council.
We meet with our clients for Free every three years to ensure the documents still work for them. Surprenant & Beneski, P.C. charges $500 for an initial estate planning consultation. However, this consultation fee will be waived if you reference this article.
If you would like more information on Medicaid planning, call for our Free Consumers Guide to Medicaid Planning or our free report 25 Ways You Can Mess Up Your Estate Plan or to make an appointment for a consultation, call our toll free number (800)929-0491 for a recorded message or call our office at 508-994-5200.
Feel free to contact Michelle at 508-994-5200 or visit www.myfamilyestateplanning.com
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