Tag Archives: Estate Planning

Your trust might be OK after all

March 4, 2021Estate Planning, Home Ownership, real estate law, trustsEstate Planning, nominee trusts, trustsRobert Bevans

There is a constant battle between Medicaid applicants and MassHealth that is “David-and-Goliath-Like”. The applicant wants to minimize the amount of assets included in their application so they can qualify for Medicaid Assistance and have their long-term care paid for by the government and MassHealth wants to include as many of the applicant’s assets as possible to limit the assistance provided to the applicant. Many of the debates between applicants and MassHealth involve the use by applicants of trusts. This battle over the use of a nominee trust was brought to the Massachusetts Supreme Judicial Court by Joellen Guilfoil as the personal representative of the estate of Dorothy E. Frank. (Joellen Guilfoil, personal representative vs. Secretary of the Executive Office of Health and Human Services)

As a background to the case, MassHealth governs the Medicaid program in Massachusetts. Medicaid eligibility is based upon the applicant’s countable assets. The value of the applicant’s countable assets cannot exceed $2,000.00. Countable assets are basically those assets of the applicant that are in their control and those assets given away by the applicant for less than fair market value during the 5 years preceding the date of their application. Many applicants will transfer assets to a trust in the hope of excluding them from their countable assets and therefore qualify for Medicaid benefits. In an effort to prevent this from happening, Congress has enacted the “any circumstances” rule. This rule is defined as “if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual, the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be made shall be considered resources available to the individual”. If any circumstances are found, the assets are considered as being in control of the applicant and therefore a countable asset.

Dorothy Frank, the David of the case, created a nominee trust entitled “the Frank Family Realty Trust” on December 16, 1999. She was the trustee of the trust. She also named the beneficiaries of the trust. The beneficiaries were her five children as joint tenants with rights of survivorship and herself with a retained life estate. She then conveyed her Fitchburg home to the trust at the same time she created the Trust. Dorothy applied for long-term benefits from MassHealth, the Goliath, in 2017. The only potential countable assets she had were the Fitchburg home worth $109,000.00 and a credit union account worth less than $2,000.00. MassHealth denied her application ruling that the trust property was in her control and therefore a countable asset. Based upon the value of the credit union account, if the home was not a countable asset Frank would have qualified for Medicaid. A hearing was held next and the MassHealth denial was upheld. The Superior Court later upheld the decision of the hearing officer denying the application. Frank appealed the Superior Court decision and the SJC decided to take the case.

The SJC framed the issue presented to them fairly simply as, “whether the entire interest in a property transferred to a nominee trust is a countable asset in a MassHealth eligibility determination where the trustee retains a life estate in the real property”. The Court, in its discussion, focused on what a nominee trust is and what it is not. A nominee trust is usually created for the sole purpose of holding title to the property. The trustee has a minor role in the application of the trust and its assets. The Court stated that a Nominee Trust is not a “True Trusts”. True Trusts are either revocable or irrevocable trusts. A True Trust creates a fiduciary relationship requiring that the trustee act for the benefit of the beneficiary of the trust, a much greater role than the trustee of the nominee trust.

The Court stated that there are qualitative differences between nominee trusts and True Trusts. The initial difference it discussed was the limitation of the trustee powers. Trustees iof a Nominee Trust are unable to act with respect to trust property without the direction of the beneficiaries. This limitation was included in the Frank Family Revocable Trust. This limitation creates a principal and agent relationship and not a fiduciary relationship. The central concept of the True Trust is the fiduciary relationship. The trustee of a True Trust may have broad powers it can undertake for the benefit of the beneficiaries without their input. There is a true delegation of power to the trustee.

The next level of review by the Court was whether the grantor of the nominee trust has the power to revoke the trust. If the grantor’s power to revoke does not exist then the beneficiaries become the vested owners of the property, if there is a power to revoke then beneficiary’s interest does not vest until after the grantor’s death. The beneficiaries of the Frank Family Revocable Trust and not the grantor of the Trust had the right to terminate the trust and therefore the property ownership was vested in the beneficiaries. Based upon these factors the SJC ruled that the Frank Family Realty Trust was a nominee trust and not a revocable or irrevocable trust. Therefore, once the property was conveyed by Dorothy Frank to the Trust the property was vested in the beneficiaries.

The Frank Family Revocable Trust does give the power to revoke the trust to any beneficiary. Dorothy was a beneficiary and the grantor, so why is she not able to revoke the trust and get the property back? If the Frank Family Revocable Trust was terminated all assets of the Trust must be distributed to the beneficiaries pursuant to the terms of the Trust. So even if Dorothy as one of the beneficiaries was to terminate the Trust each beneficiary would get their interest in the property subject to Dorothy’s life estate. So, the initial transfer of the property to the trust created an irrevocable gift to the beneficiaries subject to Dorothy’s life estate. MassHealth has long held that if an irrevocable gift was made by an applicant and the five-year look-back period has expired the property given is a non-countable asset, here the look back period had long since expired.

The next issue reviewed by the Court, was whether the life estate retained by Dorothy Frank would make her ineligible for Medicaid? The SJC ruled that it did not. The life estate gave her the right to use and occupy the property but not the right to sell it and distribute the proceeds of the sale. Therefore, this property was not a countable asset for Medicaid eligibility purposes and Dorothy’s application should be treated as such. Based upon this the SJC reversed the Judgment of the Superior Court. Confirming that yes David can occasionally take down Goliath.

Estate Planning Essentials: Your Age Doesn’t Matter

December 9, 2014Estate Planning, Health Care Proxy/HIPPA, trusts, UncategorizedEstate Planning, health care proxies, powers of attorney, WillRobert Bevans

The current pace of our lives makes finding time to develop an Estate Plan more and more difficult. Please find below some moves you can make which are not complicated, or expensive, but which can improve your position, and let you sleep at night.

Create or Update Your Will or Revocable Trust

These documents are the cornerstone of your Estate Plan. They insure that your assets will be distributed exactly as you would like. Failure to keep these documents current may result in disinheritance or financial hardship for loved ones who depend on you.
Review Beneficiary Designations. When you established life insurance or retirement plans, you were asked to name beneficiaries of these accounts who will receive the assets upon your death. It is important to review these designations regularly to ensure that your assets pass to the appropriate loved ones.
Create or Update Your Health Care Proxy and Living Will You need a health care proxy to appoint your spouse, a trusted friend or family member to make medical decisions on your behalf in the event you are unable to make those decisions yourself. Your health care agent will work with your doctors and other health care providers to make sure you get the medical care which is best for you. A living will is a type of advance directive that gives you the opportunity to formalize your wishes as to prolonged health care in the event that your condition is terminal. NOTE: Living Wills give direction but are not legally binding
Create a Durable Power of Attorney. Regardless of the size of your estate or your family circumstances, you should have a durable power of attorney. You may appoint your spouse, a trusted family member or friend to handle all of your financial affairs on your behalf in the event you are not able to do so, yourself.
Establish Guardianships for Minor Children. Have you considered who would take care of your minor children in the event of the untimely passing of you and your spouse? If you do not finalize your wishes in your Will, a court will decide who will care for your children. Do not leave your children’s well-being in the hands of a court. Appoint a Guardian for you minor children in your Will.
Encourage Your Adult Children to Create an Estate Plan. Whether your son or daughter is going off to college or beginning a career, encourage your child to set up an Estate Plan. If your adult child requires medical attention, you have no legal right to their medical records, nor can you participate in health care decision, without a duly executed health care proxy.
Encourage Your Aging Parents to Create, or Update, Their Estate Plans. It becomes increasingly more difficult to discuss finances and health care decisions with your parents as they age. Encourage your parents to put an Estate Plans in place, or review their existing Estate Plans.

Should I draft a Will or should I be placing my assets in a Trust?

March 9, 2012Estate Planning, Health Care Proxy/HIPPA, trusts, UncategorizedEstate Planning, Revocable Trusts, trusts, willsadmin

When it comes time for you to devise your assets, you may be asking yourself, “Should I draft a Will or should I be placing my assets in a Trust?” A Trust in most instances does not replace a Will. An effective Estate Plan requires a Will. Whether there is a Trust component within the Will, or a Trust outside the Will, you almost always need a Will.

Advantages of Creating a Trust:

Tax Avoidance-Property can be left not outright to your children, but in a Trust for their benefit for life. Eventually, the property is distributed to your grandchildren. No federal or Massachusetts estate tax could be imposed on the property that is in the Trust at the time of your child’s death. However, the federal government does impose “a generation-skipping transfer tax” upon the death of your child; there is an exemption available to your grandchildren.

Control and Flexibility- A trust provides a resolution to different concerns and financial circumstances. If you feel that your children or grandchildren are not wise or old enough to handle your assets, you could appoint a qualified Trustee to handle the financial matters for the benefit of your children or grandchildren.

TYPES OF TRUSTS

Testamentary Trust-This is a type of trust that is created in a Will. The disadvantages of this type of trust are that the Trustee’s handling of the assets is subject to supervision of the Court and in cases where a minor is involved, “a guardian ad litem” will be appointed. Also, the Trustee must file annual accounts with the Probate Court and, ultimately, the assets in the Trust and the activity of the Trust will become a matter of public record.
Revocable Trust-In contrast to a Testamentary Trust, you could create a Revocable Trust during your lifetime while retaining the right to revoke it or amend it. Then you would be providing in your Will that your property is to be added to your Trust. You would have unlimited access to your property and could manage it in any way you want during your lifetime.

Like so many things in life, there are the advantages and disadvantages.

The disadvantages of a Revocable Trust regarding real property are transfer of Title to the Trust requires deed preparation, title examination, and recording. In cases where a mortgage needs to be obtained, a Trust may cause disqualification in certain circumstances. On the other hand, once a piece of real property has been placed in a Revocable Trust, there will be no need to include the property in your Probate Estate, which can make things much easier for your heirs. Relatively recent legislation in Massachusetts permits a Trustee of a Trust to file a Certificate stating only the basic abilities of the Trustee to act for the Trust.

Much more to follow!!!

BY: Caroline J. Hanania

Associate Attorney

Topkins & Bevans

Attorneys At Law

781-890-6230 Ext 225

DISCLAIMER: PLEASE NOTE THAT THIS IS NOT LEGAL ADVICE. PLEASE CONSULT AN ATTORNEY REGARDING ANY LEGAL MATTERS

What would happen to my Estate if I were to die today?

February 24, 2012Estate Planning, Health Care Proxy/HIPPA, trustsEstate Planning, Willadmin

Unfortunately, one does not know what can happen from one day to the next. That is why it is important to consult an Attorney to create an Estate Plan, which includes a Will and, possibly, a Trust. If a person fails to dispose of all, or a portion of, his or her estate by a valid Will or Trust, then such property is distributed under the Massachusetts rules of intestacy. You will need to be especially careful in the coming days, because, as of March 31, 2012, things are scheduled to change.

The pending changes to the Intestacy Laws will have a significant impact on the Estate of a person who dies without a Will or Trust in place. For instance, under the new law, a much larger share will be distributed to the surviving spouse than under the current Massachusetts law. Changes like the aforementioned are things that people need to be aware of. To that end, over the course of the next few months I am going to post a series of questions that are commonly coming up in my daily practice, starting with a basic one: I am married and do not have a will, what would happen to my Estate if I were to die today?

Answer: The answer to this question varies depending on circumstances.

1. For instance, if you don’t have a parent or children, then the surviving spouse takes the entire intestate estate.

2. If, you have a parent, and no children, then the spouse takes the first $200,000.00 and three-fourths of any balance of the intestate estate.

3. If you have children born into the marriage of you and the surviving spouse and there are not other children of the spouse, then the spouse takes the entire intestate estate.

4. If, you have a child or your spouse has a child but the child is not common with both of you, then the spouse takes the first $100,000.00 and one-half of any balance of the intestate estate.

If this is not how you would like your property to be distributed upon your death , you need a Will or some kind of Trust. Please contact me to set up an appointment to meet, so we can memorialize the distribution of your assets which you desire. I can be easily reached at chanania@topbev.com.