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Legal Notes

Irrevocable Trust Update

There have been significant court cases recently relative to irrevocable trusts. A recent case from the Worcester Superior Court held that if a parent transferred their home to an irrevocable, and the irrevocable trust provided that the parent had the right to "use and occupy" the home, then, based on state and federal Medicaid regulations, the trust does not protect the home from nursing home expenses.

The family argued under Massachusetts trust law that the house was protected from nursing home expenses, but the court gave great deference to Massachusetts and federal Medicaid regulations and found that the house was not protected. This case has been appealed to a higher court with the hope that the appeals court will overturn this decision.

In another case, the Massachusetts appeals court granted a favorable decision against an argument MassHealth has been raising against irrevocable trusts for many years. With an irrevocable trust, the parent usually retains the right to the income from the trust, but has no ability to access the principal or assets held by the trust, such as the home. MassHealth had tried to use a very technical argument that the trustee had the ability to sell the home and purchase an annuity, which could change all of the assets of the trust into income and, thus, make all of the assets of the trust accessible for nursing home expenses. The appeals court rejected this argument and held that the house was protected from nursing home expenses.

In the same case, the appeals court held that, if the trustee had the ability to distribute assets from the trust to the parent's children, this was acceptable and did not make the house reachable for nursing home expenses.

These two recent court decisions illustrate the complexity of irrevocable trusts. If you or a family member are considering a legal instrument such as an irrevocable trust, consult an attorney. It will be important to understand what this tool is and if it accomplishes your intent to financially plan for the future.

The views expressed in this column represent general information. To address your particular and specific needs consult your own attorney. If you need help with referral to an attorney, contact the Franklin County Bar Association at (413) 773-9839 or the Worcester County Bar Association at (978) 752-1311.

Call Community Legal Aid at 413-774-3747 or toll-free 1-855-CLA-LEGAL (1-855-252-5342) during their intake hours (Monday, Tuesday, Thursday, and Friday from 9:30 a.m. to 12:15 p.m. and Wednesday from 1:30 p.m. to 4:15 p.m.). Apply for help anytime online by visiting www.communitylegal.org. Franklin County Office is located at 55 Federal St, Greenfield, MA. The office is no longer open for walk-ins. Services are free to people age 60 and older.