August 31

Trustee’s Ability to Purchase Annuity Does Not Compromise Irrevocable Trust

The Massachusetts Court of Appeals rules that the state Medicaid agency erred when it determined that the assets in an irrevocable income-only trust were countable because, in the agency’s opinion, the trustee’s ability to purchase an annuity with trust assets allowed the trustee to distribute trust principal to the beneficiary. Heyn v. Director of the Office of Medicaid (Mass. App. Ct., No. 15-P-166, April 15, 2016).

Everlenna Roche transferred her home into an irrevocable income-only trust in 2003. In 2011, Ms. Roche moved to a nursing home and began receiving Medicaid benefits. Two years later, the Office of Medicaid terminated Ms. Roche’s benefits after determining that the trust should be considered a countable resource. Although the trust allowed the trustee to distribute only trust income, not principal, to Ms. Roche, the Office of Medicaid took the position that the trustee’s ability to purchase an annuity with trust funds in effect allowed the trustee to distribute to Ms. Roche the principal used to purchase the annuity, rendering the trust countable.

Ms. Roche passed away and her estate appealed the Office of Medicaid’s decision, but the appeal was rejected at an administrative level and upon review by the Superior Court. On appeal to the Appeals Court, Ms. Roche’s estate argued that state law prohibited the trustee from changing principal payments from the annuity into income and that the returned principal payments from the annuity were required to be retained in the trust.

The Massachusetts Court of Appeals overturns the Office of Medicaid’s decision. The court finds that “[o]ut of each annuity payment, only the investment income portion would be available for distribution to the grantor from the trust; that portion of each payment representing a return of capital would be required by the trust instrument to be retained in the trust. The income portion available for distribution in such circumstances would be no different in character than interest earned on a certificate of deposit . . . In all events, the trust principal is preserved in the trust, and is not available for distribution to the grantor under the governing provisions of the trust.” The court also agrees with Ms. Roche’s estate’s claim that state law prohibits an allocation of principal to income that would circumvent the trust’s prohibition on principal distributions.

The Massachusetts chapter of the National Academy of Elder Law Attorneys submitted an amicus curiae brief in support of the estate’s position.

To read the full text of the court’s decision, go to:

For a blog post on the decision written by Sarah Foster of Margolis & Bloom, LLP, click here.

August 29

An Irrevocable Trust Authorizing the Trustee to Purchase an Annuity Was a Not a Countable Asset for Purposes of Determining MassHealth Medicaid Eligibility (Mass. App.)

Approximately eight years before Everlenna Roche entered a skilled nursing facility, she established an irrevocable trust and transferred title to her home to the trust. Roche applied for MassHealth benefits upon entry to skilled-care and was initially approved. Benefits were later terminated on the grounds that the trust was a countable asset. Roche appealed. The ALJ upheld the agency decision, concluding that the trust authorized the trustee to sell trust assets and to reinvest the proceeds in any other form of investment, including an annuity. Because the trust allowed distributions of income, the ALJ said, hypothetical annuity payments resulting from any annuity purchased with the sale of the home sale proceeds could be distributed and consequently were available for Roche’s support. A Superior Court affirmed the agency decision. The Massachusetts Court of Appeals reversed. It held that, out of any hypothetical annuity payment to Roche, only the investment income portion of the annuity would be distributable. The trust’s terms required that the portion of each payment representing a return of capital must be retained by the trust. Because there were no circumstances in which the trustee could distribute the trust’s corpus principal to Roche, assets held by the trust were not countable.

Heyn v. Director of the Office of Medicaid, 2016 WL 1466564 (Mass. App. April 15, 2016)

August 24

Judge Orders Medicare Agency to Comply with Settlement in “Improvement Standard” Case and Provide More Education

In an Opinion and Order released on August 18, 2016, Chief Judge Christina Reiss, who oversees the “Improvement Standard” case (Jimmo v. Burwell, No. 11-cv-17 (D.Vt.)), ordered the federal government, through its Centers for Medicare & Medicaid Services (CMS), to comply with the Settlement Agreement that she had approved in January 2013.  The Order requires CMS to remedy the Educational Campaign, which was a cornerstone of the Settlement Agreement, by “direct[ing] the Secretary [of Health and Human Services] to propose corrective action for Plaintiffs’ consideration within forty-five days of this Order.”  The goal continues to be to end the practice of denying coverage to tens of thousands of Medicare beneficiaries by replacing the illegal “Improvement Standard” with a maintenance coverage standard.  As the Court held: “Plaintiffs bargained for the accurate provision of information regarding the maintenance coverage standard and their rights under the Settlement Agreement would be meaningless without it.”         

The Order granted in part a Motion for Enforcement filed on March 1 of this year after plaintiffs’ attorneys had been unable to persuade CMS to carry out corrective measures.  “It was distressing that CMS refused to take further action in response to the obvious systemic problems that continued to harm this particularly vulnerable class of Medicare beneficiaries,” said Judith Stein, an attorney for the plaintiffs and the Executive Director of the Center for Medicare Advocacy.  “Despite our repeated demonstrations that the word has not gotten out that people do not have to improve in order to obtain Medicare coverage for necessary care,” she added, “CMS took the position that it had done enough. We are relieved the Court has ordered CMS to do more to educate Medicare providers and decision-makers.”

Plaintiffs had consistently provided proof to CMS since January 2014 that the agency’s Educational Campaign had failed to communicate the necessary information to the providers and contractors that make the front-line decisions in the Medicare program.  “I was baffled by CMS’ resistance,” said Michael Benvenuto, another of plaintiffs’ attorneys and the Director of the Medicare Advocacy Project of Vermont Legal Aid, “because even the sampling of decisions done by an independent contractor showed an error rate of over 40%.  No matter what evidence we presented them, their response was always ‘We’ve done all we have to do.’”

Plaintiffs’ enforcement motion included 24 declarations from beneficiaries, family members, advocates, and officials of organizations dedicated to patients with chronic illnesses and injuries, and hundreds of pages of exhibits, to demonstrate the extent and ongoing nature of the problem.  “Returning to court was certainly not the preferable way to go,” explained Gill Deford, also of the Center for Medicare Advocacy and lead counsel for the plaintiffs, “but CMS simply would not budge.  We had to move for enforcement because there is no excuse for Medicare still using this illegal rule of thumb to deprive desperate beneficiaries of the care and services they need.”

The Court’s Opinion concluded that “at least some of the information provided by the Secretary in the Educational Campaign was inaccurate, nonresponsive, and failed to reflect the maintenance coverage standard,” citing as the “most compelling example … the Secretary’s ‘Summary of the questions posed and answers provided during the … National Call with contractors and adjudicators.’”  CMS will thus have to develop “corrective action” for the inadequate education effort, and if the Plaintiffs are not satisfied with it and the parties cannot agree, they may return to the judge for a resolution.

Kim Calder, Director at the National Multiple Sclerosis Society, is gratified that CMS will provide more education. “Among the reasons the National Multiple Sclerosis Society is a Jimmo plaintiff and applauded the Settlement was the promise that Medicare would provide a nationwide education campaign so Medicare’s own administrators, health care professionals and the public would know that continued ‘improvement’ is not a requirement for coverage and payment,” said Calder. “Rehabilitation therapy is an integral part of MS treatment because it helps prevent declines in walking, moving, speaking and optimal functioning.  Denying patients access to these treatments can lead to worsening disability, lack of independence and more expensive health care needs.”

Further information on the ruling and the case, including contact information for beneficiaries and organizations affected by the Improvement Standard, is available from Matthew Shepard, Communications Director at the Center for Medicare Advocacy (860-456-7790 or

August 22

Trustee must Present Evidence That Expenses Were Actually and Properly Incurred to Be Reimbursed (S.D.)

Mary Novotny’s conservators established the Mary Novotny Trust for the benefit of Mary’s daughter Catherine Novotny. The conservators were appointed as trustees. After a dispute arose over the validity of the trust, a circuit court granted reimbursement of attorney’s fees and various expenses to the conservator-trustees pursuant to S.D. Codified Laws § 55-3-13. Catherine appealed, arguing that the limited information provided to the court regarding the trustees’ expenses was insufficient to determine whether the expenses were actually and properly incurred. The South Dakota Supreme Court agreed and remanded for further proceedings. The trustees had submitted an affidavit that listed the sums paid to certain individuals or entities, but did not provide any additional information related to the expenses. The court held that section 55-3-13 requires evidence or testimony on the record that would allow a court to determine whether the amounts a trustee seeks for reimbursement were “expenses actually and properly incurred in the performance of his or her trust.” The lower court abused its discretion by relying on affidavits that provided no information as to how the trustees incurred the fees sought.

Guardianship of Novotny, 2016 S.D. 36 (S.D. April 20, 2016)

August 17

Legal and Care Planning for People with Multiple Sclerosis

This video series, entitled “Legal and Care Planning for People with Multiple Sclerosis,” is intended to help people diagnosed with Multiple Sclerosis and their families understand the complex legal and planning issues that they face. The video series was produced via a partnership between NAELA and Stetson University College of Law, in consultation with the National Multiple Sclerosis Society.

Multiple Sclerosis (MS) is an unpredictable, and often disabling disease of the central nervous system that disrupts the flow of information within the brain, and between the brain and body. Symptoms vary from person to person and range from numbness and tingling, to walking difficulties, fatigue, dizziness, pain, depression, blindness and paralysis. The cause of MS is still unknown and scientists believe the disease is triggered by as-yet-unidentified environmental factor in a person who is genetically predisposed to respond. The progress, severity and specific symptoms of MS in any one person cannot yet be predicted. Most people with MS are diagnosed between the ages of 20 and 50, with at least two to three times more women than men being diagnosed with the disease.