A Massachusetts appeals court holds that the state is not required to recognize the reformation of a Medicaid applicant’s trust after the original trust was considered an available asset. Needham v. Director of the Office of Medicaid (Mass. Ct. App., No. 14-P-182, Oct. 20, 2015).
Maurice Needham created an irrevocable trust that instructed the trustee to accumulate principal to use for Mr. Needham’s benefit. The state denied Mr. Needham’s application for Medicaid benefits, finding that the irrevocable trust was an available asset because Mr. Needham retained control over the assets. Mr. Needham reformed the trust to remove the provision that made him ineligible for benefits, and appealed the state’s decision.
The hearing officer determined that under the original trust, Mr. Needham was not eligible for benefits and concluded that the reformation of the trust was a transfer of assets within the look-back period. Mr. Needham appealed to court, which ruled that because a court had approved the reformation of the trust ab initio, it was as if the original trust never existed. The state appealed.
The Massachusetts Court of Appeals reverses, holding that the state was not required to consider the reformed trust. The court states that if Medicaid applicants were allowed to reform trusts during the look-back period, then “persons of means would be permitted to enjoy otherwise countable assets held in trust throughout their lives, transfer those assets for less than fair market value by reforming the trust ab initio when their health declines, and thereby obtain Medicaid payment for long-term nursing home care without complying with the waiting period imposed by Federal law.”
